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President Biden and a bipartisan group of senators announced last week that they reached a deal on an infrastructure bill. The $1.2 trillion plan, which includes $579 billion in new spending, will largely focus on America’s physical infrastructure like roads, bridges, airports and public transportation. The bill will have to overcome heavy political headwinds if it is going to pass through Congress, but it still marks a significant step forward in a lengthy negotiating process that left many in Washington questioning whether a bipartisan deal was even possible.
One of the biggest sticking points in negotiations, one that will likely be a key point of contention going forward, was the question of how to pay for the plan. Biden pushed for higher taxes on the rich and corporations — a nonstarter for the GOP. Republicans proposed higher gas taxes and fees on vehicles, an approach rejected by the White House. In the end, the two sides found a compromise that would fund the bill through a combination of tax revenue brought in by improved tax enforcement, repurposed COVID-19 relief funds, changes to unemployment insurance programs, private investment and a hodgepodge of other sources.
That funding plan includes measures that both Democrats and Republicans might quibble with, but those disagreements may not be enough to sink the deal. A more contentious funding debate may be on the horizon over how to pay for the second, potentially much larger bill focused on “human infrastructure” that Democrats are hoping to pass on their own as a complement to the bipartisan deal.
Why there’s debate
The debate over how to pay for infrastructure echoes partisan disagreements that come up whenever new government spending is proposed. Democrats largely agree that the best way to fund infrastructure is by increasing taxes on the wealthy and corporations. It makes sense, they argue, to ask the most prosperous people and profitable companies to chip in for projects that will benefit all Americans.
Conservatives warn against overtaxation, which they say will stifle the economic growth that’s one of the key goals behind improving infrastructure. Instead, many on the right say the bill should be paid for with so-called user fees — a broad category of revenue sources that can include bridge and highway tolls, gas taxes and fees on certain vehicles. Supporters say user fees are the fairest method because they pass the burden of paying for infrastructure projects to people who will actually use it. Biden has said user fees, specifically a higher gas tax, would amount to a tax increase for low-income Americans.
A variety of other funding strategies have been proposed, including partnerships with private companies, a carbon tax and cuts to regulations that drive up construction costs. Some on the left have argued for a novel approach: not paying for infrastructure at all right away. They say low interest rates and the economic boost provided by revitalized infrastructure will make it easy to pay off any debt the country takes on to fund the projects in the short term.
A number of progressive lawmakers have said they won’t support the bipartisan infrastructure deal unless it’s passed in tandem with a Democrats-only human infrastructure plan. Negotiations on the latter bill are only in the early stages, meaning it may be months before any infrastructure proposal makes its way to Congress for a final vote.
Borrowing money to pay for infrastructure would be irresponsible
“For lawmakers, nothing is easier than spending money without paying for it. Deficit spending buys support among its recipients and allows lawmakers to appear compassionate, all while dumping the cost on the unborn or those too young to vote.” — Brian Riedl, National Review
Lawmakers shouldn’t be scared to raise taxes on the wealthy
“Let’s … be clear that keeping tax rates for the rich at just a fraction of what they were before the ‘Reagan revolution’ produced massive inequality is an act of rank political cowardice.” — Will Bunch, Philadelphia Inquirer
Don’t worry about paying for it right now
“The world’s investors are offering America a cheap line of credit if we want to make some much-needed upgrades to our roads, trains, and electric grid, and there’s no real reason to turn them down. Thanks to those rock-bottom interest rates, the U.S. could add a trillion dollars or so to the debt right now without it making a massive difference to the long-term shape of the federal budget.” — Jordan Weissmann, Slate
Corporate taxes should pay for infrastructure
“Many of [the biggest] conglomerates benefit tremendously from the infrastructure paid for by American taxpayers. They use the highways and railroads to get their supplies and deliver their goods. They benefit from the government's investment in technology. … They piggyback on research and development paid for by taxpayers. … In other words, shouldn't they help pay for all this?” — Dave Zweifel, Capital Times
Corporate taxes are the wrong way fund government projects
“Even making the economically wrongheaded assumption that making U.S. corporate taxes higher than most of the developed world will actually ‘pay for’ the new spending, how does [that] justify using the higher taxes for even more spending rather than to finally reduce the biggest peacetime deficits and debt in U.S. history?” — Quin Hillyer, Washington Examiner
User fees are a fair way to fund infrastructure
“Placing the burden for infrastructure improvements on those who use the facilities is the traditional way of paying for expanding and upgrading those facilities.” — Henry Olsen, Washington Post
User fees hurt the poorest Americans
“Unlike progressive taxes, user fees … are not generally varied by ability to pay. They are imposed at a flat rate, on the poorest and wealthiest alike, assessed in proportion to their use of public infrastructure. These extractive revenue models condition access to critical goods and services on families’ available resources. And unlike with consumer goods, people often have no choice but to use these spaces.” — Brian Highsmith, New York Times
A carbon tax would create revenue and reduce greenhouse emissions
“The carbon tax … has unique advantages. Republicans should favor it because it bypasses regulation, encourages innovation and offers an alternative to a higher corporate tax. For Democrats, it would be a needed source of revenue that also helps the environment. It’s the obvious way forward.” — Michael R. Strain, Bloomberg
Unspent COVID-19 relief funds should be repurposed
“The country could use some infrastructure investment, and a focused bill that repurposes unspent Covid funds is the best option.” — Editorial, Wall Street Journal
Cut regulations to make construction less expensive
“If the president's goal were truly to ‘build, baby, build,’ he would be making every effort to pare back regulations that raise the labor and material costs of federal infrastructure projects.” — Christian Britschgi, Reason
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