From Sea to Shining Sea: A Bold Bipartisan Plan to Rebuild American Infrastructure

By including most baseline spending, Republicans make their package appear larger. The Republican $568 billion plan includes current funding levels—the baseline—in all but its broadband numbers.

By excluding all baseline spending, Democrats make their package appear smaller. The president, in contrast, underrepresents the true costs of his proposal by neglecting to include the $360 billion in baseline infrastructure funding and by undercounting the cost of renewable energy tax credits. When including these expenditures, the true cost of the administration’s plan approaches $3 trillion over eight years.

Five years vs. eight years. The timeframes for both expenditure and revenue differ between the two proposals. The Republican plan proposes that federal resources be spent in five years—which is traditional for surface transportation authorizing legislation. Note, the recently passed S. 914—adopted on April 29 with an 89-2 Senate vote—reauthorizes federal water programs for five years. The president similarly seeks to authorize federal surface transportation programs for five years, but other program spending is authorized over eight years. Adjusting the administration plan to five years, assuming “straight line” spending, reduces its cost from nearly $3 trillion to just over $2 trillion.

Both the administration and Republican plans propose to spend federal resources faster than they raise them. The Republican plan proposes to spend in five years and pay in 10. The administration’s plan, as written, proposes to spend over eight years and pay over 15. While disassociating revenue and spending timeframes is not per se inappropriate, the lack of contemporaneous revenue will place upward pressure on the federal debt, as Congress can be expected to continue to expend resources between 2027 and 2037 with a more limited set of revenue options. On a more positive note, delayed offsets are preferable to direct deficit spending; both parties should be acknowledged for the attempt to pay for these investments.

BPC’s proposal takes the following approach:

• We include the baseline for surface transportation programs and assume new spending for all other areas;
• To be consistent with the five-year window for reauthorization of surface transportation programs, we compare all three proposals over five years; and
• We include both five and 10 year projections for our revenue proposals—except for the baseline motor fuel revenues to the Highway Trust Fund, which are only scored for five to match the spending.

BPC takes a broad view of physical infrastructure. The president’s proposal expands the definition of infrastructure to encompass a broad combination of administration priorities—many of which stray beyond the traditional understanding of infrastructure as the built environment. Conversely, the Republicans’ constrained focus on surface transportation is not adequate to address economic recovery from the COVID-19 pandemic or provide a basis for bipartisan legislation that takes priority over a partisan reconciliation strategy.

BPC proposes a package of $1 trillion in spending over the next five years. BPC’s proposal prioritizes traditional infrastructure projects that will put Americans back to work, expand digital access that is essential to participation in the 21st century economy, provide child care facilities so that parents can return to the workforce, grow the supply of affordable homes to provide construction jobs and a foundation for employment, and promote infrastructure that is consistent with the imperative to decarbonize the economy. Importantly, the key provisions in BPC’s proposal all have a strong history of broad ideological and bipartisan support. In most cases, there is pending bipartisan legislation that aligns with these provisions.

Historically, there has been strong bipartisan support for incremental and common-sense improvements to the federal environmental review and permitting process. Such measures were included in transportation reauthorization bills passed in 1998, 2005, 2012, and 2015. Moreover, Republican and Democratic administrations have authored generally consistent guidance documents, issued executive orders, and launched other initiatives designed to improve the National Environmental Policy Act (NEPA) process.

BPC’s Executive Council on Infrastructure found that unnecessary delays in the environmental review and permitting process add to project costs, slow the delivery of needed—often cleaner—projects, and discourage private capital from investing in U.S. infrastructure. For many private investors, the risk of changing political dynamics is simply too great if the time between project conception and construction is several years. The imperative to achieve net-zero carbon emissions by 2050 is an enormous undertaking that will not succeed unless we modernize our permitting processes to match the required breakthroughs in energy technology. There are both important small steps and innovative approaches Congress must take to ensure we can build all our infrastructure faster without jeopardizing our environment and while taking into full consideration the interests of affected communities. Recently, BPC’s Smarter, Cleaner, Faster Infrastructure task force released 23 policy recommendations to accelerate the deployment of clean infrastructure, including:

