The Deal with the Infrastructure Deal
Electric school buses. Broadband access for all schools. Money to fix water systems in school buildings. And theater of the oppressor.
All these can be found in the 'bipartisan' infrastructure 'deal' that the Biden administration shepherded through a divided Senate. While certainly the bill is better than nothing--which had been the dominant policy over the last decade--we can and should be critical of it. Eleni Schirmer, badass researcher and organizer, asked whether I'd seen the proposed financing apparatus behind this policy at various stages of its anemic existence. I'd heard some rumblings about asset recycling and harumphing in the left-populist-antimonopoly crowd on twitter, but I hadn't dug into it. She sent me a couple pieces and, yeah, it's something socialists interested in education should know about.
C'mon man
The legislation resulted from a slow process of nixing good ideas. At one point, there were a ton of interesting finance concepts involved in the legislation. Progressives even wanted $10 trillion for green infrastructure that could create jobs and reduce emissions. But, alas. After weeks of radical moderate extremists outdoing each other in saying 'no' each of these ideas got cut along with more money for infrastructure. Ultimately, there isn't as much in the law to help people as there was in the beginning. But at least capitalists and their representatives are happy and can claim a win. That's what really matters!
Take the last two weeks as an example. An updated announcement about the bill, proudly advertising the important spending on the buses and water systems, had a cryptic little paragraph at the bottom titled "offsets":
In the years ahead, the deal will generate significant economic benefits. It is financed through a combination of redirecting unspent emergency relief funds, targeted corporate user fees, strengthening tax enforcement when it comes to crypto currencies, and other bipartisan measures, in addition to the revenue generated from higher economic growth as a result of the investments.
The largest source of funding is $205 billion of repurposed COVID money. The cryptocurrency tax would take on the supposed $2 trillion of exchanges happening in that market (though who knows what a cryptocurrency really is, meant to generate $28 billion. One of the "other bipartisan measures" is delaying a medicare rebate. Awesome.
But then over this last weekend the 'crypto lobby', or maybe we should call them cryptokeepers, descended into the hot haze of Foggy Bottom and spooked the negotiators. The tax on crypto was almost nixed, but not quite. The bill ends up being worth $1.2 trillion, spending $500 billion of 'new' money, meaning funding that wasn't just laying around going unspent.
Despite the fanfare the whole thing is a little depressing. This bill started at $1.5 trillion of new spending, went down to $579 billion, and then to $550 billion, and ended up a bit less than that. Both Democrats and Republicans have used the deficit myth to justify cutting this legislation down: we can't pay for this, how are we going to pay for this, we can't add to the deficit, I don't support such an expensive bill, etc. Lots of "no, we just can't do that for you, sorry."
Smartly, Democrats passed the bipartisan deal and then went right into a budget resolution process to appease progressives in Congress, who could block the smaller moderate deal. It's not $10 trillion but it's pretty good. I'm looking it through it now.
Coulda been cool maybe
Looking back at those previous iterations of the infrastructure bill, several sort-of-interesting finance ideas have gone by the wayside as the pricetag has been cut. When the bill was for $579 billion, a document listed eleven sources of revenue.
One of them was giving the IRS more resources to collect taxes from high earners. That's not terrible! Cut. Then there was the idea to index the gas tax to inflation, which, I don't know, fine I guess to incentivize lowering emissions? Cut. And adding a surcharge to electric vehicles? Not as good, but the cars are still commodities that could generate revenue and don't. These are basically taxes on the 'middle class' (and apparently there was fear of an American yellow vest protest), so there was ambivalence about them. Cut.
There were two ideas that were even better than these. One was an infrastructure finance authority, which sounded pretty neat and had the municipal bond community clutching their pearls. The second was direct-pay municipal bonds for infrastructure which, as long as they weren't just handouts to ruling class bondholders and instead made the federal government the bondholder for local governments, would have been cool. We didn't get any details about these though: how would they work?
Such questions don't matter now since all that's out the window. They both got cut. At least, all the stuff that doesn't fit under the category of "other bipartisan measures," which largely just means good ol' fashioned neoliberalism. Here's a breakdown of two such finance mechanisms they could have snuck and then did sneak in to get this done (h/t David Dayen, who you should always read):
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["Private activity bonds"] (https://www.investopedia.com/terms/p/privateactivitybond.asp): a softer version of a scheme pushed in the Trump administration of tax-exempt bonds to entice investors into infrastructure projects. It lets local and state governments issue bonds on behalf of private companies. This ultimately made it in! Ugh.
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"Asset recycling": mentioned earlier, this is an idea imported from Australia, which is really just an enormous shell game. It involves selling off public infrastructure to acquire the resources to build new infrastructure.
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Public-private partnerships: should sound familiar to anyone with a basic awareness of neoliberalism, more privatizing of public infrastructure when government 'partners' with private firms and gives away the store.
Listen to Alan Greenspan
The whole thing felt like a performance to me. These senators were like rich students at a boarding school working on a group project that none of them really cared about, who all know they'd be fine no matter happened, but want to keep up appearances so kept at it anyway.
Aside from the spectacle, it's the shrinking amount of spending and the deficit talk that get me most depressed. To these senators, helping people is just too expensive. Climate disaster, mediocre infrastructure, and not creating thousands of jobs is preferable because its...'affordable'?
This is malicious learned helplessness. Like Alan Greenspan explained to Paul Ryan back in the late 2000s, the federal government can create as much money as it wants and control inflation with the Federal Reserve. When these senators say we can't afford to do something, what they're saying is that they don't want to. It's a political question and their politics are to not help people.