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Breakingviews - U.S. stimulus is map for infrastructure bonanza

The U.S. Capitol is seen as the House of Representatives prepares to debate the Senate's version of U.S. President Joe Biden's COVID-19 relief plan in Washington, U.S., March 8, 2021. REUTERS/Erin Scott

WASHINGTON (Reuters Breakingviews) - Uncle Sam’s latest big handout offers a road map for a U.S. infrastructure bonanza. Senate passage of $2 trillion in economic aid offers hope for new roads, bridges and airport runways. The slim Democratic majority used a parliamentary trick to bypass Republicans, which they can also apply to President Joe Biden’s next, pricier, priority. Companies should prepare to be asked to pay some of the bill.

Biden is on the cusp of his first major legislative victory. The plan passed on Saturday adds $300 a week to unemployment benefits through the end of the summer while individuals making up to $75,000 a year will each get a check of $1,400. The House is expected to consider the bill on Tuesday.

The Democratic push to go it alone paid off. Republicans balked at the size of relief after passing $900 billion in aid in December. So Senate Majority Leader Chuck Schumer turned to the budget reconciliation process, which is reserved for issues that affect federal spending and debt and requires simple-majority approval in the 100-member chamber rather than the usual filibuster-proof number of 60 votes.

In a pinch, that could also be used to pass infrastructure spending. Last week, the American Society of Civil Engineers said it would take $6 trillion to repair the country’s dams, highways and water facilities. Senator Joe Manchin, a key moderate Democrat, told Axios on HBO on Sunday that $4 trillion could be on the table if it’s paid for with tax increases, including bumping the current corporate tax rate from 21% to 25%.

That would help meet reconciliation rules. One restriction prohibits legislation that increases the deficit beyond a 10-year budget window. Repealing tax cuts for wealthy individuals that were part of Donald Trump’s 2017 plan could also be an offset.

Still, Manchin said he wanted Republicans involved in infrastructure. But getting 10 GOP members on board to overcome the filibuster threat will be a challenge, especially if green energy initiatives are included. If Democrats find a way to navigate Manchin’s demands and Republicans still oppose, as they did with the stimulus, reconciliation becomes a realistic route.

Like the economic relief plan, infrastructure is popular with voters. Polls by Gallup and others show federal spending on fixing roads and bridges often has the support of 70% or more of those surveyed. It’s another reason to follow the reconciliation path.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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