American Jobs Plan: Remaking America pt.2

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 economic impact of the foreign born in Arizona

This article published in the Arizona Daily Star on July 31st reveals some surprising facts about foreign born workers and their economic impact on the State of Arizona. It is surprising to read that some 920,000 foreign born workers live in Arizona; about 13% of the population. A far greater share of these, 71% are of “working age” compared to 47% of the general population. The foreign born command purchasing power of $16B with income of $21.4B. The undocumented of these have income of $3.5B and spending power of $3.1B. Since wages reflect value added at the point of production it is accurate to state that these foreign born added more value to the state than they were paid; a counter point to the assertion that undocumented workers are a drain on the economy.

It was discovered that the foreign born paid $1.7B in state and local taxes in 2014, the year studied and the latest year these statistics were available to researchers at the New American Economy; the group that conducted the study commissioned by the Arizona Chamber. The vast majority of these workers are employed in low skill, low pay, hard conditions jobs. They make up 32% of janitors and building cleaners, 50% of landscaping and grounds maintenance people and 55% of maids and housekeepers, according to the article.

In agriculture, the undocumented, according to US Chamber of Commerce Vice President Randy Johnson, make up about 60% of the workforce. “…Johnson said any federal legislation to require employers to electronically check the legal immigration status of their workers is dependent on farmers and others being able to get the laborers they need in some way,” according to the article. “Let’s just say it: They can’t work without undocumented workers in the workforce,” he said. When pressed about low wages and harsh conditions being the reason US born workers will not do those jobs, Arizona Sen. John McCain was quoted from a speech in which he claimed US workers would not do the work for even $50/hr. This assertion has not been tested that I know of.

The US Chamber, according to VP Johnson supports efforts to “legalize” the undocumented in some fashion. Johnson derided the I-9 system that allows employers to hire people with documents other than green cards “with a wink and a nod” as employers simply “verify the legal status of workers by logging in documents they present, a system that is generally considered to be rife with loopholes and people using forged and stolen papers”, according to the article. Johnson wants the undocumented in the US to be allowed to remain legally subject to a background check. He does not offer more details about what that legal status would entail.

An obstacle to the desire of the US and Arizona Chamber was provided by Arizona State Senator Noel Campbell. “We have to have the border secured first,” said Campbell who worked for 27 years for U.S. Customs and Border Protection, reflecting the views of many within his party,” according to the article. Rep. Campbell must know that most undocumented people in the USA came here legally and overstayed their visas; not by slipping across the border.  This article from the New York Times shows that in 2013 about 250,000 overstayed while about 150,000 crossed illegally. Even though Campbell admits the “border will never be 100% secure” he insists the border must, nevertheless be secured before any comprehensive path to citizenship or other form of legal work status can be granted, in his view.

Since the case has been made that millions of jobs done by undocumented workers would not be done by American born workers then one can conclude that bringing these working people out of the shadows to the light of government labor regulations and protections would allow them to add even more productive value to the economy and boost the revenue to the Social Security system along the way.