• Congress should support coordinated federal, state, and local agency action by requiring, to the extent possible that:
  • A lead agency be designated to lead multiagency environmental reviews and work collaboratively to develop a single permit plan and permitting timetable for the necessary environmental review and approvals;
  • Participating agencies raise and adjudicate any issues that might limit schedule adherence early in the process and work concurrently rather than sequentially; and
  • The lead agency and participating agencies prepare a single environmental document and sign a single record of decision.
• Congress should reauthorize FAST-41;
• Congress should direct agencies to maximize the use of programmatic reviews for all types of infrastructure projects and direct the administration to coordinate and transparently maximize the use of categorical exclusions (CEs) for clean infrastructure projects
• Congress should expand NEPA assignment pilots and further look toward piloting NEPA assumption programs to allow states with state-level environmental laws—that are as stringent or more than federal requirements—to assume federal NEPA responsibilities along with federal audits and monitoring.
• Congress should allow applicants to prepare environmental documents, while maintaining requirements for federal agencies to retain responsibility for oversight, transparency, and the final document.
• Regarding the Federal Permitting Improvement Steering Council (FPISC), Congress should:
  • Remove the sunset and merge it with CEQ;
  • Improve the FPISC’s ability to accelerate clean infrastructure projects by expanding the number and types of projects eligible and by assigning and funding dedicated staff to ensure clean infrastructure projects are efficiently reviewed and permitted;
  • Require federal agencies to adopt remedial plans when they fail to use CEQ/FPISC best practices for efficient and effective execution of their authorizations and environmental reviews; and
  • Ensure that FPISC is finalizing and operationalizing the Environmental Review Improvement Fund.
• Congress and the administration should maximize use of the Permitting Dashboard, requiring all NEPA analyses to be included on the site along with permitting timetables, plans, and project details.
• Congress and the administration should support improving public engagement by codifying the NEPA 2020 regulations’ expansion of scoping and directing all agencies to prioritize early engagement and consensus building.
• Congress should provide the training, support, and staff salaries and expenses funding necessary to ensure agencies have sufficient resources to conduct accelerated, coordinated reviews and permits.
• To ensure representation of underserved communities, Congress should:
  • Ensure underserved communities have the necessary resources to participate in the environmental review and permitting process;
  • Codify CEQ’s 2011 mitigation guidance and support well-established compensatory mitigation programs; and
  • Direct CEQ, in its capacity as Chair of the White House Environmental Justice Interagency Council, to provide comprehensive direction regarding the consideration of disproportionate and adverse environmental effects and the use of mitigation to reduce such effects.

Pre-Approve Projects on Mass Scale. Congress should create a state grant program for states to identify and pre-approve sites for clean infrastructure projects and direct the administration to pre-approve federal land for clean infrastructure projects with aggressive target goals for capacity. Further, Congress should authorize a new National Grid Planning Authority and update the Energy Corridors program to reflect current clean infrastructure needs.

Race to Net-Zero Grants. Congress should authorize a new, competitive grant program to create an incentive for states to work as quickly as possible to reduce their own greenhouse gas emissions. Under such a program, states would be eligible for several rounds of competitive grants for planning and building clean infrastructure projects, permitting streamlining and harmonization to speed the deployment of clean infrastructure, and achieving actual emissions reductions compared to baseline. This proposed program recognizes the unique role states play in our federal government and that actions at the state level are just as important as action at the federal level.

BPC’s Executive Council on Infrastructure estimated that there could be as much as $250 billion of private capital ready to invest in American infrastructure projects over the next five years. But to achieve this level of investment, Congress must first take several important steps:

• Eliminate the volume cap on private activity bonds;
• Restore advance refunding bonds;
• Authorize a new direct payment bond;
• Enact the “Building Faster” reforms noted above;
• Require state and local governments and federal agencies to conduct asset inventories and adopt asset best practices, such as life-cycle cost analyses;
• Require projects receiving federal funding to conduct public-private partnership screens, using value-for-money analyses to select the most efficient and cost-effective project delivery method; and
• Provide technical assistance and support state and local capacity building to promote the use of innovative project delivery and financing options.

