The $1 Trillion Infrastructure Bill Spends a Lot More Money on the Same Old Highway Programs

“The $1 trillion infrastructure bill that President Joe Biden signed into law..dumps a lot of new money into existing highway programs to be spent by state departments of transportation (DOTs).
The price tag of the bill—which includes $550 billion in new spending, $110 billion of which is earmarked for highways and bridges”

“by mostly topping off existing programs, it will largely maintain a status quo where some states deploy their highway dollars effectively, while others continue to set them on fire in the hopes that that will produce better roads.”

“That would include places like New Jersey, which ranked last in a report on state highway performance released by the Reason Foundation today.

The Garden State, per the report, spent $1,136,255 per mile of state-controlled road in 2019 while also having some of the worst urban congestion and pavement conditions in the country.

That’s well above more cost-effective states like Virginia. It managed to spend only $34,969 per mile of state-controlled roads while also having above average pavement quality and slightly worse-than-average congestion. (Virginia ranked second overall in the Reason highway report, right behind North Dakota.)”

“Feigenbaum says part of New Jersey’s high expenditures can be chalked up to the high design quality of its highways, which have generally wider lanes and straighter curves in order to improve safety. (It ranks fourth in the Reason report in terms of overall fatality rate). But he also says a lot can also be explained by a cronyist state DOT that’s dominated by political appointees.

A state like Virginia has been able to keep up road quality while keeping overall road spending in line by having a more professionally run DOT, he says. It also makes heavy use of public-private partnerships, whereby private companies put in their own capital to rebuild or expand highways in return for being able to charge tolls on the lanes that they build, says Feigenbaum.

In keeping with its “spend more on the same old programs” nature, Biden’s new infrastructure bill does remarkably little to advance public-private partnerships or expand the interstate tolling that supports them.

The infrastructure bill does increase the amount of private activity bonds (tax-exempt bonds issued by a private company to fund an infrastructure project) that can be issued from $15 billion to $30 billion. It also reauthorizes a handful of limited programs that allow states to use tolls to reduce congestion or rebuild bridges. But it leaves in place a general prohibition on tolling interstate highways.

The overall trend in highway spending over the past decade has been higher spending and marginally improved roadway quality, says Feigenbaum, with some states standing out for either their innovations or their wastefulness.

The new infrastructure bill will likely produce more of the same.”

The bipartisan infrastructure law is both historic and not nearly enough

“About $550 billion of the $1.2 trillion law is new spending, which will be spread out over five years. The remaining $650 billion in the bill would have been allocated for existing transportation and highway programs under previously planned funding.
The new money in the bill will go toward a wide range of projects, including road repairs, high-speed internet services, and investments in electric buses. Notably, the infrastructure bill was backed by both Democratic lawmakers and some Republicans, and was the culmination of years long attempts to advance infrastructure legislation that’s spanned presidential administrations.

While it’s a landmark investment, the legislation only authorizes a fraction of the funding required to tackle the entirety of the US’s infrastructural challenges. Across specific categories of the bill, including lead water pipe replacement and broadband, it’s likely to take much more than what’s already been allocated to fully solve issues of access, safety, and equity. The bill includes $15 billion specifically for addressing lead pipes, for instance, while experts believe it will take $60 billion to actually replace every lead pipe in America.

Still, the passage of this bill — which contains critical funding that the country has needed for decades — is significant, and an important down payment for future investments.”

How Biden’s infrastructure win falls short in one big area

“The bill, H.R. 3684 (117), is historic in its scope with $550 billion in new money funneled into hard infrastructure, from overhauling bridges to supercharging Amtrak’s most popular rail corridor in the Northeast. But it falls far short of Biden’s original vision, which promised to dramatically reduce the climate impacts of transportation, the single largest source of pollution. In the end, the final product was the victim of the bipartisan focus it took to get the bill done and is an example of the razor thin governing majority Democrats must navigate.”

Inflation Will Make Government Budget Problems Worse

“inflation is real. The all-item consumer price index (CPI) was up more than 5 percent on a year-over-year basis for July, August, and September, and now shows a 6.2 percent increase for October—the largest jump since 1990. The Fed considers 2 percent inflation to be its bright-line monetary policy goal. Obviously, there is a large gap between that and what we are seeing on the ground.”

“Individuals whose salaries, wages, Social Security payments, and even mortgage interest or rental rates are automatically adjusted for inflation have much less to worry about than their neighbors on fixed salaries, who must cope with ballooning grocery bills or pay twice as much at the pump. On these grounds, inflation may be devastating for some and almost meaningless for others. These gaps widen as inflation gets worse.”

