This Week in Washington

Latest news from Washington, D.C. produced by Total Spectrum/SGA exclusively for members of the Arizona Chamber of Commerce & Industry

More Info: Michael DiMaria | Partner and SW Regional Director | 602-717-3891 | [email protected]

Thanks for your interest in Washington, D.C., and thanks for reading This Week in Washington.

The cherry blossoms are out and tourists are beginning to return to Washington. Congress is on recess, so we thought that we would take a deep look at the Administration’s infrastructure proposal, the American Jobs Plan.

Steve Veverka is one of the newest members of the Total Spectrum team.  He currently divides his time between Mesa, Arizona and Minneapolis.  In his article, Steve top-lines many of the provisions of the infrastructure proposal.  Heard on the Hill looks at the plan from the Administration’s perspective and that of Senate Republicans and suggests some things to watch as this bill works its way through Congress.

We are happy to include a guest column by Steve Trussell, Executive Director of the Arizona Rock Products Association.  Steve discusses the outlook for state and local transportation in Arizona.

Congressman Erik Paulsen is a former member of the House Ways and Means Committee and was Chairman of the Joint Economic Committee. He had prepared for this week’s edition an article about the tax provisions that are part of President Biden’s infrastructure bill, but Wednesday morning the Treasury Department released a detailed proposal on the tax proposal, which is called the Made in America Plan. Congressman Paulsen will review this plan and we will include his report in a special future edition of This Week in Washington.

An upcoming interview for Total Spectrum Spotlight will be with Senator Shelley Moore Capito (R-WV). Senator Capito is the ranking member of the Senate Environment and Public Works Committee, and serves on the Committees on Appropriations, Commerce Science and Transportation, and Rules and Administration.  Look for more from her in our next edition.

Stay well.

Steve Gordon, Managing Partner

Heard on the Hill

By Steve Gordon, Total Spectrum Managing Partner

Congress is on a state and district work period, but conversation has not quieted about the Administration’s infrastructure bill called the American Jobs Plan.

Everyone agrees that it is not an infrastructure bill as most of us would define it. It is a massive — $2.3 trillion – piece of legislation.  It expands the use of infrastructure far beyond roads, bridges, and broadband to include support for schools, federal buildings, power stations for electric vehicles, home care workers, and job training.

The plan has four parts:

  • How we move: investments in roads, bridges, rail – both passenger and freight – and other parts of the transportation infrastructure.
  • How we live: investments in broadband, water, power, housing, and buildings.
  • How we care for one another: investments in home and community-based care for older Americans and those with disabilities.
  • How we make things: investments in manufacturing, research and development, the development of a high-quality work force, and supply chains.

The bill pays for these investments by proposing to increase corporate income tax rates, increase rates for individuals (or couples—it’s not yet clear) with income over $400,000 per year, and changing small business rates and provisions for pass-throughs like LLCs.

Democrats maintain that even with the outstanding jobs report for March, more than 9.5 million Americans remain out of work, one in three families are struggling, and millions of small businesses are just hanging on. The Biden Administration in its talking points memo for their infrastructure bill maintained that “this is a once in a generation chance to create a new economy by increasing public investment to where it was in the 1960s.”  They want to create “good paying jobs by ensuring a free and fair chance to organize and join a union.”

Republicans counter that the Administration threw the proverbial kitchen sink in their bill. There appears to be broad Republican support for a true infrastructure bill, but it would probably be in the $600-$800 billion range.  Republicans point out that the economy was really humming and we were at full employment prior to the pandemic – progress that was the result of the tax changes in the 2017 Tax Cuts and Jobs Act. They say that raising the taxes on American big business will make us less competitive in a global economy, and that the worst way to fund this bill is to tax small business, which is the engine of our economy.

President Clinton famously said that the “era of big government is over.”  President Biden’s Administration says that these investments must be made to keep America competitive in the global economy, and that these public investments will ensure that all sectors of our population will not be left behind.

Republicans counter that the marketplace is the best way to create growth and opportunity, and that taxpayers cannot afford to keep spending as if there is no tomorrow. They point out that the federal government spent $4.4 trillion in all of 2019, and that President Biden proposes to match that in six months.

Republicans add that this is more a tax bill than it is an infrastructure bill. They point out that at least $900 billion of the $2.3 trillion American Jobs Plan pays for things that are a long way from infrastructure, and add that the proposed program delivers benefits for eight years yet requires higher taxes for 15 years.

Some Democrats agree. Senator Joe Manchin (D-WV) says he will not let this bill get to the Senate floor in its current state.  Former Senator Heidi Heitkamp (D-ND) said “it is an Oprah Winfrey style of legislating. You get a road, and you get a hospital.”

