The Biden Infrastructure Plan becomes reality and what it means

President Biden’s infrastructure plan has become a reality when it passed the Senate and the House of Representatives after an arduous battle. But the key to the plan is what it is supposed to accomplish and its economic implications for the United States.

The Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Framework or BIF, has become a reality after a tough fight in the Senate and the House of Representatives. This is an infrastructure plan that President Biden ran on during his campaign for the White House and thanks to a majority in the House and the Senate, it will be able to deliver substantial economic benefits to each state in the country. Biden’s 2020 campaign promise was to reinvigorate the macroeconomy from the aftermath of the Covid-19 pandemic and get it on the road to recovery.

On the positive side, the plan will pump billions of dollars into various projects for improving or building needed roads, bridges, transit modernization, a national network of electric vehicle chargers, power infrastructure and clean energy transmission, and broadband development. “Generations from now, people will look back and know this is when America won the economic competition for the 21st Century,” stated President Biden in a statement soon after the bill passed the House in a bipartisan 228-to-206 vote on November 5th.

But on the negative side, there was political rancor and division among both parties, especially among Democrats. While the bill finally did pass, it saw political vitriol that could leave scars in the House that may take some time to heal.

How the Infrastructure Investment and Jobs Act became law

Passing an infrastructure bill through both houses of Congress is difficult, but in the past years it seemed impossible. Past administrations had promised and tried to pass legislation that would improve and upgrade the nation’s severe infrastructure problem. But any attempt to aid the nation’s critical transportation and utility infrastructure encountered political and ideological roadblocks that made such a necessity only a dream. It took deft maneuvers by political leaders in both houses of Congress to get the bill through a struggle that took months, especially to get progressives and centrists with diverse and different visions of government’s economic role to support the same piece of legislation.

The key to the legislation was the conflicting agenda of the progressive and centrist wings of the Democratic party in the House of Representatives. The progressives wanted to have legislation that was $1.75 trillion that included a social safety net as well as a climate package. Centrists were concerned about the fiscal impact of the law and foregoing the social safety net and climate package. They wanted a bill focused on infrastructure that would pay for itself.

President Biden wanted an infrastructure bill passed calling both the left-leaning Congressional Progressive Caucus and the moderates who were having meetings on the legislation. Biden’s administration was under a substantial amount of pressure to fulfill his campaign promise and rebound from the difficult gubernatorial election results in Virginia and the narrow win in New Jersey.

House Speaker Nancy Pelosi and Democratic House leaders were under intense pressure to get the law passed even though they were not certain if the speaker would come through with the necessary votes.

The Congressional Progressive Caucus Chair, Representative Pramila Jayapal, Democrat from Washing state, stated that her group had attained a deal to back the infrastructure legislation as long as there was a commitment to vote on a safety-net bill during the week of November 15th. In September, Representative Jayapal said that she and members of here caucus would not vote for the infrastructure bill if the budget reconciliation bill was not passed first. Moderate Democrats did not like the scope and size of the $3.5 trillion budget bill. Representative Kurt Schrader, Democrat from Oregon, stated that, “It would have to be way under $1 trillion for me to get remotely interested.” The Democratic Centrists were concerned that the Build Back Better legislation, the safety-net deal, would have a Congressional Budget Office score that lessens their worries of long-term budget deficits.

The Progressives have clashed with the Moderates and Centrists over the scope and size of President Biden’s $1.85 trillion Build Back Better legislative proposal that expands social safety-net programs and enact vast climate programs. Whether the Build Back Better legislation makes it through the House and Senate is anyone’s guess.

The Progressives that voted against the bill were upset that it did not include the Build Back Better legislation and that it would not really help the climate problem. Among the six Democrats who voted against the bill were:

  • Jamaal Bowman
  • Cori Bush
  • Alexandria Ocasio-Cortez
  • Ilhan Omar
  • Ayanna Pressley
  • Rashida Tlaib

There were thirteen Republicans who voted to pass the House bill including Adam Kinzinger of Ohio.

While the legislation ultimately did pass, the process was not pretty and House members must have short memories in order to pass the Build Back Better legislation.

What the plan contains

The legislation has a price tag of $1.2 trillion and is solely focused on physical infrastructure. The text of the legislation is 2,702 pages for a bill that was officially presented on August 1st of this year. The legislation is actually a combination of previously approved money with $550 billion in new spending which the Senate gave its approval as part of a bipartisan deal on July 28th.

The law includes the following:

  • Extends FY2021 enacted levels through FY2022 for federal-aid highway, transit, and safety programs
  • Reauthorizes for FY2023-FY2026 several surface transportation programs, including the federal-aid highway program, transit programs, highway safety, motor carrier safety, and rail programs
  • Address climate change, including strategies to reduce the climate change impacts of the surface transportation system and a vulnerability assessment to identify opportunities to enhance the resilience of the surface transportation system and ensure the efficient use of federal resources
  • Revises Buy America procurement requirements for highways, mass transit, and rail
  • Establishes a rebuild rural bridges program to improve the safety and state of good repair of bridges in rural areas
  • Implementation of new safety requirements across all transportation modes
  • Directs the Department of Transportation to start a pilot program to demonstrate a national motor vehicle per-mile user fee to restore and maintain the long-term solvency of the Highway Trust Fund as well as achieve and maintain a state of good repair in the surface transportation system

In terms of actual dollars budgeted for various programs, the law includes the following:

Roads, Bridges, and major projects: $110 billion: There will be bridge and road repairs while also focusing on climate change mitigation, resilience, equity and safety for users, including pedestrians and cyclists. The proposal includes $40 billion for repair, replacing and rehabilitating bridges and $16 billion for major projects. The White House states there are more than 45,000 bridges and 173,000 total miles of highway in the United States that are rated in poor condition.

