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Update on the Infrastructure Bill

September 3, 2021

A new infrastructure bill is making its way through congress - how will it impact the economy, and you business, if it passes? Catch our newest TrendsTalk episode with ITR Economist and Speaker Lauren Saidel-Baker to learn more.

 

 

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Transcript by Rev


I'm Lauren Saidel-Baker. And welcome to this episode of ITR Economics TrendsTalk. Today, an update on the infrastructure bill that's currently advancing through Congress. If it passes, this would represent the largest infrastructure investment in the US in more than a decade. And while there will be benefits for many, we still have a few key questions. Namely, what does this bill look like in its final form and critically about some of the costs associated with it. But first, a few key facts. In its current form, the infrastructure bill includes $1 trillion of spending. The transportation sector is the biggest winner here with more than $100 billion allocated to roads and bridges and sizable additional investments in rail and public transit. The utility sector also does quite well with $73 billion in power infrastructure, and about $50 billion each in drinking water and water storage infrastructure. And another key beneficiary will be the communication sector with a sizeable investment in broadband.

So in the near to medium term, there is a lot of upside for a lot of folks. Critically, the manufacturers, suppliers, contractors, who will be involved in bringing these plans to fruition will really benefit. But even beyond that, individuals and businesses will enjoy some great positive externalities from having better infrastructure in this country. But we wouldn't be economists if we were only talking about the upside, we do have some concerns as well, critically, with the cost of this plan. The nonpartisan Congressional Budget Office has estimated that this plan would cost an additional $256 billion in federal deficit spending over the next 10 years. If you follow ITR, you're probably aware that an unsustainable debt burden is a critical component behind our forecast for a great depression in the 2030s. So adding this sizeable amount of deficit spending and eventually additional debt will only increase the likelihood of that event coming to fruition. In the near term though, there is some modest upside risk to our forecast if this plan does pass.

However, I don't want to overstate that impact. All of this spending, all of these numbers I just quoted, those are spread out over a decade. So the year by year addition is going to be much more modest. Critically, this is in most cases not going to be enough to completely overwhelm the existing macro economic trends, and certainly not enough to completely reverse a cycle except in some more limited cases. Beyond that, final passage of this bill will take several more months. And even when this bill does pass, these so-called shovel ready projects, those take several months to get rolling, to get off the ground, will have that lead time before shovels actually do breaker. So what does this mean for you? Well, if you can benefit from this infrastructure plan, by all means, develop your plans now. Be ready, because once final approval does take place, you want to move first.

But I would caution you to wait for that final confirmation before over-investing. We will have ample time to analyze the final version of the bill to see what those impacts will be before they actually take effect. Use that lead time, plan for that lead time and until then, follow your leading indicators because they're going to be the best gauge in the near term. And we certainly hope you stick with us at ITR Economics. Thank you for joining me today. I'm Lauren Saidel-Baker for this episode of TrendsTalk. Let's talk more soon.

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Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.