Original title: The impact of the implementation of the US Infrastructure Act on the economic boost remains to be seen
The US Congress has finally voted to pass a cross-party infrastructure investment bill totaling approximately US$1 trillion. This is the second major economic legislative achievement made by the Biden administration since the US Congress approved the US$1.9 trillion economic rescue plan in March this year. However, the investment scale of the Infrastructure Construction Act has shrunk significantly compared with the original proposal, and it mainly focuses on traditional infrastructure projects, which fails to effectively deal with climate change. At the same time, the infrastructure investment cycle is long and the effect is slow. It remains to be seen how effective it is to boost the economy.
In recent years, the problems of obsolescence and disrepair of US infrastructure, structural and distribution imbalances, and economic development have become increasingly prominent, while facing new challenges brought by climate change and technological innovation, strengthening infrastructure investment has long been a consensus in the US society. According to estimates by the American Society of Civil Engineers, by 2025, the US infrastructure funding gap will exceed US$2 trillion.
Compared with major developed economies, the US infrastructure also has the problem of insufficient investment.
After assuming office, Biden will update and upgrade the nation’s infrastructure as a major driver of economic growth and employment. He proposed an infrastructure plan totaling approximately US$2.25 trillion and named it the “U.S. Employment Program.”
However, the Republican Party opposed Biden’s initiatives to develop clean energy and address climate change. In the end, the White House and the two parties reached an investment framework for traditional infrastructure projects totaling approximately US$1 trillion. Excluding the annual funding for infrastructure projects from the federal government’s budget, the actual additional expenditure provided by the Infrastructure Act for the next five years is only $550 billion.
The infrastructure bill proposes to raise funds by embezzling unused epidemic relief funds and strengthening the tax return system of cryptocurrency investment income to avoid expanding the fiscal deficit. However, according to estimates by the US Congressional Budget Office, the infrastructure bill will still push up the federal budget deficit by approximately US$256 billion in the next 10 years.
In the long run, increasing investment in infrastructure will help increase the growth potential and competitiveness of the U.S. economy and improve the quality of life of the American people. However, infrastructure projects often have long investment cycles and slow results. The specific implementation depends on state and local governments.
Moody’s Analytics estimates that the contribution of infrastructure investment to US economic growth will only become more pronounced in 2023. However, considering that the Infrastructure Act will push up US government debt and the crowding-out effect on private investment, the budget model of the Wharton School of the University of Pennsylvania shows that the impact of the Infrastructure Act on long-term US economic growth is close to zero.
Some experts believe that the Infrastructure Act is a new starting point for improving the status quo of US infrastructure, but it is not enough to fundamentally change US infrastructure problems.