Economics be Damned and the Death Spiral of Subsidization: Understanding the Low-Infrastructure Infrastructure Bill

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high-speed red passenger train passes the railway platform

On November 15, after months of political maneuvering, President Joe Biden signed legislation that was billed as a monumental investment in America’s infrastructure. Other than his signature, however, most of the credit for its passage belongs to the other Joe we’ve heard a lot about lately, Senator Joe Manchin of West Virginia. He and his Democratic colleague, Senator Kyrsten Sinema from Arizona, along with a handful of Republicans, are the ones who provided Biden with the win on this legislation. Unfortunately, the only thing the bill will likely build is the profits of the special interests who lobbied tirelessly for it.

During the negotiations for this and the associated reconciliation bill, the Democratic caucus was at war with itself for nearly a full year, with both its moderate and progressive members fighting each other for their respective pet provisions. In the end, it was Manchin and Sinema who prevailed. They were able to wrestle this bill from the clutches of House Speaker Nancy Pelosi. Manchin also announced, just in time for Christmas, that he was done negotiating with Biden on the larger “Build Back Better” reconciliation bill as it currently stands, effectively derailing the key legislative priority of President Biden and the progressives. 

The so-called moderates may have won the day, but the sweeping infrastructure agenda they passed is anything but moderate — spending $1.2 trillion, and it’s barely an infrastructure bill — instead providing incalculable hand-outs and pay-fors in the more than 1,000-page text. Most of the money goes toward funding impractical pet projects, throws good money after bad or otherwise adds up to a colossal waste of resources. Although Biden and company have spent the last month and a half patting themselves on the back for creating “transformational” change, let’s take a look at what the bill actually spends money on.

Passenger Rail

Despite the fact that rail travel is impractical for the geography of most trips in the U.S. and possesses a waning ridership as well as untenable economics, this bill hands Amtrak $66 billion. The organization’s CEO, Bill Flynn, has already outlined his plans for the new funding. $44 billion will go toward the Federal Railroad Administration, for state-level grantmaking and for other rail projects.

Additionally, the agency will use $22 billion to expand its fleet and make improvements across the system in what Flynn called “the largest investment of its kind since Amtrak was founded in 1971.” Although some of this money will go toward expansions in the Northeast corridor where the only profitable Amtrak lines lie, much of it will also go towards funding fundamentally uneconomical lines that connect destinations that are both geographically isolated from one another and are incapable of supporting a level of ridership that would lead to long-term economy of the line. 

Although some of the money is earmarked for actual infrastructure improvements like the repair of aging bridges under the tracks and the maintenance and repair of existing tracks, it is more than likely that a large part of the money will be squandered in the end. But, hey, President Biden likes trains, and so do the Green New Dealers, so the economics be damned.

Electricity Transmission

The bill contains $65 billion for grid infrastructure, most of which is intended to go toward building new transmission capabilities to allow wind, solar and other renewables to wheel power from where the wind blows (sometimes) to where the people live. Since wind and solar can’t be transported like many mineral energies and must be generated and then immediately delivered, their expanded role in the grid would require the construction of massive new transmission infrastructure, especially long-distance high-voltage power lines.

The construction of these new lines is not as straightforward as proponents of the forced energy transition would like. A case study of this exists in the form of a recent attempt by HydroQuebec to route transmission lines through Maine in order to deliver electricity to other areas of New England, namely Massachusetts. The people of Maine voted it down — with nearly 59% of voters opposing the provision on a ballot initiative. The spoilage of the state’s forests was referenced as a primary concern. Landowners simply don’t want to allow unsightly transmission lines to traverse their properties, and constructing these lines without their buy-in would require the utilization of eminent domain powers on a heretofore unseen scale.

A proposal by HydroQuebec to bring the same hydropower into New England through  New Hampshire was also rejected by a state committee in 2018.

Increasing transmission infrastructure is not so simple as the government writing a blank check. These projects will come up against public resistance and will also have to fight their way through the National Environmental Policy Act’s (NEPA) regulatory morass in order to be built. Although the infrastructure bill establishes a “Grid Authority” to theoretically make the approval process for such projects go more quickly, it does nothing to address the underlying flawed process, choosing instead to work around some aspects of the broken system. The process is unwieldy, long and laborious, as well as being incredibly expensive. For Congress to authorize this scale of infrastructure spending without first working to ameliorate the regulatory costs involved is incredibly short-sighted. If the Biden crew really wanted to make good on their goal of building more transmission, they should have streamlined NEPA. But that is a non-starter for the greens, and so these funds will also likely be wasted.  

Electric Vehicles

The bill sets aside $7.5 billion for little-used electric vehicle charging stations. Because the majority of EV owners are mainly wealthy coastal elites, this provision effectively subsidizes the travel of the upper and upper-middle class at the expense of everyone else. It also provides $5 billion for electric and hybrid school buses in an attempt to decarbonize school transportation. One major problem with these EV initiatives is that while we are forcing more vehicles onto the electric grid, problems with NEPA and other rules preventing new generation and transmission capacity from coming online aren’t being seriously altered to make those improvements a reasonable reality.

Climate Resilience

The bill also contains funds for vaguely defined “climate resilience” and research programs at the Department of Energy. It provides $50 billion for these resilience and cyber-security measures. The stated goal of this provision is to protect the U.S. from both cyber terrorism and extreme weather events such as fires, extreme heat and droughts. How specifically these aims will be achieved is largely unclear. This spending, in particular, seems to be characteristic of Biden’s “transformational” approach — throw money at it and see what sticks. Except this philosophy is hardly transformational when it comes to government spending.

Mass Transit

Mass transit utilization has been way down since March of last year, thanks in part to the Covid-19 pandemic resulting in more remote work and, therefore, fewer daily commuters. Weekly New York subway ridership was more than 35 million in December of 2019 but was down to just over 20 million in December of 2020. The same pattern can be seen across other city transportation systems. Many city residents are avoiding tight spaces to reduce contracting variant viruses. But with ridership continuing to slide, the infrastructure bill has designated massive funds for them. Despite the massive nearly $90 billion outlay in the bill, some activists are still complaining that transit didn’t receive enough federal dough.

Other Giveaways

The bill also includes $5 billion in subsidies for existing nuclear plants to protect them from becoming uneconomical as the result of previous subsidies handed out to wind and solar. So, in essence, the government helped make nuclear uneconomical by lavishing wind and solar with subsidies, and now they want to lavish nuclear with subsidies in order to help them compete with wind and solar. I call this the death spiral of subsidization. At some point, it will be hard to tell whether the government is in charge of our energy choices or we are. But one thing is for certain, if this madness continues, we will all be paying more for our electricity, and it will be less reliable at the same time.

Conclusion

 The infrastructure bill is so full of excessive and wasteful spending that it is impossible to cover every giveaway and subsidy. The ones described above are just some of the most expensive and have the greatest capacity to do harm to our economy.

With so little in this bill for actual infrastructure, like roads and bridges or moving energy to people who need it via pipelines, the moderates and President Biden should hardly be taking a victory lap. 

About the Author: Thomas J. Pyle is the president of the Institute for Energy Research (IER), an energy think tank and the American Energy Alliance (AEA), a not-for-profit that engages in grassroots public policy advocacy and debate concerning energy and environmental policies at both the state and national level. He served as head of transition for energy under President Donald J. Trump.

*sommersby/stock.adobe.com

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