Dueling Proposals: Which Plan Will Transform America's Infrastructure?

In March, the Biden administration unveiled a $2.3 trillion infrastructure plan which included many proposals that specifically target the energy industry, including expanded renewable energy tax credits, mandates for utility system modernization, and transitioning the power sector to emissions-free electricity by 2035. Congressional Republicans responded by releasing a $568 billion counter-proposal which included a more limited scope of what qualifies as infrastructure. Since that time Biden has offered to cut his plan to $1.7 trillion, and Republicans have countered again with second counter-proposal of $928B.

The legislative process will determine the ultimate state of the bill, but these plans are beginning to converge on a final plan that will be approved by Congress. In the meantime, reviewing the similarities and differences between each party’s priorities will provide insight into what can be expected in the final bill.

 

President Biden’s American Jobs Plan

The original Biden Administration’s American Jobs Plan (AJP) was developed with the intent of creating a more resilient grid, improving air quality and public health, and beginning the path to achieving 100 percent carbon-free electricity by 2035.

Much of the initial $2.3 trillion investment was directed toward modernizing highways, roads, bridges, trains, buses, stations and airports. In addition, the plan also strived to enhance the US transportation infrastructure with zero-emission vehicle fueling and charging stations.

The plan also sought to establish a new Grid Deployment Authority at the Department of Energy, whose goal will be to facilitate the leverage of existing rights-of-way along roads and railways, and to support creative financing tools to spur additional high priority, high-voltage transmission lines.

To incentivize further development in new technologies, utilities will be eligible for research and development funding for demonstration projects, such as advanced energy storage, carbon capture and storage (CCS), green hydrogen, advanced nuclear, floating offshore wind, biofuel and bio-products, quantum computing, and advanced electric vehicle (EV) components.

In their second version of the plan, released on May 21, the Biden administration lowered the total price by shifting funding for research and development, reducing funding for rural broadband from $100 billion down to $65 billion, and cutting its new funding requests for “roads, bridges, and major infrastructure projects,” down from its original $159 billion to $120 billion. While concessions were made to get closer to the figure that Republicans would be amenable to, the general structure of the plan remained unchanged.

Industry Reactions to the AJP

Many national advocacy groups in the energy section have endorsed the Biden plan, including those in the nuclear, CCS, solar, wind and energy storage sectors. Unsurprisingly, fossil fuel advocacy groups have not, but the United Mine Workers union has expressed support of the AJP’s clean energy jobs program.

In a recent statement issued by Edison Electric Institute (EEI), President Tom Kuhn expressed support for the proposals of the AJP:

EEI and our member companies are pleased that President Biden and his Administration are focused on building and enhancing our nation’s infrastructure, and we welcome policies that create jobs and encourage investment in clean energy technologies, the energy grid, electric vehicle charging, and middle-mile broadband. 

In the statement, Kuhn goes on to express enthusiasm for nearly every facet of the plan, including clean energy initiatives, electric transmission and energy grid modernization, electric transportation and charging infrastructure, and broadband expansion.

It comes as no surprise that the AJP was received well by the energy industry, as utilities, regulators and developers are already well-versed in how to leverage tax incentives and clean energy mandates. Further, many of the initiatives being pursued by the Biden Administration align with those that utilities were already working to address.

The Republican Plan

Congressional Republicans panned the AJP as having too broad a definition of “infrastructure” and offered a more conservative five-year plan, with revisions being made on May 28. In their plan, GOP senators specifically define infrastructure as roads and bridges, public transit systems, rail, drinking water and wastewater infrastructure, ports and inland waterways, airports, safety, broadband infrastructure and water storage.

For categories that conform to more traditional definitions of transportation infrastructure, the counter-proposal budgets a comparable amount as the AJP does. Republicans argue, therefore, that their proposal is very similar to the president’s when it comes to transportation. One notable difference, however, is that the AJP calls for additional funding to promote electric vehicles (EVs) and the necessary fueling infrastructure, which will make EVs an important part of our transportation alternatives.

