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Momentum grows for 2-step strategy on infrastructure, as 11 Republican senators back bipartisan plan

A bipartisan group of U.S. senators that’s working to make a deal on infrastructure with President Joe Biden’s administration has made progress, as their ranks late Wednesday swelled to 21 senators from just 10 previously.

That new figure includes 11 Republicans, up from five and enough potentially for the Senate to approve the bipartisan package if all 50 of the chamber’s Democrats back it.

“Momentum has picked up for the two-part strategy,” said Benjamin Salisbury, director of research at Height Capital Markets, in a note Thursday.

“Under this approach a traditional infrastructure-centric
PAVE,
-2.60%

bill would be passed
under regular order (60 votes) satisfying moderate Democrats’ demand for Republican inclusion. Then, in parallel, the Democrats would pass a reconciliation bill including core climate-centric pieces based on the American Jobs Plan,” he added, referring to Biden’s infrastructure proposal, which his administration has scaled back during negotiations from an initial price tag of $2.3 trillion.

Related: A guide to budget reconciliation, which Democrats could use to push Biden’s agenda

The bipartisan proposal features $579 billion in new spending and an overall price tag of $1.2 trillion over eight years. It includes $313 billion for transportation projects and $266 billion for other infrastructure such as power, broadband and water projects.

Biden’s American Jobs Plan initially called for $621 billion for transportation-related projects, $400 billion for “the infrastructure of our care economy,” $111 billion for water infrastructure and $100 billion for broadband, along with other spending.

Other analysts said earlier this week that the bipartisan group’s infrastructure plan probably won’t become reality, and it’s more likely that Washington will deliver only a big Democratic package around this fall.

Even with the progress on Wednesday, Height’s Salisbury warned that risks remain for bipartisan effort — “including inflation and interest rates as the economy heats up and Congress’ deficit spending appetite ebbs.” He noted its proposals for funding are “almost entirely consisting of budget workarounds like repurposing unspent COVID stimulus funds, increasing IRS enforcement, and leveraging private capital,” along with “placeholders such as indexing the gas tax to inflation and a surcharge on EVs.”

“We caution investors that getting a bill over the finish line will be a massive undertaking with most of the work yet to be done. As such, we continue to see infrastructure passage as a late 2021 event,” the analyst said.

Related: Fed, alert to risks of higher inflation, now sees two interest rate hikes in 2023

U.S. stocks traded mixed on Thursday, with the Dow
DJIA,
-0.65%

lower and the S&P 500
SPX,
-0.04%

higher a day after the Federal Reserve raised its forecast for inflation and signaled it could lift interest rates sooner than had been expected.

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