Further, in the distribution of federal infrastructure funding, Congress can ensure that jobs are created and sustained locally by encouraging greater small business participation in procurement opportunities. Congress can do this by:

• Simplifying RFP processes and requirements so small businesses are not discouraged from applying;
• Creating greater transparency in bid processes so small, local companies are aware of procurement opportunities around infrastructure;
• Reducing the regulatory burden that small business contractors face; and
• Strengthening accountability for prime contractors in their use of small businesses for subcontractors.

$75 Billion – Foundational Investments that Enable and Support Work The pandemic revealed critical weaknesses in systems that support and enable work. In infrastructure legislation, BPC believes Congress should prioritize two critical physical infrastructure inadequacies that are impeding workforce participation—inadequate child care facilities and the shortage of affordable homes.

Child Care – $25 billion in one-time funds to be expended over five years. There are over 129,000 child care centers and 1 million in-home child care providers in the U.S. An investigation in 10 states conducted by the Health and Human Services inspector general found that 96% of child care inspections during unannounced visits had one or more potentially hazardous conditions and noncompliance with health and safety requirements. The Environmental Protection Agency has found that approximately 500,000 child care facilities are not even regulated for lead in drinking water. Child care businesses operate on razor-thin margins and lack the capital to invest in facility improvements and there is no public source of funding to support improvements.
The National Children’s Facility Network estimates it would take $14 billion to bring existing facilities up to standards. In addition, BPC’s state analysis of the potential need for child care and the existing capacity shows a nationwide gap of 32%. Another $11 billion in capital investments would buy an additional 655,000 new child care spaces.

Housing – $50 billion over the next five years. One of the enduring lessons of the COVID-19 pandemic is the fundamental necessity of a home. In addition to providing safety and sanctuary, homes have become the center of much of our economy and education. The annual supply of new homes is running at least 100,000 behind new housing demand. The attendant supply-demand mismatch falls most heavily on low- and moderate-income families, burdening millions of families with rents that often exceed 50% of their monthly paychecks. The administration’s American Jobs Plan proposes to invest $213 billion over eight years ($133 billion over five years), with the aim of producing, preserving, and retrofitting more than 2 million affordable homes. A bipartisan path forward, if investments in housing are coupled with more traditional “infrastructure,” would advance the elements of this proposal that traditionally garner strong bipartisan support and most directly address the severe shortage of affordable homes, strengthening families and supporting a more robust economic recovery:

• A 50% expansion in the Low Income Housing Tax Credit (LIHTC). With other key reforms, an expansion of the LIHTC—as previously proposed by BPC and included in the bipartisan Affordable Housing Credit Improvement Act—would increase affordable housing production and the supply of affordable homes.
• A new federal tax credit for home rehabilitation and construction. Bipartisan legislation—the Neighborhood Homes Investment Act (NHIA)—was introduced and later included in the Biden administration’s infrastructure plan to direct investment in the development and renovation of single-family homes in distressed urban, suburban, and rural neighborhoods. Each $1 billion in NHIA investment is estimated to support 25,000 homes built or rehabilitated and 33,393 jobs in construction and construction-related industries
• Preserve public housing. About 2.2 million people in nearly 1 million low-income households live in public housing. Yet nearly half of the public housing stock was built before 1970, resulting in significant maintenance and rehabilitation needs. As previously proposed by BPC, and included in the American Jobs Plan, additional funding of $4 billion annually is needed to address the capital backlog in public housing. However, these dollars should also lift programs like HUD’s Rental Assistance Demonstration program, which brings in private capital to support revitalization and modernization efforts.

New home-building activity will have a substantial ripple effect throughout the U.S. economy, leading to the creation of tens of thousands of jobs, more income for local businesses, and greater tax revenue that can help fund essential services. Improving access to stable, affordable housing can also lead to better health outcomes for families and stronger academic achievement for children.

