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Republicans eye deficit spending for infrastructure

Some Senate Republicans might agree to add to the national debt to pay for a scaled-back infrastructure plan, senators and aides told Axios — one more grasp at a deal with President Biden before Democrats pack up and go it alone.

Why it matters: Skipping over the thorny question of how to offset up to $1 trillion in new projects could actually be politically and philosophically easier for GOP lawmakers than agreeing on tax increases.

What they're saying: Deficit spending "could be part of the discussion," Sen. Lisa Murkowski (R-Alaska) told Axios. "It would be for what we would consider to be the hard infrastructure: the roads, bridges, the it something that is on the table? I think that's probably accurate to say."

  • Sen. Josh Hawley (R-Mo) said, "My strong preference would be for it to be paid for. But you know, if they have another proposal, I won't dismiss it out of hand."

Driving the news: The White House has indicated that Biden will make a decision by Memorial Day on whether to continue negotiating with Republicans or jump to the partisan track and try and pass a package with only Democratic votes.

The big picture: There are two Senate efforts to reach common ground with Biden on a bipartisan infrastructure package, which could climb as high as $1 trillion but well short of the $2.3 trillion he initially proposed for both hard and "human" infrastructure.

  • The first, led by Sen. Shelley Moore Capito (R-W. Va.), is mostly focused on the size and scope of a potential package. Her group has exchanged offers and counteroffers with the White House on what qualifies as infrastructure.
  • On Tuesday, a second bipartisan group led by Sens. Mitt Romney (R-Utah), Rob Portman (R-Ohio) and Kyrsten Sinema (D-Ariz.) emerged to say they're focusing on paying for any compromise.
  • "The real question is how will it be paid for because the Republicans have ruled out an amendment to the 2017 tax bill," said Sen. Angus King (I-Maine). "And they've ruled out filling the tax gap by making high-income people pay their pay their taxes."

The other side: Some Democrats are reluctant to open the door to deficit spending on a bipartisan bill, convinced that corporations and wealthy Americans need to pay higher taxes. They assume Republicans who sign on would demand to shrink the overall price tag and allow corporations to keep their tax rate at 21%.

  • "We will ultimately have the tool of budget reconciliation in front of us," said Sen. Tammy Baldwin (D-Wisc.) "We don't have to do deficit spending."

Between the lines: While some Republicans, like Sen. Susan Collins (R-Maine) are open to finding additional revenue from unpaid taxes, most are skeptical that the Internal Revenue Service can raise $700 billion as Biden claims.

  • Republicans also insist there are billions of unspent funds from the $1.9 trillion COVID relief bill. And they're focused on additional user fees through indexing the gas tax to inflation and levying a fee on miles traveled for electric vehicles.
  • But both those options are non-starters for the White House and Senate Democrats. "I've zoomed with a lot of Republican county commissioners and not a single one said 'we don't need the money,'" said Sen. Bob Casey (D-Pa.)

Be smart: Republican willingness to use deficit financing for infrastructure will be tested on the U.S. Innovation and Competition Act, which could cost $200 billion, including $52 billion for domestic semiconductor manufacturing.

  • "If you want to see who the fiscal conservatives are now, see what they do on the Endless Frontier Act," said Sen. John Kennedy (R-La.), using the original name for that legislation. "There's no question that we've got some Republicans that don't mind deficit spending."

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