President Obama’s $50 billion infrastructure initiative ignited hopes that federal spending would heat up just as stimulus funding was cooling down. But political realities surrounding the deficit doused the optimism.
Those same realities also make the $100 billion offered March 12 as part of Senate Democrats' fiscal 2014 budget proposal more pipe dream than potential pipe-laying reality.
The White House doesn’t explain how its plan would be funded. "Even without sequestration, it’s difficult to imagine any appetite to direct new spending as many view [Obama’s] proposal as another round of stimulus spending," says Building America’s Future Policy Director Kerry O'Hare. "Without an identified ‘pay for,’ it’s not considered a serious proposal."
Also, some groups are lukewarm about various aspects — like a National Infrastructure Bank and America Fast Forward bonds — of the proposal. "A poorly funded bank would be no substitute for municipal bonds," says National League of Cities Executive Director Clarence Anthony. The organization is worried about yet another proposal: to cap the deductibility of municipal bond interest.
That idea is part of House Republicans’ 10-year plan to balance the federal budget. The proposal, which lowers the top individual tax rate from 39.6% to 25%, puts municipal bond interest—along with many other deductions—at risk, says Rob Leonard, a partner at law firm Akin Gump Strauss Hauer & Feld, LLP who spent 20 years as a top staffer on the House Ways & Means Committee.
Not necessarily, says former Senate Finance Committee staffer Roderick De Arment, senior counsel at Covington & Burling LLP.
Even if Congress enacts tax reform this year —which he doubts — municipal bonds probably won’t be affected. The tax-advantaged status of private activity bonds, however, which also are used to fund local infrastructure, are another story.
— Stephen Barlas is a Washington, D.C.-based freelance writer.