This week United States President Joe Biden introduced his second major piece of legislation. Dubbed the American Jobs Plan, the proposal aims to allocate $2 trillion to rebuild and renew the country’s outdated infrastructure, improve access to the Internet nationwide, and help the US economy transition towards renewable energy sources.
According to the President, the plan will address current areas of vulnerability within the United States. It will also amount for more domestic investment in US businesses and make the United States more competitive compared to China.
Based on data by the World Economic Forum, the United States, despite being the number one economic power in the world, ranks 13th when it comes to the quality of its infrastructure. This category includes roads, water systems, power grids, Internet connectivity, and more.
Some highlights from the plan include spending about $174 billion to build half a million charging stations for electric vehicles across the country. There is also funding for improving the state of US roads, railways, airports, and their overall safety and resilience.
Biden also plans to spend a whopping $400 billion to make American streets and cities safer and more accessible to people with disabilities and the elderly, and to provide additional care for these segments of the population.
The plan also sets aside $213 billion for the building of affordable housing and $100 billion for the construction of more schools. There is also separate funding for child care facilities, hospitals, and colleges.
The proposal will support labor unions and invest $100 billion in training programs for the workforce, particularly in the sectors where people’s jobs are most likely at risk.
In terms of the US’s competitiveness with China, the proposal will ask for $180 of R&D funding, especially when it comes to semiconductors and manufacturing, $300 billion specifically for developing the country’s manufacturing, and $35 billion to address climate change.
Biden’s administration will need to borrow the money immediately and plans to spend it over eight years. The President has proposed to pay for the borrowing by hiking corporate taxes (from 21% to 28%), which will result in a complete return of the investment within 15 years. That is, as long as the country does not switch to a Republican administration within that time which may seek to lower corporate tax rates like they did during Trump’s presidency.
As with other stimulus plans, the effects of the announcement were to soften the dollar a bit and pause the growth of Treasury bond yields. However, if the plan manages to find enough approval in Congress to become a reality, the new life it will bring to the US economy will likely drive fundamentals further up, in turn supporting the USD and US companies in the long term.
