With House passage Nov. 5 and President Biden's signature 10 days later, the $1.2 trillion infrastructure bill is now a reality. The bill was initially moving alongside a $2 trillion so-called “soft” infrastructure plan, also known as the Build Back Better Act. Debate has begun on the latter bill, which will now move separately through Congress amidst a fierce partisan divide.
The fact that the higher-dollar proposal has not yet moved through Congress should not obscure the vast magnitude of the hard infrastructure package. The infrastructure plan will allocate $550 billion to new infrastructure investment. The two largest recipient sectors are transportation – with $110 billion for roads and bridges, $66 billion for railroads, and $39 billion for the modernization of public transit – and utilities – with $73 billion for power infrastructure, $65 billion for broadband, and $55 billion for water infrastructure. The plan seems to answer the current supply chain consternation with a $25 billion investment in airports and $17 billion in ports.
The infrastructure plan presents modest upside risk to our medium-to-longer-term outlook. Within that timeframe, the plan's additional investment will exert upside pressure on many economic trends as manufacturers, suppliers, and builders benefit. However, the impact will not be immediate. Implementation of the infrastructure package will take time, as even so-called “shovel-ready” projects involve at least several months of lead time. Therefore, there is only moderate upside risk within our three-year outlook period, which currently extends through year-end 2023. Additionally, it is critical to consider the eye-popping dollar totals listed above within the context of their eight-year distribution period – all of the impact will not occur simultaneously.
Longer term, the US will benefit from repairs and modernizations across our national infrastructure. However, ITR remains concerned about the cost of the package. 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 event's coming to pass.
For many businesses, the infrastructure plan presents broad opportunity. Seek relevant prospects but do not lose sight of the economic fundaments that will drive broader swings through the business cycle. And, as always, keep an eye on the leading indicators – especially as 2030 approaches.
Lauren Saidel-Baker
Economist