It is a new year with a new president, but January made clear that COVID-19 is still calling many of the shots in 2021. We are in the midst of a very difficult stretch, with coronavirus numbers surging to new highs almost daily since November and unemployment claims still about four times higher than pre-crisis levels. And even with vaccinations now underway, we know the economy won’t return to any semblance of normalcy until this health crisis is resolved. We have a long way to go.
Unsurprisingly, President Joe Biden came right out of the gate with an aggressive agenda to give the economy extra support this year as the fight to contain the virus wages on, and a Democratic Congress makes it far more likely that these policies will become law. In addition to his proposed fiscal stimulus, Biden is soon expected to release a second package of longer-term policy solutions around his upcoming address to a joint session of Congress, including an increased investment in physical infrastructure.
Infrastructure may have the greatest potential for expansive, bipartisan investment – and thankfully, it’s also where we see the greatest bang for your federal buck. During his campaign, Biden laid out a plan to pump $2 trillion into infrastructure, including roads, bridges, water systems, electricity grids and universal broadband, while also investing in care services and facilities. Republicans have echoed a willingness to work across the aisle on this issue: Sen. John Barrasso (R-Wyo.), chair of the Senate Republican Conference, was recently asked about the potential for bipartisan infrastructure investment and said, “If we have willing partners in the other chamber, we can do it for sure.”
Of course, finding bipartisan compromise, particularly on large pieces of legislation, can prove challenging. But if done wisely, such an investment would help get the United States back on track – boosting the economy, creating lasting middle-class jobs and adding value to the gross domestic product.
In an analysis conducted after the pandemic took hold last year, I found that a $2.1 trillion boost to public infrastructure spending over a 10-year period could add as much as $5.7 trillion to U.S. GDP in a decade. That’s 10 times what was lost during the recession. It would also create 2.3 million jobs by 2024, and the additional 0.3 percent boost to productivity generated per year would add a net 713,000 jobs by 2029. The estimated potential real GDP growth over the next 10 years would rise from 1.7 percent to 2.2 percent.
Of course, this investment won’t just help boost the economy – it’ll update critical infrastructure that has fallen into massive disrepair after years of neglect. In 2018, the Department of Transportation wrote that 64 percent of highways and 25 percent of bridges were in need of upgrades. These involve not just resurfacing roads and bridges but also taking steps to improve their resiliency in the face of increasingly severe weather conditions.
And while most just think of roads and bridges when infrastructure comes to mind, public health is also a form of infrastructure and, as COVID-19 has made clear, also needs improvements. U.S. public health infrastructure is currently faced with an unprecedented crisis, and budget cuts over the past 10 years have likely made it harder to handle COVID-19. Solid investments in public health infrastructure would help not only the health of citizens, but also their productivity, and, in turn, the health of the U.S. economy.
The COVID-19 pandemic has been a catalyst for rethinking the fundamental structure of many aspects of everyday life. Social distancing has led to changes in how we interact. Remote working may become a permanent fixture of the business landscape, and transportation systems may be rethought to incorporate these new ways of living. Not all people can afford the private transportation that would satisfy social distancing, and many rely on publicly available transport to make a living. In many parts of the country, reworking this infrastructure may be one of the cornerstones to adapting life to this new reality and ensuring it is viable.
Given that interest rates are at historic lows, materials remain affordable and high unemployment persists, I’m hard-pressed to see a reason not to act. By prioritizing infrastructure now, Americans could invest not only in the physical health of the nation, but also in its economic health. At the same time, the systems we build today may actually be our ticket to the future and go a long way to determining how strong America will be years down the road.
Beth Ann Bovino is the chief U.S. economist for S&P Global.
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