The price tags are similar, but President Joe Biden’s infrastructure plan has much different goals than his COVID-19 relief package.
The $1.9 trillion relief bill, which Biden signed last month, was about ensuring that the U.S. economy can recover from the shock of a pandemic. The $2.3 billion infrastructure plan, which the president outlined on Wednesday, is aimed at boosting the economy’s productive capacity over the long term.
Put another way, the relief spending is mostly designed to stimulate demand. Infrastructure spending will boost demand and create jobs, but it also will have long-term supply-side effects. Investments in roads and bridges will make the shipment of goods more efficient; investments in broadband access will bring more people into the digital economy.
“We’ve dealt with the COVID stuff, but once that recedes, where will we be?” said Steve Fazzari, a professor of economics at Washington University. “The economy was not doing all that great before the pandemic.”
The relief bill was a short-term fix, with most of the money doled out this year. The infrastructure proposal envisions a sustained investment in both physical capital and human capital over eight years.
Biden wants to spend $623 billion on transportation infrastructure, $213 billion on affordable housing and $100 billion on broadband access. He’d also invest $180 billion in research and $100 billion in workforce development, among other priorities.
He’s proposing to pay for all that spending by raising the corporate income tax rate from 21% to 28%.
Even if the spending is fully paid for, it will still boost demand, Fazzari said. For one thing, Biden is engaging in some budget sleight of hand: His corporate tax increase will take 15 years to produce the amount of money he’s proposing to spend in just eight years.
Also, the corporate tax increase will mainly hit wealthy shareholders. They might reduce their consumption of goods and services a little, but not by the full amount of the tax. Meanwhile, the workers who get new jobs in construction and broadband installation are likely to spend most of their added income.
“Raising the corporate tax rate has about the least impact on demand of any kind of tax increase,” Fazzari said.
The infrastructure plan should be helpful to almost every part of the country, including broadband for rural areas and mass transit investments for cities.
Marcela Escobari, a senior fellow at the Brookings Institution Center for Sustainable Development, thinks St. Louis is well positioned to benefit from some parts of the plan, such as the $300 billion allocated to boosting manufacturing.
“There is a legacy of manufacturing capability that may benefit St. Louis,” she said. “Federal investment in areas like semiconductor manufacturing and clean energy manufacturing may allow that legacy workforce to be put to work.”
Local leaders, Escobari said, should be thinking now about what parts of the infrastructure plan might benefit St. Louis, and how to train workers for the jobs that will be created. “Places that get ready for the funds to hit their communities are going to benefit the most,” she said. “Based on your local workforce, you might prioritize the timing of some infrastructure projects over others.”
Area leaders are already deciding how to spend their windfalls — $517 million for the city of St. Louis and $193 million for St. Louis County — from the Biden relief package. They’d be wise to invest some of that money in planning and training efforts that will position the region to take advantage of the next big federal infusion.
David Nicklaus • 314-340-8213 @dnickbiz on Twitter firstname.lastname@example.org