It is welcome to read Dean Baker’s argument in this Center for Economic and Policy Research article: The US and China: A Productive Path Forward. It seems the mass media is gladly helping pump up the China threat. The Taliban takeover of Afghanistan exposed the folly of the “war on terror” especially when waged against nation states. A more pressing, viable threat needs to be found in order to justify the insatiable appetite of the war industry. China is a difficult candidate, however in view of the substantial, arguably interdependent relationship between the two countries. Not only is the American consumer habituated to the prices and flexibility of Chinese manufacturing, but without Chinese investment in US Treasury bonds, a significant devaluation of the dollar could occur.
This White House link takes you to the Fact Sheet for the bipartisan compromise of the American Jobs Plan. There you will see that this plan is still enormous, still containing two-thirds of the original resources dedicated to the “clean transportation infrastructure, clean water infrastructure, universal broadband infrastructure, clean power infrastructure, remediation of legacy pollution, and resilience to the changing climate”.
The framework lists 10 areas of concentration:
- modernize and expand transit and rail networks across the country; the largest public investment in railroads since the creation of Amtrak;
- repair and rebuild roads and bridges; the largest public investment in bridges since the construction of the interstate highway system;
- creation of a national network of Electric Vehicle (EV) charging stations with a goal of 500,000;
- electrification of thousands of school and transit buses;
- replacement of thousands of miles of lead service and water supply lines;
- connection of every American household to reliable high-speed internet; a scope not seen since the Rural Electrification Project 100 years ago;
- upgrading the American power infrastructure by creating a Grid Authority bringing renewable energy sources online and creating new efficiencies in power transmission;
- creating an Infrastructure Finance Authority leveraging billions of dollars for investment in clean energy projects;
- addressing legacy pollution by investing billions of dollars in cleanup efforts that will, in turn employ millions in high-pay union jobs;
- preparation of much of our infrastructure for the effects of climate change, extreme weather and protection from cyber attacks.
The V2 Plan details the spending in two categories; Transportation and Other Infrastructure. Transportation budgets $579B in 10 areas; Other budgets $266B in 6 areas. Financing the ambitious plan comes from 13 areas beginning with “reducing the IRS tax gap” and ending with “macro-economic impact of infrastructure spending”. There is also public-private partnerships, private activity bonds, a repurposing of unused unemployment compensation of the Rescue Plan, and many others. Noteworthy absent from the revenue sources is the increase in the corporate tax rate that was in V1. The macro-economic impact revenue source is interesting in that it is indirect but of significant possibility. This refers to the efficiencies of commerce that is created with new infrastructure. It anticipates an increase in the Gross National Product; i.e. the value of all goods and services sold in the country. Production of enormous additional goods and services adds wealth to the nation that, in part become government revenue It is to the Biden Administration’s credit that this compromise was created. It is now up to the Republican leadership in Congress to see it through.
This article from Fitch Solutions titled “The Biden Infrastructure Plan: Key Implications For The US Infrastructure And Building Sectors” details the gargantuan scope of this initiative. When you follow the link, you will find a registration wall but do not be deterred, Fitch’s just wants you to be registered to read it. There is no subscription fee.
The article contains at least half-dozen pie charts and another half-dozen bar graphs illustrating the massive changes to American industrial sectors under the $2.3T American Jobs Plan (AJP). The extent of this is illustrated in such as the plan to electrify 20% of American school buses. It will replace 50,000 diesel-powered Federal vehicles. It incentivizes with $213B to “to ‘produce, preserve and retrofit’ over 2.0mn affordable homes”. Public housing infrastructure improvements would benefit from $40B of investment. Commercial building would also see investment. $100B is dedicated to upgrade and build new public schools; $10B would upgrade Federal buildings; Veterans Administration hospitals and clinics would benefit from $18B investment. “Additionally, a portion of USD300bn in funding allocated to programs supporting domestic manufacturing as well as part of USD180bn in funding to go to research and development would likely involve facility improvements, further boosting the non-residential segment,” Fitch reports.
This stimulates my thoughts about indirect economic impact. All this building and the funds for it mean sales for domestic producers of such as structural steel. Currently the American Steel and Iron Institute reports that capacity utilization was more than 82% when it supplied 1,839,000 metric tons the week of June 19. Year-to-date (YTD), they produced 43,219,000 metric tons, utilizing 79% of capacity; up 14% Year-over-year (YOY) when capacity utilization was just 67.8%. These numbers speak to the increasing economic activity of our “grand reopening” of the USA. The high capacity utilization is supplying current demand that probably includes back logged projects due to the COVID-19 suppressed economy of 2020.