Two things to watch:

Paying for infrastructure. This is like the old Irish saying that “everybody wants to go to heaven, but nobody wants to die.” Everybody wants new roads, more broadband, new airport terminals and a million other things, but no one is prepared to pay for them.  A perfect example:  we have not raised the gas tax since the 1970s and it has not even been indexed to inflation. We really do have to pay for the things we want and need, the question is who gets taxed and what is the impact.

Senator John Barrasso (R-WY) was Chairman of the Senate Environment and Public Works Committee in the last Congress. His committee passed in 2019 a one-year extension of the highway bill, which Senator Barrasso hoped would give Congress more time to work out a long term bipartisan solution. His bill unfortunately never got a vote on the floor of the Senate because Republicans could not agree on how to fund it.

Reconciliation Really Rules.  Young Republican Senators often chaffed about the need to keep the filibuster when Republicans were in control, but Leader McConnell reminded them that someday they would be in the minority and would look at the issue differently. Progressive Democrats are now pushing to get rid of the filibuster, but Senators Kyrsten Sinema, Joe Manchin, Jon Tester (D-MT), and Dianne Feinstein (D-CA) are mostly opposed.

Majority Leader Chuck Schumer has made the case that Democrats can use reconciliation – which requires only a simple majority – twice more this year, and it appears that the Senate Parliamentarian agrees in principle. The details need to be worked out, but it looks like Democrats will have the opportunity to pass both the American Jobs Plan and one more piece of major legislation this year through the Senate using reconciliation, as long as the items in the bill pertain to budget matters.

President Biden’s American Jobs Plan: Infrastructure and More

By Steve Veverka, Total Spectrum Strategic Partner

Last Thursday morning, the Biden Administration released details of its American Jobs Plan, the first wave of the Administration’s two-part American Rescue Plan.

The American Jobs Plan proposes to spend more than $2 trillion. The focus is on physical infrastructure – roads, bridges, water and sewer projects, and broadband – and also on providers and employees of home and community-based care. While there is less certainty on what leadership in the House and Senate will prioritize as they move forward or how much they will try to spend, the signal from the White House is a massive focus on transportation and housing.

The proposal by the numbers:

  • $621 billion to repair roads and bridges, modernize public transit, invest in passenger and freight rail service, create jobs in the electric vehicle market, and improve ports, waterways, and airports;
  • $50 billion to safeguard critical infrastructure in vulnerable communities that are susceptible to or have been impacted by natural disasters;
  • $111 billion to replace lead pipes and to upgrade and modernize drinking water, wastewater, and stormwater systems while supporting water infrastructure in rural areas;
  • $100 billion to build broadband infrastructure that reaches 100% coverage;
  • $100 billion to upgrade and modernize the electric grid while creating jobs in the industry, plugging orphan oil and gas wells and create a “Civilian Climate Corps”;
  • $213 billion for affordable housing;
  • $137 billion to modernize public schools, invest in community colleges, and upgrade and build child care facilities in areas that need it most;
  • $10 billion to upgrade VA hospitals and federal buildings;
  • $400 billion to expand access to long-term home and community-based care services under Medicaid for the elderly and disabled, and increasing pay of in-home care workers;
  • $180 billion to research and development in new technologies and climate science and to eliminate gender and racial inequities in STEM (science, technology, engineering, and math);
  • $300 billion to strengthen manufacturing supply chains, protect Americans from future pandemics, build regional innovation hubs, increase access to capital for domestic manufacturers, and partner with rural and tribal communities on economic development initiatives;
  • $100 billion to invest in workforce development, including job training, apprenticeships, and career services;
  • $10 billion to create union jobs and beef up labor union efforts to protect workers; and
  • Ten-year extension/phase down of tax credits for solar development.

The Administration wants to raise $2 trillion to pay for this plan, largely via changes to the corporate tax code. Their plan would increase the corporate tax rate from 21% to 28%, crack down on corporate inversions to tax havens, end tax breaks for the fossil fuel industry, and increase IRS enforcement of corporations.

Shortly after the plan was released, Speaker Pelosi told her caucus that her goal is to get an infrastructure bill through the House by July 4. House Republicans have already been messaging their opposition to the plan, and in some cases, tying it to the Green New Deal. Some House Democrats hope to make some changes in the committee process and have talked about addressing the $10,000 taxpayer limit on state and local taxes (SALT) that the Trump Administration implemented in its 2017 tax bill.

There is some hope that Republicans and Democrats could find a bipartisan way to pass portions of the bill on which they can agree. However, the more likely outcome is that Senate Majority Leader Chuck Schumer will use reconciliation again to avoid the filibuster. President Biden’s approval rating is at 52%, so he is probably going to forgo passing on compromising with Republicans and instead continue to focus on pleasing Democrat, Independent, and maybe even a few Republican voters.

