The US is concerned about the downside of the trillion-dollar infrastructure investment package


The US is concerned about the downside of the trillion-dollar infrastructure investment package

To change the face of the United States, the trillion-dollar infrastructure investment package that has just been approved by the Senate will take several years, and the risk of being labeled as “blowing” inflation is high.

Construction site of the viaduct of the California high-speed rail project, next to the 99 section of highway near Fresno, California. Photo taken in October 2019. Source: AP

A word of warning from a bog project

It took the US Congress years to finally achieve its long-planned legislative goal of upgrading degraded infrastructure. But even if enacted into law this fall, Americans could be years away from feeling the full impact of the trillion-dollar infrastructure investment package.

While President Joe Biden’s economic stimulus plan delivered tangible economic benefits across the United States within weeks of implementation, key components of the $1,200 billion infrastructure investment package The USD was passed by the Senate on August 10, it could take several years to come into effect.

Significant investments are likely to be quickly disbursed, particularly to upgrade existing infrastructure projects, such as road repairs. But large public works projects often have to go through a lengthy implementation process that goes through stages from federal agencies, local authorities, to private construction enterprises. And it may take years to create new infrastructure.

Thus, the long-term benefits of large infrastructure projects are what will spur next-term federal and local governments to act, but are detrimental to officials who want immediate “political rewards.” from these projects. Meanwhile, the White House believes that this infrastructure investment package will bring both short- and long-term economic benefits to the United States, citing polls showing that this investment package is nominated. widely supported by both Democrats and Republicans.

Based on a report by the Congressional Budget Office, Mr. Marc Goldwein, Vice Chairman of the Committee for a Responsible Federal Budget (CRFB – a non-profit organization) and Mr. Donald Schneider, economist at The House Ways and Means Committee estimates that approximately $566 billion in investment package of 1.2 trillion USD, New investments will be made in infrastructure, but only about $20 billion will be disbursed by the end of fiscal 2022. Meanwhile, fiscal 2022 will end shortly before the midterm elections in the same year. .

“It’s going to be a real challenge to get political credits to pay off,” said Mark Zandi, chief economist at Moody’s Analytics. complete projects in 3-5 years from now, and that is also when most projects will have to be completed.” “We are talking about a lot of long-term projects in the field of broadband, infrastructure. power infrastructure, water systems, even public transit and railways, and it will take some time from start to finish,” noted Moody’s Analytics.

According to the Washington Post, the infrastructure investment bill spends billions of dollars on pillars of the US economy that many experts say are in dire need of upgrading, such as highways, roads, bridges, water systems, urban and commercial rail lines.

Meanwhile, Jim Tymon, executive director of the Association of American Highway and Transportation Officials, is more optimistic when he thinks that if the US Congress passes the above infrastructure investment bill (after ratification by the Senate, The bill will continue to undergo debate and vote in the House), investment will begin flowing through existing federal channels to states and cities as soon as October.

“Everything is ready to go and the impact will be felt pretty quickly. They (states and cities – BTV) are ready… to take that money and pour it into projects to make a difference. really about people’s quality of life,” Mr. Jim Tymon said.

However, coming to phase 2, Mr. Tymon said that the implementation of infrastructure investments will take longer, such as the development of electric vehicle charging stations. Many states have been planning this ambitious initiative for years. It is likely that the five-year federal funding will help states implement phase 2 investment plans more strategically, rather than having to respond annually depending on initiatives, the expert said. Washington’s whims. This can help shorten the implementation schedule of large projects to 3-4 years, instead of 7 or 8 years.

On the other hand, Ray LaHood, former Transportation Secretary under US President Barack Obama, said that large-scale and complex infrastructure projects often last for many years, such as the train tunnel project. recently crossed the Hudson River connecting New Jersey with Penn Station in the financial center of Manhattan. However, the former US Transportation Secretary noted, there are also a number of road items and other projects that states can quickly roll out, making an immediate impact.

In a recent statement, White House spokesman Andrew Bates said the infrastructure investment package was to fulfill President Biden’s campaign promise “by making progress in most key areas of the economy.” 1 year”, including roads, transportation, high-speed internet, and clean energy.

“These investments will pay off for American families in the short-medium-long term, even decades to come and generations to come, like the Transcontinental Railroad (North America). and the interstate highway system,” said Andrew Bates.

But previous efforts to renovate America’s infrastructure have left warnings. In 2009, former President Obama approved the infrastructure investment law, which invested $ 3.5 billion for the state of California to implement a high-speed rail project to change the way people travel. Nearly 12 years later, Californians feel little change in their daily lives, apart from fierce arguments among local officials over how the project should proceed.

The project has been bogged down by a lengthy construction process, partly because the US lacks experience in building high-speed rail and because California requires the state to start construction before all the land needed for the project can be acquired. judgment. As for forcing this high-speed railway to pass through a densely populated area but with little contact with the North-South road, it seems to only ease political controversies, while construction is still delayed.

Risk of blowing up inflation

While debate over the short- and long-term effects has not yet subsided, the $1.2 trillion infrastructure investment bill has drawn more criticism that it will “add fuel to the fire” of inflation.

The 2,702-page bill, if passed and enacted, would be a feat of bipartisan negotiation. But there are concerns that in the long term, infrastructure investment will increase the supply of the US economy and help keep inflation low, but the short-term impact could be quite the opposite.

The Wall Street Journal cited a recent report by the Office of National Economic Research (USA) showing evidence of the short-term negative impact of infrastructure investment on the economy and the economy. No signs of stimulant effects were found. This is partly because the construction of new infrastructure will disrupt the use of existing infrastructure, and instead of stimulation, will constrain the supply of the economy.

For example, during road construction, traffic volume increases significantly and only decreases after the project is completed. Increased travel time increases the time it takes for the economy to produce the same amount of goods and services, which pushes prices up. With a large-scale infrastructure investment package up to 1.2 trillion USD, this phenomenon becomes more widespread.

One measure macroeconomic that policymakers often use is to raise interest rates when the economy is growing above potential, and stimulate the economy through rate cuts when the economic situation is difficult. Unusual circumstances such as a financial or medical crisis may force the government to spend more. With the above argument, the planned infrastructure investment is said to happen at the wrong time.

Because monetary policy is now stimulating the US economy to grow stronger than at any time since the Great Depression in the 1930s. American households with more than 2.5 trillion dollars in savings surpluses, are also beginning to put the money away, while the unemployment benefit program has also boosted wages for new hires. Meanwhile, the world’s largest economy is still growing after the American Rescue Plans Act (ARPA) passed in the spring.