During his visit to Pittsburgh on March 31, President Biden presented the American Jobs Plan, often referred to as the infrastructure plan. He had already discussed the general aspects during the March 25 press conference, but now the plan has been presented in greater detail, and the White House published a detailed fact sheet.
The American Jobs Plan will mobilize $2 trillion by 2030, targeting high-priority areas of the economy, while focusing on union job creation. The areas covered by the plan include transportation, water infrastructure, power grid reliability, clean energy, high-speed Internet access, affordable housing and public education.
- According to the White House fact sheet, the plan will create millions of jobs, while rebuilding American infrastructure and making the country more competitive internationally.
- The US is the wealthiest country in the world, but currently ranks 13th in infrastructure, and public domestic investment has decreased by over 40% since the 1960s.
President Biden also provided a brief introduction to the Made in America Tax Plan, which will increase corporate tax rates while eliminating incentives for offshoring. President Biden stated that these tax reforms are focused on corporations, and that nobody making less than $400,000 per year will pay higher taxes.
Infrastructure Investments in the American Jobs Plan
President Biden stated that the American Jobs Plan could help the country achieve a growth of over 6% in 2021. He then discussed some of the main opportunity areas to improve US infrastructure:
- 173,000 miles of road infrastructure and 45,000 bridges are in poor condition, and traffic costs the US economy $160 billion per year.
- US power grids are susceptible to blackouts, which cost the economy $70 billion per year according to the US Department of Energy.
- Between six and ten million homes still depend on lead piping for their water service, which represents a major health risk, especially for children.
- In general, US infrastructure could become more resilient. In 2020, there were 22 extreme weather events with an economic impact of over $1 billion, and a total impact of $95 billion.
Transportation infrastructure is a high-priority area in the American Jobs Plan. According to the US Department of Transportation, there is a $1 trillion backlog of urgent repairs, and 35,000 persons lose their lives in crashes each year. President Biden announced that his plan will modernize 20,000 miles of highways, roads and streets. The plan will also rebuild 10 of America’s main bridges completely, and 10,000 smaller bridges will be repaired.
The White House fact sheet provides a detailed breakdown of transportation investments in the American Jobs Plan. The plan has a budget of $621 billion for transportation infrastructure and resilience, $115 billion for critical repairs in roads and bridges, $85 billion in transit modernization, and $80 billion for passenger and freight rail service. The plan also covers air and marine transportation, with $25 billion for airports and $17 billion for ports and waterways. Considering the impact of recent natural disasters, there is also a $50-billion budget to improve resilience.
Since the Biden Administration is strongly focused on decarbonization, electric vehicle infrastructure is high on the priority list, and the plan includes a national network of 500,000 EV chargers by 2030. There is a budget of $174 billion that includes benefits like point-of-sale rebates and tax incentives. There will also be grant programs for state and local governments, as well as the private sector.
Electricity, Water and Connectivity Investments in the American Jobs Plan
President Biden mentioned the health hazards of lead piping on both occasions – the March 25 press conference and the March 31 American Jobs Plan presentation. The plan will invest $45 billion to replace 100% of lead piping in the US, which will benefit 400,000 schools and childcare facilities, along with millions of homes. There is also a $66-billion budget to modernize America’s water infrastructure in general.
The plan also has the goal of making the electric power supply more reliable, and its vulnerability was evidenced by the February 2021 winter storm, especially in Texas.
- A $100-billion budget to improve US power grids was announced, and a goal of 100% carbon-free electricity by 2035.
- There is also a targeted investment tax credit for 20 gigawatts of high-voltage power lines, and the Grid Deployment Authority will be created as part of the US Department of Energy.
- In addition, federal buildings will be purchasing clean power 24/7.
In addition, the American Jobs Plan proposes a ten-year extension for the investment and production tax credits, which benefit clean energy generation and storage. With the December 2020 extension, the 26% federal tax credit for solar power lasts until 2023, and the 30% tax credit for offshore wind power lasts until 2025.
The Biden Administration also recognizes the safety hazards and environmental damage caused by abandoned oil and gas wells that are currently uncapped, as well as abandoned mines. For this reason, the plan has a $16-billion budget to close wells and mines.
President Biden also mentioned how the COVID-19 pandemic revealed the lack of Internet access in the US, especially among the most challenged communities. There are more than 30 million Americans without access to high-speed Internet, and there is a $100-billion budget to address this issue.
Affordable Housing and Schools in the American Jobs Plan
The ASCE recently published the 2021 Report Card for America’s Infrastructure, and school infrastructure gets a D+. For this reason the American Jobs Plan includes a $100 billion budget to upgrade and build public schools, which consists of $50 billion in direct grants and $50 billion leveraged through bonds. There is also a $12-billion budget for community colleges and a $25-billion budget for child care, while businesses will get a 50% tax credit for building their own child care centers.
Affordable housing is another weak area of US infrastructure, especially in large cities. For this reason, the plan includes $213 billion to build, repair and upgrade two million affordable housing units. The specific measures covered by the budget include tax credits, grants, rental assistance and home weatherization. The Biden Administration will also work to eliminate zoning laws and land use policies that limit the construction of affordable housing units.
Federal buildings in general will get $10 billion for modernization, sustainability and resilience. There is also a budget of $18 billion specifically for Veteran Affairs hospitals and clinics.
Conclusion: Outlook for the Private Construction Sector
With the announcement of the American Jobs Plan, there is a mixed outlook for private construction companies. Measures such as project grants, improved zoning laws and renewable energy tax credits benefit the private sector directly. However, the Biden Administration has clearly stated that the infrastructure projects will focus on union labor, and this will limit participation for private contractors.
The higher demand for construction materials could increase prices higher, and some key inputs for construction have been increasing in price since the COVID-19 pandemic started, including steel. The private sector could also deal with a tax reform, which will increase corporate taxes while limiting the benefits of overseas procurement.