You’ll undoubtedly be hearing about the nearly $1 trillion infrastructure package all week as the Senate pushes to pass the bill — and for months to come as the House eventually takes up the legislation and a related $3.5 trillion budget reconciliation package.
While the bipartisan infrastructure legislation is historic and undoubtedly large — like we said, more than 2,700 pages — it’s worth putting the $550 billion in new spending in some context.
The new spending in the package is spread out over five years, meaning it averages $110 billion a year. Even without those additional outlays, the federal government is already projected to spend $28.1 trillion over the next five years, according to estimates released last month by the Congressional Budget Office. (Mandatory spending — most notably on programs including Social Security, Medicare and Medicaid — accounts for more than $18 trillion of that total.) In other words, the $550 billion in new spending represents an increase of less than 2%.
Meanwhile, revenues over the next five years are projected to total about $23.4 trillion, leaving cumulative deficits over that time of more than $4.7 trillion. The Congressional Budget Office hasn’t yet scored the new infrastructure bill, but we should find out before long whether it sees the package as being fully paid for, as negotiators say it is, or whether it will add to those deficits.
Now let’s look at the reconciliation package, which Democrats are currently targeting at $3.5 trillion in spending and tax credits over 10 years, for an average of $350 billion a year. Democrats have said that their budget package will be fully paid for with tax increases and other revenue, but moderate Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) have expressed concerns about the size of the package and whether its cost will be fully offset. They may still press for cuts or changes.
But just how massive would a $3.5 trillion package be? As of last month, CBO projected total federal spending over the next decade at $63.4 trillion, with annual outlays rising from $5.5 trillion to $7.8 trillion. The Democratic budget package thus represents a 5.5% increase in spending, or a 6% increase if you exclude the cost of interest. (Net interest payments on the debt are projected to rise from $306 billion next year to $396 billion in 2025 and $910 billion by 2031, meaning that they will eventually dwarf the proposed new spending.)
Revenues over the next decade are projected to total $51.3 trillion, and deficits are expected to add up to a combined $12.1 trillion.