“The rate of inflation gets captured in interest rates that borrowers must pay, especially for longer-term debt. Lenders hope to be paid back with at least as much purchasing power. If they believe inflation will tick away at 4 percent, interest rates tend to rise with this baked-in expectation.
In any case, higher interest rates mean higher interest costs on all forms of public and private debt. As a result, mortgage rates will rise, all forms of construction will suffer, and businesses will postpone making large investments in plants and equipment.

Now consider the public debt—especially the federal debt that ballooned from large deficits in recent years. (In 2020, federal revenues were $3.4 trillion and spending was $6.6 trillion.) The interest cost of the national debt in 2008 was $253 billion and remained at about that level through 2015. Even though the debt doubled in those years, sharply falling interest rates and low inflation worked to contain costs.

But that was yesterday. With today’s higher inflation and rising interest rates (perhaps with more to come), the Congressional Budget Office (CBO) estimates the interest cost of public debt to be $413 billion in 2021. Obviously, any dollar spent on interest cannot be spent on government benefits and services to taxpayers.”

The US is about to make the same pandemic preparedness mistakes — again

“Outside experts have estimated that as much as $75 billion should be spent over 10 years on public health infrastructure, preparedness, and prevention.

The revised Build Back Better legislation totals roughly $10 billion in public health infrastructure and pandemic preparedness funding over the next few years — a down payment on better readiness, in Democrats’ view, but one without assurance of future installations.

“All too often, when there’s a crisis, the reaction is to put money into public health. Once the crisis subsides, the funding tends to dry up,” Ron Bialek, president of the Public Health Foundation, told me. “This is not a recipe for success.””

Why Biden’s $3.5 Trillion Spending Plan Would Be Worse for the Economy Than Manchin’s $1.5 Trillion Proposal

“The larger spending package would increase government debt at a faster rate, which would increase the amount the government has to pay in interest. In the $3.5 trillion scenario, higher levels of spending and higher amounts of government debt “crowds out investment in productive private capital. Less private capital leads to lower wages as workers become less well-equipped to do their jobs effectively,” the report states.

Now, the PWBM has completed an analysis of the $1.5 trillion framework that Manchin reportedly offered as an alternative. In order to do the estimate, PWBM analysts assumed that Manchin’s proposal would increase spending by about $540 billion for means-tested childcare programs, like universal pre-K; $439 billion for a five-year extension of the expanded Child Tax Credit; $260 billion for public infrastructure; and $260 billion for other assorted government spending.

That’s still a lot of money, and there are still some negative long-term consequences—but the most important part of Manchin’s proposal is that it does not require additional borrowing, and relies on smaller tax increases than what President Joe Biden has proposed. As a result, government debt would actually fall slightly over the next 30 years. The tax increases would reduce private capital by less than 1 percent by 2050—as opposed to the 6.1 percent drop that would come with the passage of the larger reconciliation package. Wages and national GDP would remain flat under the $1.5 trillion plan, instead of the projected decline under the $3.5 trillion plan.

What the report essentially says is that Manchin’s proposal would be less bad than the $3.5 trillion proposal.”

“It is a little bit crazy that everyone in Washington is talking about $1.5 trillion as a small sum of money. What Manchin is willing to support would cost about $500 billion more than the Obama stimulus, even after adjusting for inflation. And this isn’t an emergency spending plan meant to float the country through a recession—it’s a massive increase in government spending at a time when the economy is growing significantly (despite the weirdness in labor markets and supply chains).”

What Did Public Schools Do With COVID Relief Money? Whatever They Wanted.

“The federal government sent around $190 billion in aid to public schools across the nation during the COVID-19 pandemic. That is a lot of money by any standards, but in terms of federal spending on primary education, it is a shockingly large amount: as Reason’s Matt Welch explained when surveying the Biden administration’s weak moves toward promoting public school reopening back in February, that’s more than four times as much as the federal government tended to push toward K-12 education a year in pre-COVID times.

Is the money being diligently used for its intended purpose? Of course not. A survey by ProPublica found, when examining some of the “provisional annual reports…by state education agencies” for about $3 billion worth of the aid from March to September of 2020, that “just over half of the $3 billion in aid was categorized as ‘other,’ providing no insight into how the funds were allocated.”

Over the last school year, 15 states constituting around a quarter of the total U.S. population didn’t even manage to achieve 50 percent effective in-person education, the alleged purpose of all that federal COVID money.”