EV infrastructure notwithstanding, it is fair to say that transportation is the most similar category of the two plans, which diverge even further for other infrastructure. The single-largest spending item in the latest GOP plan is $506 billion for roads, bridges and major projects. This represents a $91 billion increase over their initial offer. Other increases include $48 billion for water infrastructure, $25 billion for airports, $65 billion for broadband and $22 billion for freight and passenger rail.

The GOP plan noticeably does not allocate any funding for upgrading America’s electric grid. Differences become more pronounced the further the categories are from the traditional definition of infrastructure, with the AJP including $400 billion for home or community-based care for aging citizens and those with disabilities. The GOP has made clear that though this may be needed, it does not meet their interpretation of what qualifies as infrastructure.

Another major departure from the AJP is how the Republican plan would pay for the bill. Republicans call for funding offsets to cover the cost of the programs, which essentially repurpose existing funding that Congress has already approved (primarily targeting unspent money meant for COVID-19 relief). Biden has proposed paying for his plan primarily by increasing the corporate tax rate from 21% to 28%, but Republicans rejected any corporate or international tax increases and any attempts to undo the 2017 tax cuts passed under President Trump.

 

The Compromise Plan

The latest Republican proposal is unlikely to gain much, if any, support from Democrats, but the outline will serve as a critical benchmark for future negotiations on a bipartisan bill.

Senator Shelley Moore Capito (R-VA) told reporters in the Capitol that she and the top Republicans on the committees that oversee infrastructure policies shared the information with the White House and have been in touch with the president about their proposal.

Capito, who is leading the GOP infrastructure push, said her goal is for congressional committees to lead the negotiation process. "The biggest message we want to put forward today is that this is important to us," Capito said. "We agree that these bills are necessary and that the committees of jurisdiction forge the compromise."

One of the main factors that will determine the shape of the final bill is whether the less controversial proposals of the existing AJP proposals will be carved out to create a bipartisan infrastructure plan, leaving the proposals that are less palatable to Republicans to be passed with solely Democratic support.

Several Democrats, including Senator Chris Coons (D-DE), have suggested that Congress look for such areas of agreement for a piecemeal approach. Coons, who is close with Biden, suggested passing the other elements through budget reconciliation, which requires only 51 votes rather than the 60 votes needed to overcome a filibuster. In a recent CNN interview Coons expressed his views as follows:

We are trying to get $2 trillion worth of infrastructure and jobs investments. Why wouldn't you do $800 billion of it in a bipartisan way? And then do the other $1.2 trillion, Dems-only, through reconciliation?

President Biden has not directly addressed such a possibility, but this is likely the path that will lead to the fastest approval of the bill in a tightly divided partisan landscape. It is worth noting that there is no guarantee that Democrats will be able to pass less popular portions of the bill later through budget reconciliation, as more moderate Democrats may have objections to the process.

Another possible outcome is that the bill will remain whole but would reduce spending to a point where the corporate tax rate would not need to be raised to such an extent, meeting at some compromise rate between the existing 21% and Biden’s proposed 28%. If certain proposals were excluded from the bill and others were limited, the total spending could feasibly be reduced to closer to $1.5 trillion, which would allow the bill to be funded by increasing the corporate tax rate to 25% or 26%. Previous analysis has suggested that Republicans would be more amenable to a rate increase on this scale, though it is unlikely that it will receive a sterling endorsement from the GOP.

A third approach will be for Democrats to abandon bipartisan efforts entirely, moving forward with a bill that does not have any Republican support. President Biden campaigned on an administration that focused on bipartisanship, but if negotiations with Republicans are not productive, then Democrats can rely on their narrow majority in both chambers of Congress to go it alone. If this were the case, the bill would likely include compromises directed at more moderate Democrats like Manchin (D-WV) and Sinema (D-AZ) instead of Republicans.

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