Topline
As lawmakers in Washington struggle to agree on an infrastructure spending package, here’s what analysts from Goldman Sachs are expecting lawmakers to pass this year.
President Joe Biden speaks on Friday, June 18, 2021, in Washington.
Key Facts
The analysts say they do not expect lawmakers to reach a broad bipartisan infrastructure deal, especially because of deep disagreements about how new spending should be paid for: Democrats favor higher taxes on corporations and the rich which Republicans oppose, while some Republicans are willing to implement new or increased “user fees” like a gas tax hike, which Democrats oppose.
Instead, they’re watching for Congress to pass a narrower infrastructure bill including the areas they can agree on (like roads, bridges and transportation).
The analysts also note that progressive Democrats are likely to oppose a bipartisan infrastructure bill that does not include substantial investments in climate and clean energy, which requires Republicans to provide more support, further narrowing the bipartisan deal’s scope.
As such, Goldman’s analysts expect Democrats to use a special process called budget reconciliation to pass a second, larger package that would include progressive priorities like childcare and free community college (the reconciliation process would allow them to pass the legislation without any Republican votes).
If Democrats do use the reconciliation process to pass additional infrastructure legislation, the analysts expect new tax hikes to help finance that spending.
They’re anticipating a hike of the corporate rate from the current 21% to 25% (lower than the 28% President Biden has proposed) and possibly a hike of the top rate on long term capital gains from 20% to 28% (also less than Biden proposed), along with other “more incremental” versions of some of Biden’s other international corporate tax plans.
Crucial Quote
“While a bipartisan deal on a broad infrastructure package cannot be ruled out, we continue to think the odds are against it,” analysts led by Goldman Sachs chief economist Jan Hatzius wrote in a Monday research note. That’s because “there seems to be little agreement on financing it.”
What To Watch For
Because of the way negotiations between Democrats, Republicans and the White House are dragging on, Goldman’s analysts don’t expect a reconciliation infrastructure package to be enacted until the fourth quarter of this year. A smaller bipartisan infrastructure bill could pass as soon as September, the analysts say, because authorization for the federal highway program will expire at the end of that month.
Big Number
$2.5 to $3 trillion. That’s the range of the overall fiscal boost Goldman’s analysts are expecting from infrastructure legislation over the next decade, including a $2.5 trillion Democratic reconciliation package.
Key Background
Last week, multiple outlets reported that Senate Democrats are considering a $6 trillion spending package to pass through budget reconciliation. That plan would reduce the Medicare eligibility age to 60 and include many of the elements of President Biden’s American Families Plan and American Jobs Plan. Reports of the massive spending plan come as a bipartisan group of senators is floating their own $1 trillion infrastructure proposal to the White House.
Further Reading
Democrats Reportedly Prep Massive $6 Trillion Reconciliation Plan Including Medicare Expansion (Forbes)
Here’s What’s In Biden’s $2 Trillion Infrastructure Plan (Forbes)
Bipartisan Senate Group Strikes Deal On Nearly $1 Trillion Infrastructure Plan (Forbes)
