While significant infrastructure modernization and investment from the federal government has remained elusive for more than a decade, President Biden and Democrats in Congress have made infrastructure their next priority following the passage of the $1.9 trillion COVID-19 relief bill through budget reconciliation.
Last year, the U.S. Senate Committee on Environment and Public Works advanced an infrastructure proposal, the American Transportation Infrastructure Act, out of the committee with a unanimous, 21-0 vote. The rare bipartisan effort contained more targeted funding for the nation’s highways, bridges and other critical infrastructure through the country by reauthorizing the FAST Act, a surface transportation bill passed in 2015.
The Senate’s efforts also ensured a more streamlined permitting process and increased workforce development opportunities to provide the skills needed to complete projects funded by the bill on time and under budget. The bill, however, was never given attention on the Senate floor, nor was it picked up in the lower chamber.
This congress, Tom Carper (D-Del.),the new chairman of the Senate EPW committee, has restarted efforts on a bipartisan package. And similar efforts exist in the U.S. House of Representatives, as the Democrats leading the chamber will look to reintroduce a version of their infrastructure bill from the previous congressional session. The Moving Forward Act, dubbed with the weighty number of H.R. 2, passed the House in 2020 and would have provided $1.5 trillion for an ambitious infrastructure investment.
This session’s Congress will likely merge its labors with President Biden’s Build Back Better agenda, to include an estimated trillion in funding for traditional infrastructure, while adding an additional trillion for “human infrastructure,” which will include federally mandated paid leave and tuition-free community college.
The Moving Forward Act drew concern from Associated Builders and Contractors last Congress for its favorability of labor organizations to the detriment of small businesses and merit shop contractors in the construction industry. The bill included several harmful provisions that would expand discriminatory government-mandated project labor agreements, apply flawed and inflationary Davis-Bacon prevailing wage requirements and fail to recognize the widespread success of industry-recognized apprenticeship programs.
The House Democrats’ bill is likely to take a similar posture again this year, leading to another partisan bill.
In all, the Democrats’ proposal could cost an estimated $3 to $4 trillion. Regardless of which chamber’s legislation, if any, will become approved, an agreement on an effective revenue stream is necessary to move forward, as it is unclear as of press time how lawmakers will fund any significant infrastructure proposal outside of deficit funding.
Tax Implications
Earlier this year, U.S. Secretary of Transportation Pete Buttigieg expressed his opposition to raising the gas tax to help pay for an infrastructure package and, while other “user fees” are still on the table, recent reports have indicated the Biden administration has been eying tax hikes, as well as roll backs of certain tax cuts included in the 2017 Tax Cuts and Jobs Act. This may include raising the corporate tax rate from 21% to 28% and/or increasing the top individual tax rate from 37% to 39.6%.
Though the significant price tag and expanding the scope of an infrastructure package would likely be a nonstarter for many Republicans in Congress, some Democrats have suggested breaking up the package to gain bipartisan support on a traditional infrastructure proposal. However, many Republicans would likely be wary of supporting a bipartisan infrastructure plan if they knew Democrats would seek to implement additional priorities under reconciliation later in the year.
Without Republican support, Democrats could be left with pursuing an infrastructure investment through budget reconciliation, which would allow them to circumvent the Senate’s 60-vote threshold. This is an option that many Democrats have already expressed their openness to and believe would better guarantee their ability to pass a substantial infrastructure bill without Republican support.
Recently, Sen. Joe Manchin (D-W.Va.), in a Senate key vote for Democratic priorities on infrastructure, expressed his support for tax increases to pay for infrastructure, including raising the corporate rate to at least 25%, indicating a pathway to passage.
While budget reconciliation would make it easier for Democrats to increase spending on existing federal infrastructure accounts and programs, it would also limit the policies they would be able to pursue, including efforts to mandate project labor agreements or expand inaccurate prevailing wage rates. Just as Democrats hit roadblocks in their $1.9 trillion spending package, which was passed under reconciliation and resulted in the removal of priorities such as the establishment of a $15 federal minimum wage, the Senate Byrd Rule requirements will be in effect to remove extraneous provisions from a reconciliation package concerning infrastructure.
Support for federal policies discriminating against non-union shops continues to be echoed by the Biden administration. In his first Congressional hearing as the new secretary of transportation, Pete Buttigieg stated his intention for infrastructure modernization to create “jobs that are union or pay prevailing wages,” indicating his preference for discriminating against the 87% of the construction industry that chooses not to join a union, including many of our small, minority, veteran and women-owned businesses.
For the merit shop construction industry, ensuring all qualified contractors are able to fairly compete to build and work on potential taxpayer-funded projects by preventing anti-competitive project labor agreement mandates remains a key priority. An investment in workforce development will also be a crucial component to the successful implementation of an infrastructure plan.
Any increase in construction demand generated by a significant investment will not only have exponential job creation effects in the industry, which is still clawing back the jobs shed nearly a year ago at the start of the COVID-19 pandemic, but would also create even greater demand for a skilled workforce. In 2021, construction companies will need to hire 430,000 more workers than they employed in 2020 just to meet the demand that exists today, according to an ABC study of U.S. Bureau of Labor Statistics data.
As discussions over an infrastructure investment take center stage, it is clear that the construction industry will be a key part of the future recovery of the ailing U.S. economy seeking to turn the corner nearly a year after the beginning of the COVID-19 pandemic.
