Top senators floated a bipartisan compromise Tuesday to pay for new infrastructure spending by bringing back an Obama-era bond program that would shift some of the debt onto state and local governments.
The proposal to bring back the Build America Bonds was the brainchild of the Senate Finance Committee’s chairman and ranking member. It is just a piece of the ongoing negotiation between the White House and congressional Republicans over the $2.25 trillion package of roadwork, social welfare programs and climate change policy that is being pushed by President Biden.
"This is an approach that Congress has to return to because it works," said Senate Finance Committee Chairman Ron Wyden, Oregon Democrat.
The program would have to be revamped to generate significantly more revenue than it did under President Obama and still would not finance anywhere near $2.25 trillion.
Before the bond program expired in 2010, by comparison, only about $180 billion in bonds were issued.
Build America Bonds were created in 2009 as part of that year’s stimulus package. The program gave states and municipalities the ability to issue new taxpayer-backed bonds to raise revenue. Local jurisdictions then received subsidies from the federal government to help cover the interest on the bonds.
The bonds were designed to lower the cost that local governments faced in borrowing money to pay for infrastructure projects while spurring private sector investment.
"They can be a significant way of incentivizing private capital into our infrastructure," said Republican Sen. Michael Crap of Idaho, the ranking member on the Senate Finance Committee.
Mr. Wyden and Mr. Crapo’s floated the idea as White House and congressional Republicans test whether a bipartisan compromise is possible on infrastructure. At the moment, both sides are far apart on what should be in the package.
Mr. Biden drew the ire of Republicans by proposing a package heavy on what he called “human infrastructure” while going light on fixing roads, bridges and railroads.
Only $612 billion of the president’s $2.25 trillion proposal goes to transportation systems. The rest of the money is spread out over programs like healthcare for the elderly, job training for felons and public housing.
“What we’ve got here is what can best be described as a bait and switch,” said Senate Minority Leader Mitch McConnell, Kentucky Republican.
Republicans proposed an alternative package that they called “fiscally responsible.” It would spend upwards of $800 billion exclusively on roads, bridges and other transportation systems.
Although Republicans say they are willing to compromise on cost, the biggest divergence between both sides is over how to pay for any new spending.
Mr. Biden is set on raising corporate and income taxes to pay for his proposal, something Republicans say is a “red line” for the party.
The White House has also ruled out increasing “user fees,” such as the gasoline tax, that have been used to fund infrastructure projects for decades.
Republican Sen. Shelley Moore Capito of West Virginia, who has been tapped to lead the negotiations with the administration, is devising a list of potential options of how to pay for new spending that will be acceptable to everyone.
The task may be impossible given the size of the infrastructure package and the spending levels proposed.
Mr. Wyden and Mr. Crapo inadvertently showcased the divide among both parties, even as they pitched their bipartisan solution to revamp the Build America Bond program.
“The tough question, with respect to infrastructure, is how you go about paying for it,” said Mr. Wyden. “In my judgment, there is an obvious answer … It is long past time for mega-corporations to pay a fair share for building and repairing roads and bridges.”
Mr. Crapo, who is part of the GOP negotiating team led by Mrs. Capito, argued that “offsetting the cost of infrastructure with a corporate tax rate increase or increases in international taxes ... is counterproductive and non-starter on my side of the aisle.”