An Infrastructure “Win” That No One Needed

Congratulations are in order on the passage of the so-called bipartisan infrastructure bill. Not to President Joe Biden, whose own priorities barely feature in the legislation, but to another Joe, the one from West Virginia (though we would be remiss if we didn’t also congratulate Senator Krysten Sinema, the Arizona Democrat who worked hard to attract GOP support for the bloated bill). The legislation, which finally passed the House months after passing the Senate, was really Senator Joe Manchin’s vision of what infrastructure spending should be The Manchin infrastructure bill, like Senator Manchin himself, is an old-timey brand of Democratic party legislating:  spending a lot of money, but getting very little in return. 

What do we get for all this spending?

Spending with no return is the feature of all the biggest components of the bill.  

• Tens of billions of dollars for passenger rail, which is used by few Americans, makes little sense in a country the size of the US, and is fantastically expensive, as the California high speed rail boondoggle has shown over the last ten years.
• Tens of billions of dollars for mass transit, ridership of which collapsed due to the pandemic and may never recover, is concentrated in only a small number of cities, is of questionable economic benefit, and again is hugely expensive for what often mediocre service it provides.
• Tens of billions of dollars for electricity transmission which is mostly unneeded. As AEA noted in its score opposing this legislation, the grid works just fine for reliable baseload electricity generation. What causes struggles, from Texas to California is the proliferation of unreliable wind and solar generation, whose wild swings in output require expensive backups and redundancies. So this spending is not about “improving the grid,” it is an indirect subsidy to intermittent generation sources, trying to paper over their inadequacies with federal cash. Again, all this spending does nothing to improve our electricity system: it neither saves ratepayers money nor improves reliability. It just is a quixotic attempt to replace the electricity generation we already have with more expensive and less reliable generation.
• Even the spending on actual highways (a mere 10% or so of the total spending) is likely to net only a limited gain. The bill eats away at the value of this spending with union mandates that raise the cost of any projects funded. Combined with the Biden administration’s announced efforts to roll back some Trump administration reforms of the National Environmental Policy Act (NEPA) and inject vague new infrastructure roadblocks in the guise of “environmental justice,” most of the increase in highway spending will be eaten up by higher costs, bureaucracy, litigation and delays.

The “infrastructure” bill includes numerous other subsidies and slush funds for favored interests: little-used electric vehicle charging stations, subsidies for existing nuclear plants to protect them from the subsidies handed out to wind and solar, slush funds for vaguely defined “climate resilience” and research programs at the Department of Energy. All certainly send money out the door and put cash in the pockets of government clients, their actual economic value is seemingly irrelevant. At a time of rocketing inflation, this trillion-dollar spending spree seems especially poorly timed.

What about the politics?

The three-month delay between Senate and House passage was due to infighting among the Democratic party over linkage of the infrastructure bill with an even larger, and much more destructive, spending spree contained in a reconciliation bill that the Democrats will try to ram through without any attempt at bipartisanship. While we certainly opposed it outright, The linkage of these two pieces of legislation was among the reasons AEA fought this legislation so hard. With passage of the infrastructure bill last week and no timeline for the reconciliation bill to be completed, the immediate linkage is now seemingly broken. The only question now is whether the Democratic leadership in the House and Senate can unite the warring factions amongst their ranks and pass the budget busting monstrosity. 

Some in the administration cling to the hope that passage of the infrastructure bill somehow resuscitates the Biden agenda. But this infrastructure bill does nothing to fix the actual problems facing America today the voters are most concerned about:  the supply chain crisis and rocketing inflation. The legislation completely ignores supply disruption issues, instead choosing to simply spread government pork to everyone with a good lobbyist. As to inflation, its $550 billion boost to federal spending can only put more pressure on inflation, with that new federal money chasing workers and goods that are already in short supply. Ignoring the concerns of voters to focus on running up spending for the sake of spending does not make for a catchy campaign message.

Conclusion

The infrastructure bill spends a lot of money, can be expected to accomplish little of benefit, and is of questionable value politically. What it does not do is contribute in any way to addressing the ongoing supply chain crisis choking America’s ports and disrupting delivery of goods, nor will it do anything but add to inflationary pressure throughout the economy. That this wasteful and unnecessary legislation has consumed the attention of Congress for half the year is an indictment of the institution. We can only hope that that wasted time and wasted money are the only consequences of this legislation.