Speeding Toward an Infrastructure Bill: Analyzing the Infrastructure Investment and Jobs Act
The Situation: On August 1, 2021, the U.S. Senate proposed the Infrastructure Investment and Jobs Act, a $1.2 trillion infrastructure bill to improve the country's physical infrastructure.
The Result: The plan focuses on physical infrastructure, providing funding for roads, bridges, and airports. The plan also includes improvements to broadband, water, and power infrastructure. Unlike previous versions of the plan, it will be funded through new revenue and savings measures.
Looking Ahead: This bill is not yet law, and many progressive votes hinge on the passing of a much larger $3.5 trillion Democratic budget resolution. Businesses should stay aware of both this bill and the progressives' larger bill to seek opportunities for tax credits, and to take advantage of bonds and public–private partnerships.
The Road Toward Better Infrastructure
On August 1, 2021, the Senate proposed the Infrastructure Investment and Jobs Act, a $1.2 trillion infrastructure bill including $550 billion in new spending to improve the country's physical infrastructure. On both sides of the aisle, leaders have long acknowledged America's deteriorating infrastructure, ranked 13th globally. This bipartisan framework is poised to reinvigorate America's deteriorating roads, bridges, and highways. After months and several failed negotiations, President Biden's original plan, proposed in March 2021 and revised in June 2021, was cut back significantly. Though a fraction of the original proposal, the new bipartisan plan is still poised to create new opportunities for businesses interested in taking advantage of newly available projects.
President Biden's Proposals
On June 24, 2021, the Biden administration announced the Bipartisan Infrastructure Framework, the original $1.2 trillion infrastructure plan set to spend $579 billion to revitalize America's deteriorating infrastructure system. This plan was a downsized version of his $2.6 trillion proposal from March 2021. President Biden's June 2021 proposal directed $312 billion toward transportation, with $109 billion in roads and bridges, $66 billion in passenger and freight rails, and $49 billion in public transit. However, electric vehicle infrastructure, including 500,000 electric vehicle chargers nationwide, would spend only $15 billion. Nontransportation infrastructure plans were set to spend $266 billion to upgrade "other" infrastructure. This would have included $73 billion for power, $65 billion for broadband, and $55 billion on water and lead pipe removal. This "physical" infrastructure spending over eight years could have amounted to $1.2 trillion. President Biden's plan was cut down by the Senate in favor of a slightly smaller and redirected $550 billion spending plan, titled the Infrastructure Investment and Jobs Act.
What the Senate Cut
Unlike President Biden's original $2.6 trillion plan, the new Senate-proposed Infrastructure Investment and Jobs Act budget removed much of what was referred to as "social infrastructure." Cuts were made to funding public housing and updating federal buildings and hospitals as well as carving out U.S.-based manufacturing and funding research into clean energy. The complete removal of $363 billion toward clean-energy tax credits amounts to more than half the funding of the ultimate bill itself.
What the Senate Kept
The major fields that remain in the Senate's version include transportation projects and utility updates. This includes $110 billion toward roads and bridges and $66 billion toward railways, the largest investment since the creation of Amtrak. However, only $7.5 billion will be invested in electric vehicle ("EV") charging networks, which is much less than the originally proposed $157 billion in EVs from President Biden's March 2021 proposal. Updates to broadband, power infrastructure, resiliency efforts, and water storage were only minimally cut. Expanding and maintaining the electrical and broadband grid remained a high priority for both sides of the aisle. The only area that exceeded the originally budgeted amount was in efforts to clean up pollution in abandoned wells and mines, receiving $21 billion instead of the originally suggested $16 billion.
What Does this Mean?
This new Infrastructure Investment and Jobs Act focuses on traditional transportation and utility infrastructure. Lawmakers have announced that the cost of the new bill will be covered with revenue and savings measures. $200 billion will be covered by repurposed COVID-19 relief money, $49 billion will come from delaying the former administration's initiated rule on Medicare rebates, and $87 billion will come from sales of wireless spectrum space. Additional funding will come from returning unused unemployment insurance and revenue from cryptocurrency reporting requirements. Therefore, the original funding opportunities from President Biden's proposals do not appear to be available. However, opportunities still remain in investing in tangible infrastructure projects like roads, bridges, and broadband.
Looking AheadThe Infrastructure Investment and Jobs Act is far from passed. Now, a bipartisan majority will need to remain through rounds of amendments from both sides. Senate Majority Leader Charles E. Schumer proposed a fast-track timeline ambitiously hoping for a deal by the end of the week. However, other Democrats who have been pushing for the $3.5 trillion budget resolution will be unlikely to sign off without further investments in President Biden's originally proposed "human infrastructure." Conversely, other Democrats are refusing to even discuss the ambitious $3.5 trillion plan until the $550 billion version is passed. Businesses will be well-served to keep an eye out of the developments of these two plans and what opportunities the larger economic proposal may present.
Four Key Takeaways
- The Senate put forth a 2,702-page long-awaited $1.2 trillion infrastructure proposal titled the Infrastructure Investment and Jobs Act.
- The bill is just a fraction of President Biden's previous proposals of a $2.6 trillion infrastructure plan, and it removes many business incentives such as previously proposed tax breaks.
- Democrats have put forth a budget resolution of their own amounting to $3.5 trillion in spending on both physical as well as "human infrastructure," which includes health care and daycare spending.
- The Senate's new bill may have trouble getting passed if progressives condition their votes on the passing of the more ambitious budget resolution. However, some senators predict a fast-paced timeline toward passing, as soon as August 5, 2021.
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