President Joe Biden traveled throughout the country this week to promote the benefits of infrastructure projects as rising inflation threatens his administration’s revamped “Building a Better America” domestic agenda. Meanwhile, Federal Reserve Chair Jerome Powell affirmed expectations that interest rates will begin increasing next month with consumer inflation running at an annual pace of 8.5 percent. (NBC News, April 19 and Associated Press, April 20) 

Revising “Build Back Better”

• Democrats are expected to resuscitate parts of the moribund Build Back Better (BBB) Act when Congress returns on April 25 by focusing on a scaled-back package to attract enough party line support in the 50-50 Senate for passage. (Roundtable Weekly, April 15)
  
  
• A key consideration for Senate Democrats and the White House will be agreement on policy priorities with Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ), who rejected the administration’s BBB social and climate policy package late last year. (Roundtable Weekly, Jan. 21)
  
  
• Sen. Manchin cited inflation as one of his top concerns about passing more spending bills. “Getting inflation under control will require more aggressive action by a Federal Reserve that waited too long to act,” Manchin recently said. (The Hill, April 12)
  
  
• Sen. Sinema will discuss the current policy landscape in Congress with Real Estate Roundtable members next week in Washington DC during The Roundtable’s April 25 Spring Meeting.
  
  
• Rising consumer prices and inflation have been a focus of Republicans as the mid-term elections are only about six months away. (BGov and Fortune, April 20)
  
  
• House Ways and Means Committee Ranking Member Kevin Brady (R-TX) on April 12 discussed inflation’s threat to small businesses and the administration’s agenda on CNBC’s Squawkbox. 

Fed & Interest Rates

• The Consumer Price Index’s rise to 8.5 percent last month – the fastest annual increase in 40 years – sparked expectations that the Fed will move aggressively to raise interest rates. (Bureau of Labor Statistics, April 12 and CBS News, April 21) 
  
  
• The Federal Reserve’s Open Market Committee will meet next on May 3-4 to consider monetary policy, the discount rate and consider a reduction in the nearly $9 trillion in bonds on its balance sheet.
  
  
• Powell, above, commented  yesterday on the Fed’s target for annual price increases. “We really are committed to using our tools to get 2 percent inflation back,” he said, adding, “It’s absolutely essential to restore price stability.” 
  
  
• Powell also noted a half point interest rate increase next month may be the start of future interest rate increases. “I would say 50 basis points will be on the table for the May meeting,” he stated. (CNBC, April 21)
  
  
• He also said the Fed will act to get demand and supply back in balance, “so that inflation moves down and does so without a slowdown that amounts to a recession.” (CNBC, April 21)
  
  
• The Fed also released this week its latest “Beige Book” containing anecdotal information on current economic conditions. The report stated “supply chain backlogs, labor market tightness, and elevated input costs continued to pose challenges” and that “outlooks for future growth were clouded by the uncertainty created by recent geopolitical developments and rising prices.” (Fed’s Beige book, April 20) 

The Roundtable’s Spring Meeting next week will include a discussion with former Fed Board Member Kevin Warsh on inflation, interest rate expectations, potential asset bubbles and other economic challenges.

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The Biden administration announced this week the restoration of strict environmental reviews for major infrastructure projects. Additionally, the U.S. Office of Management and Budget (OMB) issued new guidance to help federal agencies implement the “Build America, Buy America” sourcing provisions passed as part of the Infrastructure Investment and Jobs Act (IIJA) last November. (PoliticoPro and Council on Environmental Quality, April 19)

Project Permitting & Climate Change

• The environmental guidelines will revive how federal agencies authorize and issue permits for infrastructure construction projects. The regulations reaffirm that Federal agencies must evaluate all environmental impacts – including those associated with climate change – during reviews of proposed projects like bridges, mass transit and energy generation. (Wall Street Journal, April 19)
  
  
• A second, broader proposal with additional changes is expected later this year. It is uncertain how the regulatory review guidance will affect projects authorized in the Roundtable-supported $1 trillion IIJA. (White House Council on Environmental Quality, April 19, 2022 and Roundtable Weekly, Nov. 12, 2021)
  
  
• The restored regulations, which take effect on May 20, will also allow federal agencies to adopt environmental review standards that are more stringent than what is outlined in the National Environmental Policy Act (NEPA). The NEPA environmental review rules were in effect since 1970 before the Trump administration scaled them back in 2020. (Reuters, July 15, 2020)
  
  
• Under Trump’s revisions, full environmental-impact statements were required to be completed within two years, while less comprehensive reviews had a one-year deadline. (Wall Street Journal, July 15, 2020)

Infrastructure Materials Sourced in America

• The OMB’s preliminary guidance issued this week instructs federal agencies how to implement new “Buy America” requirements applicable to federally funded infrastructure projects. (Associated Press, April 18)
  
  
• The IIJA requirement provision mandates that all federal agencies must ensure that a “Buy America” requirement applies to all infrastructure projects that receive federal financial assistance, whether or not funded through IIJA. (National Law Review Q&A, April 20)
  
  
• The new requirements, which take effect on May 14, require material purchased for infrastructure projects be produced in the U.S, with waivers included in case there are either not enough U.S. producers or domestic material costs prove excessive. (White House blog, April 20)

The Biden administration’s effort to increase domestic manufacturing and ease supply chain pressures from overseas sourcing comes as inflation has reached a 40-year high ahead of the 2022 midterm elections. (U.S. Bureau of Labor Statistics, April 12)

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