One Big Accounting 'Gimmick' in the Infrastructure Bill

By Yuval Rosenberg

Good evening, fiscal followers!
President Biden said Tuesday afternoon that the Centers for Disease
Control and prevention would soon issue a new eviction moratorium
aimed at protecting renters after an earlier moratorium expired a
few days ago — and after the administration said he lacked the
authority to renew it. Biden warned that the new moratorium "is
likely to face obstacles" given a recent Supreme Court decision
that the previous one wasn’t legal. Here’s what else is going
on:

Bipartisan Infrastructure Bill Still Relies on One Big
Accounting ‘Gimmick’

The bipartisan infrastructure bill is slowly making its way
through the Senate. While Senate Majority Leader Chuck Schumer
(D-NY) and Minority Leader Mitch McConnell (R-KY)
continue to squabble over the pace of progress and
the consideration of amendments, the package still faces some
serious questions over its proposed financing.

The Washington Post’s Jeff Stein
reports that, even as Senate negotiators scrapped
some criticized financing measures from the bill, budget watchers
say they’re still relying on some fuzzy math and creative
accounting as they look to pay for some $550 billion in new
spending.

"Before, they were doing four or five gimmicks. Now they
just picked one gimmick and just made it much bigger," Marc
Goldwein, a budget expert at the nonpartisan Committee for a
Responsible Federal Budget, tells the Post. "So, maybe less in
style points."

CRFB estimates that the proposed offsets in the legislation —
revenue and savings from repurposing unused COVID relief funds,
lowering prescription drug costs, improving cryptocurrency
information reporting and a host of other measures — will only
raise about half as much as lawmakers claim they will.

"Lawmakers claim these policies will save at least $483 billion
and that the legislation will boost economic growth enough to
generate an additional $56 billion of savings," the committee said
in a recent
blog post. "This $539 billion of reported offsets
would nearly cover the $550 billion of new spending. However, we
believe actual savings would be closer to $200 billion before
dynamic scoring, only covering about half of the new spending
overall."

The more than $200 billion in savings from repurposing unused
Covid relief money, for example, may largely come down to the
difference between what the program was originally expected to cost
and what was actually spent — savings that would exist regardless
of the new infrastructure bill, and that are being counted
selectively, Stein reports: "While some coronavirus relief
provisions ended up costing less than projected, others — not
mentioned by the bill's authors — ended up costing more."

Stein notes that some economists say it’s not necessary to
offset the new spending given that interest rates are low and the
nation’s infrastructure needs are increasingly urgent. He adds that
the negotiators behind the bill have defended their numbers — and
have agreed to not judge the package according to the Congressional
Budget Office’s official score, which is likely to find that it
will add to federal budget deficits.

"When I asked about the fuzzy math behind the pay-fors of the
bipartisan infrastructure deal, one senior Democrat responded: "Let
us have our bridges, Jeff," Stein tweeted
Tuesday.

The bottom line: Questionable accounting may not prevent
senators who want to vote for the bill from doing so, but it could
at least add some political pressure. The conservative group
Heritage Action for America on Tuesday called on senators to vote
against the infrastructure bill, saying it "recklessly spends $1
trillion."

Expanded Child Tax Credit Provides Major Economic Benefits:
Analysis

A new analysis from the conservative-leaning Niskanen Center
finds that the expansion of the child tax credit pushed through by
the Biden administration will provide significant benefits to the
broader economy, especially in rural America.

According to the analysis, the temporary, one-year boost to the
child tax credit — which is now delivering up to $300 per child to
the majority of American households — will result in $27.6 billion
in additional spending and provide support for more than 500,000
new jobs. It will also produce an estimated $1.9 billion in
revenues for local governments from sales taxes.

"While only enacted for one year, the expanded CTC is expected
to reduce child poverty by 40% and support investments in children
that promote family stability," Niskanen said in a
press release. "Less appreciated, however, is how
child benefits like the CTC can serve as a powerful economic
stimulus for local communities given the greater consumption needs
of households with children."

Getting the most from federal spending: The analysis
finds support for the idea that providing money to lower-income
households provides more bang for the buck than giving money to
higher-income families, since the former are far more likely to
spend their benefits quickly, creating more economic activity. This
"implies that the economic impact of the CTC will exceed its
headline budgetary cost," the analysts say.

Big boost for red states: Given the way the tax credit is
structured, more money will flow to states with lower household
incomes and larger families. That includes red states such as Utah,
Texas and Florida that have often elected Republican
representatives who tend to oppose expansions of the social safety
net.

"The child tax credit expansion is going to be huge for rural
working-class communities," Samuel Hammond, the Niskanen economist
who co-authored the report,
told The Washington Post. "It’s strange to see
Republicans oppose spending money even when it goes to their own
constituents."


Read the full analysis from the Niskanen Center
here.

Is Congress Shortchanging Pandemic Preparedness Funding?

