What the Midterms Mean for Infrastructure

For the past two years, politicians on both sides of the aisle have touted their support for infrastructure, but actual legislation has remained elusive. The midterm elections have brought a new Congress and an opportunity to move beyond the talking points and start working together on this seemingly shared priority. Importantly, the dynamics on Capitol Hill have shifted with a new Democratic majority in the House and new committee assignments in both chambers. Now, for anything to be passed into law, it will require bipartisan cooperation, and as Senate Majority Leader Mitch McConnell (R-KY) has said, if there is one area for the newly divided Congress to come together, it will be on infrastructure.

Previewing 2019

Fortunately, Congress will not be starting from scratch. In the past year, both parties came together to pass a few discrete yet important infrastructure measures. The bipartisan budget deal for Fiscal Year (FY) 2018 that appropriated an additional $20 billion for a variety of infrastructure programs. And over the summer a water reauthorization bill resoundingly passed with $4.4 billion over 3 years for the Drinking Water State Revolving Fund and $3.7 billion for Army Corps dredging and flood prevention projects.

But make no mistake, despite these incremental increases, there is still a tremendous need for more investment in infrastructure. Currently, there is at least a $1 trillion funding gap between today’s spending levels and the amount needed, which does not necessarily include the price tag of upgrading and modernizing.

However, simply spending more in 2019 may not be feasible. As BPC has tracked, the deficit for FY2018 came in at $779 billion, and is projected to be more than $1 trillion next year. If Congress avoids making any hard choices to cut spending or increase taxes, increased infrastructure spending will only add to the country’s $21 trillion debt. This reality has been further complicated by the recent Republican tax reforms, which itself adds to projected deficits but, importantly, also took repatriated corporate profits off the table as potential infrastructure pay-for.

To date, the White House, the bipartisan Problem Solvers Caucus, the Senate Democrats, the Congressional Progressive Caucus, the House Democratic Policy and Communications Committee, and retiring Rep. Bill Shuster (R-PA), the outgoing chairman of the House Transportation and Infrastructure Committee, have all released comprehensive infrastructure plans. While most of these proposals have avoided the elephant in the room, identifying pay-fors or offsets, their chosen spending priorities may preview where the infrastructure debate will go in 2019.

Who Gets the Money

Each plan has taken a broad view of infrastructure, including roads and bridges alongside water systems, rail, and broadband. But the plans are far from identical.

For starters, the Democrats’ plans have proposed expanding the federal government’s role in infrastructure to more directly include public school buildings and housing. The White House’s plan cast a wide net on the type of infrastructure projects that could be funded but essentially stayed within the current federal government’s infrastructure footprint. Though back in May, the Department of Transportation altered one of its discretionary grant programs to favor funding more rural road and bridge projects, rather than urban transit projects. The changes prompted criticism from Sens. Susan Collins (R-ME) and Jack Reed (D-RI) for shifting the program away from Congress’s intended purpose. Defining which types of infrastructure qualify for federal support, and how it will be distributed, will be one of the first pivotal points to this debate.

Funding or Financing, Public or Private

Further separating each of these plans is the balance between direct funding, financing, and private investment.

The democratic plans have generally called for upwards of $1 trillion in direct spending, while the White House’s plan hinged on using a smaller pool of federal funds to generate a surge in state, local, and privately funded projects. McConnell has signaled that he would prefer private investment to take a leading role. But perhaps paving the path for a future compromise, President Trump has been reported as voicing support for the democrat’s approach over his administration’s official position.

These key differences in approach to infrastructure will have to be reconciled to pass a comprehensive bill. BPC has previously supported an all-of-the-above approach, especially when it comes to funding and financing mechanisms for both public and private partners.

Leftover To-Do List

In addition to punting on a comprehensive package, the 115th Congress has left several infrastructure issues unresolved:

• The Farm Bill has been caught up in debates over immigration, trade, and work requirements for the Supplemental Nutrition Assistance Program, but it might still pass in the lame-duck session. If not, the bill’s fate will be decided by the new Congress, along with how support will be given for rural broadband and water infrastructure through the U.S. Department of Agriculture.
• The debate over placing guardrails on autonomous vehicles technology will likely remain unaddressed before 2019. The bill is currently stalled in the Senate following a series of high-profile accidents and deaths. The bill has also been stymied by cybersecurity concerns and a debate over preempting current state laws. With more pilot programs starting up around the country and new vehicle models being rolled out, there will be additional urgency for Congress to establish a national regulatory framework.
• In the final throes of this summer’s legislative session, Shuster previewed an upcoming issue for the new Congress—shoring up the Highway Trust Fund. Currently, the trust fund will run out of reserves in 2021. Revenues to the fund have long been insufficient. In fact, the fund has received $144 billion from the Treasury over the past decade since the gas tax has not been raised to match inflation or take account of increased fuel efficiency. Though Shuster is retiring at the end of his term, he released a plan that would raise the gas tax and other taxes over the next 10 years before phasing it out entirely (to be replaced by a to-be-determined source at the recommendation of a commission).

With these outstanding issues, upcoming deadlines, and a slew of campaign promises, 2019 could finally be the year infrastructure is addressed. It’s clear that each party has different priorities and approaches. If a bipartisan proposal is to come to fruition it will require party leaders to take their plans to each other, negotiate, and compromise over these key differences.