There are a lot of moving parts as Congress attempts to write and pass a massive infrastructure package. With tensions running high in Washington, there’s a good chance that things may not turn out exactly as planned. Cowen Research’s Chris Krueger laid out a set of potential paths the infrastructure effort could take over the next few months, providing a useful sense of both how unsettled the situation is and where we could end up in the fall.
Krueger identified four possible outcomes, in decreasing order of likelihood:
1. Two bills, with some tweaks: Critics are already complaining that the $973 billion infrastructure package agreed to by President Biden and a bipartisan group of senators doesn’t really pay for itself — as we noted Tuesday, Howard Gleckman of the Tax Policy Center says the financing proposals are little more than “pixie dust.” Krueger thinks the simple fix for that is to merge the infrastructure plan with the highway bill, a five-year, $715 billion spending package that House Democrats plan to vote on this week. Combining the two, which cover many of the same areas, makes sense, and could result in an infrastructure bill worth about $700 billion.
Whatever form the bipartisan infrastructure bill takes, Democrats are going to push for a second bill, passed on a partisan basis via reconciliation, to provide more spending on their social welfare and green energy priorities. Krueger pegs the size of the package at somewhere between $2.5 trillion and $3.5 trillion, with roughly half of it paid for.
2. One big reconciliation bill: If the bipartisan effort fails, Democrats will attempt to pass a single bill via the reconciliation process to fund their infrastructure plans, with the term broadly defined to include things like child care and climate change resiliency. In the absence of a companion bipartisan bill, the reconciliation bill will sweep everything into one package, with a price tag between $3.5 trillion and $4 trillion — basically the same overall as the first scenario, except for the political optics around bipartisanship.
3. Bipartisan bill only: In this scenario, the roughly $700 billion bipartisan infrastructure bill (or perhaps an expanded highway bill) gets to President Biden’s desk, but the reconciliation fails for some reason. Biden signs it, preferring to get something rather than nothing.
4. Goose egg: Republicans and Democrats can’t agree on a final spending package, and the latter then fail to come together to pass legislation on their own. Krueger says this is unlikely, but that “doesn't mean it is impossible.”
The base case for Kreuger is a package in one form or another authorizing between $3 trillion and $4 trillion in spending on infrastructure, which will likely include hard (roads and bridges), soft (human welfare) and green (clean energy) components.
Krueger adds an interesting historical note that could come into play: “Do not forget: per public comments, this is Speaker Pelosi's final term as Speaker. This bill is her swan song.”
