The infrastructure bill is unclear and insufficiently understood-Twin Cities
The Biden administration and Congress clearly agreed on at least part of the $1.2 trillion infrastructure bill. That is a lot of money. Unfortunately, the media and politicians have failed to link it to other expenditures, including the $2.2 trillion COVID relief bill passed at the end of March 2020, or the $2.3 trillion fiscal year 2021 comprehensive appropriation passed on Christmas Eve The bill, all products of the Trump era.
Then we received a $1.9 trillion Biden COVID relief and economic stimulus bill. The citizens are already at a loss. When Washington reporters missed a key factor, this confusion multiplied.
In short, the problem is that the bill for the COVID response is meant to be spent quickly. The first includes more than one trillion direct payments and exempt loans. The 2021 fiscal year appropriation bill is used for social security, national defense, medical insurance, agricultural subsidies, and the transfer of federal highway and airport taxes to state and local governments. Maintenance expenses.
The difference in the infrastructure bill is that it will take more than eight years. This will spend an average of US$150 billion a year on the maintenance and construction of usual roads, bridges, airports, passenger railways, rivers and ports. It also includes funds for expanding high-speed broadband, repairing water and sewer systems, repairing and expanding federal buildings, and improving private housing and commercial buildings in disaster-stricken areas.
Note that when the incoming Obama administration in 2009 sought infrastructure spending to stimulate economic activity immediately after the financial market collapsed, a term was not used repeatedly. How many projects are truly “ready”? If a project requires years of planning, design, and land acquisition before any real buildings are built, any impact on overall economic output will lag behind and will not help alleviate the economic recession.
The same problem exists today. Instead of focusing on the overall price tag, consider the eight-year infrastructure bill as an investment in the long-term efficiency of the economy. Don’t expect to increase employment or output immediately.
If more people, including the media and ordinary people, understand some basic knowledge of federal finances, the situation will become clearer. Or, if partisan politicians are not hype or weaponized, the media and the public will imitate the pros and cons of the spending bill.
First, the US Congress controls spending. According to the Constitution, the president’s only power is to sign or veto tax and spending bills passed by Congress. Yes, the administration can propose a budget and request specific expenditures as usual. Nothing requires Congress to meet these requirements.
Then understand that there are always three basic steps: First, spending must be authorized. Second, funds must be allocated. Third: Capital expenditures must be made.
The constitution only provides for appropriations. Article 1, Section 9 is a key clause and a widely debated clause in the framework of the document.
The separate “authorization” of projects prior to appropriations stems mainly from the rules of the House of Representatives and the Senate. Before the Civil War, funding was only the task of the fundraising committee. But state spending has become so complicated that work has to be spread out. Since the establishment of the trade union in 1789, there have been special committees for national defense, foreign affairs, and postal services. These committees debated and recommended action. Ways and Means must propose the necessary tax levels and determine the specific dollar expenditures.
This kind of department-by-department supervision needs to be retained. The new appropriations committee should not have the power to spend its own money. Therefore, the “authorization” bills of other committees approved by each House of Representatives are a prerequisite for the funding of new committees.
Expenditure, that is, the treasury actually paid to citizens or suppliers, is an administrative function that flows out of the other two steps. However, in the calendar or fiscal year in which the necessary bills are passed, expenditures usually do not occur.
Take the process of building an aircraft carrier as an example. The Armed Forces Committee must recommend authorization for this. Then the two houses must pass, and the president must sign the authorization bill. The Appropriation Committee then specifies the exact amount to be paid to the contractor. Usually such expenditures can be used for a specific fiscal year, but multi-year grants can be made, and circumstances may require accelerated or delayed actual payments. Therefore, new naval vessels authorized in 2020 may have almost no funding before the 2021 and 2022 fiscal years. Large expenditures may appear in four to five years.
Authorization does not guarantee funding. This does not guarantee actual expenditures. Dakota’s main dam on the Missouri River takes up a lot of fertile land, mainly to reduce flooding hundreds of miles to the south. These states need to be compensated through the politics of authorization, even though most of the land is basically stolen from Native American tribes. North Dakota got a promise for a large-scale irrigation project. Therefore, the subsequent garrison water improvement project was authorized. However, although the funds were used for urban and rural water supply, despite decades of political conflict, few people allocated funds or used it for irrigation.
Authorizations and appropriations can also be combined into one bill, which is usually used for ongoing projects, especially projects with dedicated sources of income. These include social security and medical insurance funded by FICA taxes or highway and airport taxes, which are remitted back to the states in accordance with the formula. For programs that benefit individuals, the continuous automatic authorization and appropriation of expenditures built into the initial legislation are called “rights.” This is a technical term, but somehow this shortcut is interpreted as the opposite, a derogatory term that implies the payment of “welfare”. What followed was the anger of many citizens, driven by politicians who were suitable for them.
The current infrastructure bill is mainly authorization. The specific amount of funding depends on the future conference in the next eight years. The actual expenditure depends on the situation. But history is like this. Once this expenditure is on the right track, no one wants to move it aside.
It is useful to compare with past bills. The Bush 43 government requested and received approximately US$60 billion annually from 2005 to 2009, only for transportation, not for communications, water supply or sewers or buildings. A bill in 2012 has a two-year bill of US$112 billion, which is almost the same as before. The same applies to the five-year bill passed in 2015. All these amounts include highway and airport expenditures that have been established for decades according to the formula, so there is little new.
So yes, the current bill does increase expenditures, and it does cover things like repairing outdated local sewer systems and expanding broadband. But it is not as big as many people think.
The contact information of Sao Paulo economist and writer Edward Lotman is [email protected].