The American Jobs Plan is a $2.3 trillion infrastructure project spread over 10 years. If Congress approves, the proposal would be fully funded over 15 years through corporate tax increases, such as raising the top rate from 21% to 28% and imposing a minimum tax of 15% on profitable companies. Some federal borrowing will be required to fund the effort until it’s paid off but the plan appears financially feasible. The Congressional Budget Office (CBO) has blessed it as having a net positive economic impact by 2050. The Wharton School of the University of Pennsylvania has confirmed the CBO’s findings through its own econometric modeling.
It also seems that Biden’s plan has come at a critical time in infrastructure. The American Society of Civil Engineers (ASCE) gave America’s infrastructure a C- this year. The ASCE’s 2021 report card outlined how America’s bridges are becoming structurally deficient every day, highways are filling with potholes, ports are outdated, airports are worn down and almost half of Americans still don’t have access to a transit system. America’s Energy Transition Index has been stagnant since 2019, meaning we have not been making clean energy improvements to help preserve the environment. The list goes on.
AMG agrees that investment in infrastructure will improve Americans’ quality of life and provide a direct economic stimulus—but only if done efficiently and cost effectively. Here are some concerns:
- Government has a poor reputation when it comes to completing large-scale projects on budget and on time. There are countless examples of well-intended but mismanaged government building efforts.
- Piling on more federal debt. Unexpected pandemic expenses have taken our total public debt from almost 80% of GDP to over 100%. However, these federal expenditures were clearly helpful in creating the V-shaped economic recovery America needed.
- Taking profits from the very companies that need to hire back the 10 million Americans still unemployed and those that dropped out of the labor force during the pandemic. Almost half of America’s labor force works for corporations with fewer than 500 employees. These corporations account for 99.7% of all businesses in the United States. By taking 7% more in taxes from their profits, these companies have that much less to invest in growing their enterprises, which in turn boosts the U.S. economy.
- How will the money be actually invested? This is perhaps the biggest concern. Less than 5% of U.S. infrastructure is actually owned by the federal government. About 60% is owned by the private sector, and the other 35% is owned by state and local governments. So how does the Federal government plan to allocate these funds? How many of these projects are shovel-ready, meaning they already meet all federal, state and local construction and environmental regulations? Who will actually administer the projects?
It is clear that state and municipal governments would likely take on the leading roles since they know the specific infrastructure needs in their areas. So, it is incumbent on us all to engage and ensure that any plan approved by Congress is implemented wisely at the local level. If we do, America could be on the highway for continual growth for this century.