The Senate has passed a $1 trillion infrastructure bill that promises to be the largest infrastructure investment in the US in more than a decade. While the scale of the investment is indisputable, and the outlay will yield benefits for many, numerous questions remain regarding the final version of the plan.
- The $1 trillion is divided between $550 billion in new infrastructure investment and $450 billion allocated to existing programs.
- The transportation sector receives the most funding from this bill, including $110 billion for roads and bridges, $66 billion for rail, and $39 billion for public transit.
- Utilities investment is also prioritized, with $73 billion for power infrastructure, $55 billion for drinking water, and $50 billion for water storage.
- Another key beneficiary is the communications sector, with $65 billion allocated to broadband infrastructure.
The infrastructure bill will likely provide some upside momentum for many economic trends. The proposed infrastructure plan will benefit a myriad of manufacturers, suppliers, and contractors. Even more individuals and businesses will enjoy the externalities of improved infrastructure. Nevertheless, the bill poses only modest upside risk to our forecasts through year-end 2023. Final passage of the bill is likely to take several months, and even so-called “shovel-ready” projects will likely entail at least a few months of lead time.
While there are obvious benefits to a massive investment in domestic infrastructure, we at ITR Economics are also concerned about the cost. The nonpartisan Congressional Budget Office estimated that the infrastructure plan would add $256 billion to the federal deficit over 10 years. An unsustainable debt burden is a crucial component of our forecast for an economic depression in the 2030s. This increase to deficit – and debt – levels will only add to the likelihood of that expectation coming to fruition.
In short, develop your plans now, but, to mitigate the risk of overinvesting, wait for confirmation before implementing them. There will be ample time to analyze the final version of the infrastructure plan before its impacts take effect. Until then, follow your leading indicators.
For more on this topic, see the latest edition of the ITR Advisor ™!