Continuing our focus on steel; only one component of construction materials; imagine the greatly-expanded demand created by the Biden plans. It is likely that the demand will push capacity utilization over 100%. This means that the US steel industry would need to increase capacity to meet demand. Steel is also going to be demanded for increased passenger rail service both inter and intra-city-wise. $80B is dedicated to this part of the massive transportation infrastructure plan. Arizonans may finally get the passenger rail service between Tucson and Phoenix we have been dreaming of for decades. Ten thousand bridges are slated for rebuilding. These are chiefly if not entirely composed of structural steel.
Tucson Mayor Regina Romero recently spoke about the resources available from the AJP to the City of Tucson for addressing the water contamination that forced the closure of southside wells due to PFAS contamination. Romero spoke more generally about the benefits to the city in this opinion piece from the Arizona Daily Star:
“The AJP would be transformative for Tucson and communities across the country, rebuilding our nation’s transportation networks, creating millions of good-paying, union and green jobs, prioritizing historically under-invested communities, and re-defining “infrastructure” to encompass basic necessities such as high-speed internet and affordable housing.” -excerpt “Tucson Mayor Romero: American Jobs Plan would be game-changer for us“
It is also noteworthy that the AJP will seek materials for the projects from domestic manufacturers and suppliers before foreign ones are tapped. This will entail the use of our huge surplus labor force. According to the US Bureau of Labor statistics, the US workforce participation rate (LFP) is about 61.7%. This metric is a broader, longer term one than the unemployment rate we usually consider. This is due to the fact that the unemployment statistic measures only those workers who are registered with state bureaus. If they become discouraged and stop reporting, they fall off the rolls and become non-statistical. The LFP indicates that tens of millions of American workers are not utilized or grossly under-utilized. Many of these do not work due to support by a partner and may be providing uncompensated social value through care of children or elderly parents. The American Family Plan will address this by compensating millions of these people. Many of these who are providing childcare out of necessity due to the unaffordability of commercial childcare will be unburdened of this when tens of thousands of new childcare facilities are constructed under the AJP’s dedication of $25B for this need.
That brings me to my conclusion and a focus upon another indirect economic benefit of the AJP. Adding tens of millions of workers to our workforce and retraining and educating tens of millions more through the free community colleges and workforce development funding of $100B will greatly expand production. The US Gross Domestic Product will swell from the former meager 2.5% we have been accepting. The Federal Reserve estimates GDP growth this year to be 7% only to slide back to less than 3% in 2022. The Fed, it seems does not anticipate passage of the American Jobs Plan. The Jobs Plan creates wealth on a massive and very broad scale. It keeps on giving through efficiencies realized with enhanced transportation of good and people; enhanced communication and information access; and a larger and more productive workforce. The tens of millions of new and well-paid American workers will bring hundreds of billions of dollars of consumer demand into the economy growing it in all corners. It is truly transformational and should be carried out.
The American Jobs Plan will ambitiously “reimagine and rebuild a new economy”. Jim Hannley LLC is presenting a series of posts to highlight some parts of this plan as presented in this White House link. It will bring tens of millions of workers who are under employed or long term unemployed into the workforce by attracting them to jobs with high pay and benefits. Many of these workers have been discouraged from applying for jobs because they have not been employed in a very long time and/or believe that their skillsets and education make their prospects for employment very dim. Some of these are working but are not being paid. Part 1:
SOLIDIFY THE INFRASTRUCTURE OF OUR CARE ECONOMY BY CREATING JOBS AND RAISING WAGES AND BENEFITS FOR ESSENTIAL HOME CARE WORKERS
One very great objection Republicans have to the plan is the budgeted $400B to compensate American care givers “…toward expanding access to quality, affordable home- or community-based care for aging relatives and people with disabilities.” This link to the Caregiver Action Network shows that “…The value of the services family caregivers provide for “free,” when caring for older adults, is estimated to be $375 billion a year.” Some of the other statistics show that millions of children care for elderly in their homes; women make up the vast majority of care givers; that most care givers are employed outside the home and that (their) employers estimate that some $34B in productivity is lost annually due to this obligation of their employees.
Caregiver Action Network points out that the $375B value of this work is more than twice ($158B) what is currently spent on nursing home and homecare services. Not only are the estimated 65 million care givers providing an uncompensated service to society through their labor but in 2007 they also spent, out of pocket $5,531 (10% of their household income). Without the compassionate care America’s elderly and disabled people receive, typically in their own home, from family members, they would be dying sooner or living lives of lonely desperation. It is easy to imagine the added burden without this care that our hospitals and medical clinics would be bearing to address the resultant acute medical conditions of these people; likely at a cost to society of tens of billions of dollars.
Women care givers are more than 2.5 times as likely to live in poverty and five times as likely to be receiving Supplemental Security Income (SSI). Households that have at least one disabled member have 15% lower incomes than those without this burden. Logic dictates that this poverty is closely related if not a result of this burden. So, the billions of dollars of compensation that these care givers and those who will be employed in more formal care settings will significantly ramp up consumer demand; creating a snowball effect for secondary employment. Next: Part II, Roads and Bridges