Responsibly Fund Arizona State and Local Transportation

Guest column by Steve Trussell, Executive Director of the Arizona Rock Products Association

As the state of Arizona makes big decisions regarding transportation, planners, decision makers, and leaders look toward the rapidly growing population and private sector investments to make appropriate adjustments.  Currently, the state population is over 7.5 million people and climbing daily with an influx of people from the west coast coming to Arizona, not to mention the high-tech industry that is expanding its footprint here.  The recent announcements of a Taiwanese microchip processing company selecting a prime location with room for expansion in the West Valley and the $20 billion dollar expansion of Intel’s Chandler facility have us expecting impacts to our supply chains, logistics, and freight.  All these critical components are of paramount importance to the state’s economy.  A tremendous amount of planning and foresight has contributed to getting us to this point in Arizona’s story, but leave us all questioning where we go from here.

Arizona must continue to rev its economic engines, and the speed of our state’s success is predicated on our functional multi-modal transportation system, continued planning, and adoption of technologies that will allow us to move people and goods in an efficient and cost-effective way.  We must acknowledge that, at a statewide level, the system is inadequately funded with only the minimum needed for operations and maintenance.  We must be honest with ourselves about how long this minimal contribution can sustain our growing state. 

There is no debate, and we all agree we must maintain what we have.  The gas tax – the sole purpose of which is to maintain roadways – is considered a user fee that has not been raised or adjusted in more than 30 years.  As technologies have changed, including the efficiency of the traditional automobile, you and I are contributing even less to the state’s transportation funds than in years past.  Couple this challenge with alternative fuel vehicles that contribute nothing into the system and yet continue to use the road and we have a challenge that must be addressed.  Would you be able to live on your same salary from 30 years ago?  Neither can our transportation system. 

The argument could be made that federal relief packages will provide the state with an influx of cash.  While valuable to build new roads and bridges, it’s important to remember that federal money is one-time money and has the potential to add to our funding challenges as those new roads and bridges will need to be included in the operations and maintenance funding on an annual basis.  The source of those O&M dollars is still largely made up of the antiquated and perpetually scarce gas tax. 

Key commerce corridors are critical and in desperate need of development and upgrades including the incorporation of new technologies such as broadband and other infrastructure for our rural communities. The success of rural Arizona will have a major impact on the more urban Maricopa, Pinal, and Pima counties.

Our cities and counties play a critical role in infrastructure development and it is important to keep the decision making local regarding what projects and modalities are appropriate for specific regions.  Maricopa County has been the fastest growing county in the country for the last three years.  We cannot keep this pace without building new key commerce routes and upgrading existing ones.  Building the system is one thing; maintaining the system is a whole different commitment.  Decision makers in local communities working together know what is best for their region, but we cannot lose sight of the fact that those decisions impact the larger Arizona economy.  We can’t afford to get it wrong.

Our economic growth and development will depend on proper future planning and funding.  Maricopa County Proposition 400, the sales tax levy approved by the voters for transportation, will expire in 2025. Maricopa County is not unique.  Other counties and even cities will have to make important decisions on how to address funding for their municipality, county, or region.  Over the next two to four years, citizens will be asked through the ballot box if they want to increase capacity, maintain status quo, or ignore future needs. 

It is foresight that got us to this point, and we must continue to look ahead.  Without future planning we will suffer at every level – state, county and local.  Our growing population, our businesses and our industry can’t afford that – and neither can our citizens.  Pay now through a responsible tax and a measured approach or pay later with inordinate costs, lack of opportunity, and a state in decline.  Our goal is to maintain and continue to improve our state’s business and family-friendly environment.  Arizona needs and deserves a long-term sustainable funding source that will meet the needs now and into the future.

Steve Trussell is the Executive Director of the Arizona Rock Products Association (ARPA), the oldest mining related trade organization in Arizona. For over 63 years, ARPA has been providing representation for 50 member companies involved with the production of construction aggregates, asphaltic concrete, ready mix concrete, asphalt, lime products, and portland cement used in nearly every private and public construction project in Arizona.  Arizona’s aggregate mining industry employs approximately 7,745 people directly and 17,929 indirectly for a total of 25,674 jobs and has an estimated direct and indirect impact on the Arizona economy of $4.9 billion.  Our producer members, combined with more than 61 associate members, provide related transportation, contracting, mining supplies and consulting services.

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This e-newsletter is produced by Total Spectrum/Steve Gordon and Associates and the Arizona Chamber of Commerce and Industry. The views expressed herein may include subjective commentary and analysis that are the views of the editors and authors alone. Information in this e-newsletter is obtained from sources believed to be reliable, but that cannot be guaranteed as independently investigated or verified. Information in this e-newsletter is not an endorsement, advertisement, recommendation, or any type of advice; political, legal, financial or otherwise. For questions about the content of this e-newsletter, please contact the Arizona Chamber of Commerce and Industry.

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