“”The law places few restrictions on how districts can spend the federal aid, as long as the investments are loosely connected to the effects of the pandemic,” ProPublica explains, while noting that various districts, as reported by the Associated Press, are diverting the cash to athletics. The schools are supposed to spend all the money by 2024. The Associated Press reports that although schools “are required to tell states how they’re spending the money…some schools are using local funding for sports projects and then replacing it with the federal relief—a maneuver that skirts reporting requirements.””

How Democrats Could Hide $2 Trillion in New Spending With Budget Gimmicks

“Democrats are reportedly considering a one-year extension of the expanded child tax credit, which pays parents $3,000 annually for every child (and an extra $600 for kids under age 6) and is paid out as a refund even for families that owe no federal taxes. Previously, Biden’s plan called for a five-year extension of the child tax credit. As I wrote in September, the five-year extension was a budget gimmick designed to make the tax credit appear to be roughly $700 billion less expensive than it otherwise would be within the standard 10-year budget window. In short, Democrats were signalling that the expanded child tax credit would be permanent, but they were only accounting for half of what it would actually cost to make it permanent.

A one-year extension would be mashing that same “gimmick” button even harder.

In a similar way, Democrats are also reportedly considering a shorter-than-planned extension of the expanded Obamacare subsidies made available during the pandemic. Instead of being extended permanently, those provisions would technically expire after three years—even though everyone knows they are likely to be extended past that sunset date.

“These proposals don’t actually shrink the package; they just shorten it,” says Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB), a nonprofit that advocates for balanced budgets. The CRFB estimates that the twin “blatant budget gimmicks” involving the child tax credit and Obamacare subsidies could hide between $1.5 trillion and $2.4 trillion in future spending, depending on other trade-offs in the final package. Even if the final bill is $1.9 trillion and requires no new borrowing on paper, the CRFB warns that the actual price tag could be as much as $4 trillion with much of the hidden cost financed by adding to the deficit.”

40 Years of Trillion-Dollar Debt

“Rising costs of entitlement programs and the interest on the debt itself are the primary reasons why the debt will keep growing. In other words, even cutting a lot of discretionary spending would have little effect on the debt at this point.

The guilty parties are, well, both parties. It was fitting that the debt hit the symbolic $1 trillion figure during Reagan’s presidency, as the Gipper ignored his own warning. Republicans have spent much of the past 40 years venerating Reagan as an icon of conservative values, including supposedly limited government. And while his successors ran up far larger amounts on the nation’s credit card, Reagan saw the government surpass not only the $1 trillion debt threshold but also the $2 trillion threshold.”

“The guiding principle for today’s Democratic Party is the idea that debt doesn’t really matter if interest rates remain low. So long as the cost of servicing the federal debt stays below 2 percent, policymakers should not be restrained by the “traditional idea of a cyclically balanced budget,” Larry Summers, Clinton’s treasury secretary, and former Obama economic adviser Jason Furman argued in an influential paper published last year.

But the past 40 years would suggest that lawmakers have almost never been restrained by the idea of balanced budgets—a few brief interludes of fiscal sanity notwithstanding.

It took nearly two centuries for America to accumulate $1 trillion in public debt. It took 40 years to increase that amount 28 times over. If we refuse to address the breakneck speed at which America spends money it doesn’t have, how long until Clinton’s warning is realized, and that debt deals with us?

Los Angeles Is Squandering $1.2 Billion While Homeless Face a ‘Spiral of Death’

“Five years after Los Angeles voters approved a $1.2 billion bond measure and a countywide sales tax hike to raise another estimated $355 million annually to solve its homelessness problem, there are more people living and dying on the streets than ever before.

Many of these men and women are both frequent targets and perpetrators of violence.

Mayor Eric Garcetti (D), who did not respond to our interview request, has partially blamed this failure on the pandemic, which slowed new housing construction and limited shelter capacity. It’s true that COVID caused a surge in homelessness, but the city’s plan was already failing.”

“The centerpiece of L.A.’s plan was to spend the $1.2 billion raised through Proposition HHH to build 10,000 supportive housing units over a decade. Even if the government were able to pull that off, it would merely put a dent in the problem in a city where more than 30,000 people are living on the streets and sidewalks according to the 2020 homelessness count.

Five years into the 10-year plan, just 14 projects are in service. Of the promised 10,000 supportive housing units, the city has completed fewer than 700.

It would take more than 30 years to house all of the people currently homeless in L.A. county at that pace, according to a federal court order.”