Balancing User Fees and Corporate Taxes – BPC proposes federal infrastructure spending of $1 trillion over the next five years, including baseline spending of $360 billion plus additional spending of nearly $700 billion. BPC believes that this spending should be principally offset by a combination of user fees and corporate tax increases proposed in the Democrat and Republican plans. This balance will address the regressivity and competitiveness concerns that result from relying solely on one approach or the other. In addition, we have identified offsetting savings that can be derived from fees on private-sector beneficiaries of taxpayer investments and opportunities to reprogram some funds that remain unspent from previous federal economic relief legislation and can be better applied toward economic recovery. Finally, we believe that changes accelerating infrastructure permitting and efforts to encourage private investment noted above will result in hundreds of billions in additional private-sector funding to augment public investments.

User Fees – The first principle that should apply to funding infrastructure is simply that those who primarily benefit directly from increased infrastructure spending—passenger vehicles, freight transporters, internet users, electricity
consumers—should shoulder much of the increased costs.

Therefore, BPC proposes to offset the $500 billion of spending on surface infrastructure with targeted user fees, including an increase in excise fees on motor fuels—currently 18.4 cents per gallon of gas and 24.4 cents per gallon of diesel fuel and unchanged since the last increase in 1993. Increasing these taxes by 15 cents and indexing for inflation would offset some of the increase in the proposed surface transportation expenditures.

However, the “gas tax” cannot sustain the Highway Trust Fund long term given the rise of fuel-efficient and electric vehicles. In 2020, over 810,000 vehicles were sold in the United States with some form of electric or hybrid engine capacity—a 70% increase from 2015. Some estimates suggest electric and hybrid vehicles could comprise more than 60% of the purchase market by 2030.

To ensure that all those who use the roads help pay for them and institute a long-term solution to the HTF, Congress should expand on efforts to begin the transition to a Vehicle Miles Travelled (VMT) fee. The Federal Highway Administration’s Surface Transportation System Funding Alternatives (STSFA) is already funding several state pilot programs to begin testing VMT systems. Congress should dramatically expand the STSFA grant program and mandate that each state DOT develops and begins testing a plan to implement a VMT user fee, deploying the best practices derived from existing pilots.

Corporate Taxes – Investments in our public infrastructure will increase private-sector productivity, create jobs, and result in economic growth. It is appropriate that business tax rates be increased to offset a portion of the additional public expenditures in a manner that doesn’t hurt long-term growth. BPC recommends an increase in the corporate tax rate from 21% to 25% to fund approximately $400 billion over a 10-year period. From a competitive standpoint, a 25% federal corporate tax rate would be near the OECD weighted average of 25.85%.

Tax Compliance – In addition, it is conservatively estimated that nearly $300 billion in federal income taxes owed but unpaid could be collected over the next decade with increased tax compliance.

The Transition from Crisis to Recovery – The federal government has expended nearly $6 trillion over the last year to combat the pandemic. Most of this spending was necessary and essential to turning the tide of the public health crisis. However, some of the spending authorized has not been spent and is not expected to be outlaid for many years to come. Reprogramming a portion of these funds through the budget rescission process can provide needed monies now for funding current infrastructure needs. Conservatively, we believe that $150 billion, less than 3% of committed spending, should be reprogrammed to support the nation’s economic recovery. Some examples follow:

• FEMA Disaster Relief Fund ($47 billion/American Rescue Plan Act): Of the $50 billion authorization under the bill, CBO expects only $47 billion of spending, 52% of which will occur from 2023 through 2030.
• The Higher Education Emergency Relief Fund ($39.6 billion/American Rescue Plan Act): CBO projects that 50% of this funding will spend out from 2023 through 2028.
• Economic Injury Disaster Loan (EIDL) program ($475 billion/Paycheck Protection Program and Health Care Enhancement Act): Funded with $50 billion in loan subsidy, around $200 billion of EIDLs have been approved to date, and loan approvals have stalled in recent months, leaving $275 billion still available. Barring anything unexpected with respect to the virus and the economy, the vast majority of this $275 billion in remaining authorization will remain unspent—representing around $21 billion in remaining loan subsidy.

The three principles and the offset examples accompanying them provide revenues more than sufficient to cover BPC’s proposed $1 trillion, five-year investment in our nation’s infrastructure.

^{1 bridging-global-infrastructure-gaps-full-report-june-2016.pdf (mckinsey.com)}