Washington Post Columnist Catherine Rampell reports that
the bipartisan infrastructure package being considered in the
Senate doesn’t include any of the $30 billion in "biopreparedness
and biosecurity" funding that President Joe Biden proposed in his
own infrastructure plan.

"Public health experts," she writes, "hoped it would be
shifted into the reconciliation bill that Democrats plan to pass
with a party-line vote. Senate aides have told me, however, that
while there is a line item in the reconciliation package for
pandemic preparedness funding, it has been shaved down — from
Biden’s original $30 billion to about $5 billion."

Rampell says that, while Congress has provided $10 billion
for similar purposes in a previous Covid relief bill, public health
experts are concerned that we’re not taking the necessary long-term
view when it comes to pandemic preparedness. "A year and a half
into covid-19, with more than
613,000 Americans dead and cases rising again,
lawmakers still aren’t ready to commit the funds necessary to
prevent another tragedy of this scale," Rampell writes. "If these
conditions aren’t sufficiently motivating, what would
be?"


Read the full piece at The Washington Post.

Wealthy Account for Most ‘Excess Savings’ During Pandemic:
Study

Denied the opportunity to spend on travel, dining and
entertainment, and boosted by a surging stock market and an
unprecedented gusher of federal spending, Americans saved about
$3.7 trillion during the Covid-19 pandemic, according to a new
study by Oxford Economics. Most of that money, however, has ended
up in the pockets of those who were already well off.

Oxford found that 70% of the savings during the pandemic
went to the top 20% of households in terms of wealth. And when
looking at "excess savings" — the money saved at a rate higher than
the pre-pandemic trend would suggest — the numbers are even
starker: The top 20% claimed 80% of excess savings, with the top 1%
claiming nearly half, or 47%.

The study also found that households in the bottom 20%
saved less than expected during the crisis, relative to their
pre-pandemic pattern.

"This latest data suggests that savings are even more
skewed to the top than we previously thought," Oxford’s Nancy
Vanden Houten
told CNBC.

How much will they spend? The findings could have
implications for the ongoing and so far uneven economic recovery.
Oxford economists expect Americans to spend about $360 billion of
their excess savings over the next 18 months, with the top 20%
spending about $250 billion. That means the recovery could depend
in large part on the willingness to spend by the
wealthy.

"This is unprecedented," Vanden Houten said. "There are
some limits in spending. Will wealthy people go on two vacations
instead of one because they missed one in 2020? Or will they just
take one more elaborate vacation? We don’t know."

Trump’s Health Secretary Calls on Republicans to Encourage
Vaccinations

Alex Azar, the former secretary of Health and Human Services
under President Trump, is calling for Republicans to embrace and
encourage Covid-19 vaccinations. In a piece for The New York Times
Tuesday, Azar touts his role, and the Trump administration’s, in
developing the vaccines and emphasizes that the shots are safe and
effective.

Azar also details some areas where he says officials could have
done better, suggesting that they could have done more to address
vaccine hesitancy and to explain that the Food and Drug
Administration’s emergency use authorization means that the
vaccines were held "to such high standards that the only real
difference is that full approval requires steps like analyzing
longer-term safety and efficacy data, and inspecting manufacturing
facilities."

Azar also laments that they "did not predict the politicization
of vaccines that has led so many Republicans to hold back" —
politicization that, critics would surely note, was simply an
extension of Trump’s approach to the pandemic. Azar doesn’t admit
that, but he hints at it: "I’m glad former President Trump got
vaccinated, but it would have been even better for him to have done
so on national television so that his supporters could see how much
trust and confidence he has in what is arguably one of his greatest
accomplishments."

Azar writes that it’s time for conservatives to step up — and
claim the vaccines as part of Trump’s legacy while they’re at
it.

"The vaccines could be a victory lap for the Republican Party,
and I call upon all party leaders and conservatives to double down
on encouraging vaccination," he writes. "Conservatives need to do
our part, and the Biden administration must find voices that will
be trusted in conservative communities to explain the data and
integrity of the vaccine programs. They would also do well to
continue to acknowledge the historic achievement of the Trump
administration in expediting these vaccines. I’m not naïve about
the partisan issues and the mistrust between parties at play — but
a measure of political graciousness could go a long way to
depoliticize the issue."


Read the full piece at The New York Times.

Quote of the Day

"Some governors aren’t willing to do the right things to make
this happen. I say to these governors, please, if you aren’t going
to help, at least get out of the way for people who are doing the
right thing."

– President Joe Biden, criticizing governors
who have blocked mask mandates or other measures to prevent the
spread of Covid-19. Speaking from the White House, Biden on Tuesday
did not name any specific governors but singled out Florida and
Texas, Republican-led states where cases have surged.

Send your feedback to yrosenberg@thefiscaltimes.com.
And please tell your friends they can
sign up here for their own copy of this
newsletter.

News

Views and Analysis