Public Transit/Passenger and Freight Bill: $105 billion: To modernize and expand the transit rail networks nationwide. The Biden Administration claims this is the largest federal investment in public transit history. This includes $66 billion for Amtrak for passenger and freight rail service. The law will seek to eliminate Amtrak’s maintenance backlog and modernize the Northeast Corridor.

Power infrastructure: $73 billion: The objective is to build thousands of new and resilient transmission lines throughout the United States. This project will facilitate and expand renewable energy. The Administration says that this program will be the largest clean energy transmission investment in the history of the United States.

High-Speed Internet: $65 billion: The goal of this program is to connect every American with reliable high-speed internet. The framework of the program is to lower internet service prices while also closing the digital divide that exists in the United States. For many in Congress, this program is vital since Covid-19 pandemic exposed inequalities and inequities in internet and broadband access for numerous households, students, and businesses across the United States. It is estimated by the Biden Administration that as many as 40 million Americans do not have broadband access.

Clean drinking water: $55 billion: This program aims to deliver clean drinking water to 10 million American families and more than 400,000 schools and child care facilities. This program also sets a goal of removing lead service lines and pipes in many communities. The Biden Administration claims that this is the largest investment in clean drinking water and waste water infrastructure in American history.

Airports: $25 billion: This program will strive to modernize American airports with terminal renovations and multimodal connections which will provide affordable access for passengers and workers.

There are additional programs the law will develop that total $65 billion. These programs include:

  • Environmental remediation at $21 billion
  • Ports and waterways at $17 billion
  • Safety at $11 billion
  • Electrical vehicle infrastructure at $7.5 billion
  • Electric buses and transit at $7.5 billion
  • Reconnection Communities at $1 billion

Economic implications

There are potential positive economic and financial implications from the Infrastructure Investment and Jobs Act that could have long-term ramifications.

“The Bipartisan Infrastructure Deal will create a generation of good-paying union jobs, build better roads and bridges, ports and airports, broadband for all and electricity transmission to combat the climate crisis,” said Secretary of Energy Jennifer Granholm in a recent statement after the vote on the legislation.

There are economists who feel that federal spending on infrastructure benefits the nation in becoming more efficient since it allows workers a higher degree of mobility while improving the transportation of goods and products. This will increase productivity, manufacturing, and economic growth in the long run.

According to Adie Tomer, a transportation expert at the Brookings Institution, a center-left think tank, “The infrastructure bill should increase labor productivity in the long term in the exact ways the American economy needs.”

Mark Zandi, an economist at Moody’s Analytics has estimated that by the year 2031 the recently passed legislation will increase labor-productivity growth by 0.03 percent per year. He further stated that the nation’s economy could see a growth rate of 1.93 percent annually rather than the 1.9 percent increase as estimated by the Congressional Budget Office.

Moody’s has estimated that the legislation will increase output in the United States by 0.17 percent or $34 billion by the end of 2021 and by 0.5% by the end of 2026. Moody’s feels that the nation’s GDP will increase by $39 billion or by 0.12 percent than if the legislation had not been passed by Congress.

Ultimately, the nation will see economic growth and a badly needed boost to its infrastructure that is a long time in coming.

Just what the country needed

The Infrastructure Investment and Jobs Act came at the right time and could actually help in the long and short run. An infrastructure improvement bill is desperately needed since there are so many areas that need help. From better internet access to improving public transit to bettering Amtrak’s situation replacing lead pipes this law and the programs instituted under it will be a real shot in the arm for the nation.

For those concerned in where the money will come from to pay for the $1.2 trillion in additional spending, there are various methods. Under the law, the five-year spending package is to be paid for by accessing $210 billion in unspent Covid-19 relief aid and $53 billion in unemployment insurance aid some states have stopped and including numerous smaller stashes of funds such as the petroleum reserve sales and $87 billion from past and future wireless spectrum space auctions for 5G services. There will also be approximately $50 billion from delaying a Trump-era rule on Medicare rebates as well as about $30 billion generated from applying information reporting requirements for cryptocurrency.

The law could also lay the groundwork for a $1.85 trillion proposal that Democrats are calling “human infrastructure” through the Build Back Better bill. This will be a tricky and difficult piece of legislation that Congressional Democrats, especially the Progressives, will try to get into law. The bill includes such items as subsidized child care, extending an expanded child tax credit, universal pre-kindergarten for 3-and 4-year-old children as well as affordable housing. The passage of the bill will not be easy since it will meet steep resistance by Republicans, Centrist Democrats, and fiscal hawks on both sides of the aisle. But there is always that distinct possibility and that President Biden could claim another notable victory.

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Arthur Guarino

Arthur Guarino is a finance professor at Rutgers University in New Jersey. Professor Guarino’s professional career has been deeply involved in the financial services industry with such corporations as TIAA-CREF, Met Life, and The Bank of New York Mellon. He has held various positions in the financial services field including sales, training and development, administration, product development, customer service and relationship, and management. His teaching experience as a full-time instructor has been at Stevens Institute of Technology in Hoboken, New Jersey, and currently at Rutgers University in Newark. His teaching background includes graduate and undergraduate courses in macroeconomics and microeconomics, as well as managerial accounting, financial management, corporate finance, portfolio theory, financial institutions and markets, and investment analysis. Professor Guarino received his B.A. in Political Science, M.B.A. in Finance as well as a graduate certificate in International Business all from Seton Hall University. He also has a Master’s degree in International Relations from the Maxwell School at Syracuse University and received his J.D. from Rutgers University School of Law in Newark.

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