THINKING OUTSIDE THE BRIDGE

You and I come by road or rail, but economists travel by infrastructure. ~ Margret Thatcher  

The president’s next legislative project for improving our nation offers a cornucopia of infrastructure improvements. Pretty exciting? Maybe.

Joe Biden’s American Jobs Plan (Plan) is expansively thinking way outside the bridge as far as defining “infrastructure.” Everything from soup (more nutritious K-12 school meals) to beyond nuts (that together with bolts and rivets fasten girders on bridges and in new electric-car battery manufacturing plants) is included.

President Biden and Congressional Dems want to significantly enlarge what’s considered infrastructure. In the modern world of today and tomorrow, they view infrastructure as no longer just bridges and roads, shown below.

 

Traditional infrastructure

 

New infrastructure

 The Plan will fund, construct and improve much more: high-speed broadband for rural areas, electric vehicles, shown above (including 20% of all the nation’s school buses), high-voltage transmission lines, extend Medicaid, public transit systems, sustainable and affordable housing for low-income folks, upgrade and build K-12 school buildings, home and community-based care for the elderly and disabled, clean energy research & development, expand domestic semiconductor manufacturing, workforce development (e.g., training), new community college facilities and replace hazardous lead water pipes to homes.

The president has characterized his Plan as “the largest American jobs investment since World War Two” that will “empower workers” and create jobs with “fair and equal pay.” Dems are very pleased with this depiction, given their long-standing and until this past January 20th thwarted interest in expanding higher-wage (union) jobs for a flourishing American workforce.

This Plan is certainly sizable; 20% bigger than the president’s $1.9 trillion stimulus package that Congress passed last month. The Plan’s expenditures sum to a gigantic $2,300,000,000,000 outlay over eight (8) years, which defies ready comprehension.

Another way to consider such huge dollar expenditures is to think about their weight. The actual weight of $2.3 trillion (T) George Washington dollar bills is an impressive 2.53 million tons. The displacement (weight) of the Ever Given, the giant container ship that recently blocked the Suez Canal, is 293,078 tons. It is almost three (3) times larger than our biggest aircraft carrier. The weight of $2.3T Georges thus equals 8 ⅔ Ever Givens, which could carry 133,400 containers (each stuffed with over 1.7 million Georges). This Plan indeed is a hefty load of money, and infrastructure.

Predictably, Rep. Alexandria Ocasio-Cortez and other progressive Dems have demanded even more spending to boost jobs than the president’s already-massive Plan proposes. They fantasize $10T might be appropriate, a sum that itself represents more than two times the entire federal government’s 2020 total budget.

Senator Mitch McConnell and his Repub colleagues are definitely not pleased with the Plan. Principally because the president wants to partially fund it by raising corporate and wealthy people’s taxes. Bipartisanship has now been tossed under the bridge into the canyon of forgotten phrases. The Repubs’ expressed, new-found belief that infrastructure only refers to large, solid things made out of concrete and steel – highways, bridges and water-treatment plants – has been labelled modern-day Luddism by critics.[1]

Fortunately for the Dems, the Repubs have yet to discover any opposition talking-points to the Plan that the public actually cares about. Do you think many voters oppose raising taxes on already-rich, big corporations and wealthy fat cats? Hardly. Republican politicians oppose these tax increases, but very few voters do.

The president’s infrastructure plan enjoys very broad, bipartisan support. In one poll 85% of voters overall, and 82% of Republicans, agree that “America is in need of an infrastructure improvement.” In the past ever-duplicitous Repubs have supported several elements of President Biden’s Plan as worthy of infrastructure spending that they now oppose.

The Dems got a giant legislative booster jab for their Plan on Apr 5 when the Senate Parlimentarian ruled in their favor, allowing them to use the reconciliation process yet again. All the Dems have to do is convince each and every of their Senate members to vote “yea” for the Plan, and have Vice President Harris bring it home for President Biden to sign.

That could take some doing, especially when moderate Sen. Joe Manchin has already voiced some “concerns” about the Plan. Specifically, he does not want to raise the corporate tax rate to 28% from the Trump tax bill reduction of 21% in 2018. Instead, Manchin said he and “six or seven” other Senate Dems want the new, revised top rate not to exceed 25%, to stay competitive in world commerce. Your play, Mr. President. We’ll soon see how open Joe Biden is to compromise, as he’s already stated.

Negotiations behind closed Congressional doors undoubtedly will continue on multiple infrastructure topics. That may take some time. It’s worth remembering that it required several months for the Dems to pass their covid relief legislation using the reconciliation process.

No matter how the American Jobs Plan ends up, it’s certain the public idea of infrastructure will be changed. The guardrails along concrete and steel infrastructure have been removed. This can be beneficial, given that the majority of our macroeconomy’s undertakings are no longer traditional industrial activities, but services that don't require concrete.

How our economy can effectively absorb several additional trillion dollars of government-directed expenditures remains an open question. Primary apprehensions include

(1) Not to count the Easter chicks after they’ve hatched, but with public expectations high, how successfully this huge, multi-faceted Plan is implemented will make all the difference. Especially before Tuesday, Nov 8, 2022.

(2) How productively can this plethora of funds be managed by federal agencies? This is the third wave of stimulus moneys to be authorized by the federal government. Infrastructure expenditures are notoriously slow to start. Bridges and EV charging stations cannot be mailed to taxpayers like stimulus checks.  Developing cogent rules and regulations for this spending is both necessary and time-consuming. I’ve yet to see any emphasis on prioritizing “shovel-ready” projects (whether they actually use shovels or not). The Biden administration has no more than 19 months from today – election day – to make a visibly positive contribution to the public’s overall well-being.

(3) Some economists have expressed worries that this additional government borrowing may strengthen inflationary pressures. The interest rate on 10-year Treasury bonds has risen 85% since last October to 1.73% this week, in part reflecting the increased amount of the government’s planned deficit financing and rising inflationary expectations.

Here’s hoping the president’s infrastructure Plan achieves many of its stated goals and does not suffer too much from the various, inevitable unintended consequences.

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[1] Luddites were a secret organization of English textile workers in the early 19th century who ransacked textile mills and destroyed new machinery, like mechanized looms and shearing equipment, which they said were being used in "a fraudulent and deceitful manner."