Posted by: Josh Lehner | April 8, 2021

It’s Actually Infrastructure Week

With the Biden administration’s American Jobs Plan proposal being released, it’s actually time to start talking about infrastructure. The U.S. government can and has done big investments in the past, however since building the interstate highway system, ramping up space exploration, and even the height of the Cold War, public investments have been considerably smaller. In recent decades, government investment spending has been at these reduced levels and has increased at about the same rate as the overall economy as seen in this edition of the Graph of the Week.

Note that “structures” in the BEA data really means anything that stays in place and is not mobile. It includes physical buildings but also roads and the like.

The American Jobs Plan has a lot in it. There is funding for classic old school infrastructure like roads and bridges. Additional funding for rail and transit. Furthermore it includes retrofitting public buildings, increasing broadband access, modernizing the electrical grid, improving water systems, and electric car charging stations.

Overall there’s some discussion about the specifics of all the above in terms of what’s the best opportunities and highest priorities, but it’s really the other portions of the proposal that have people talking in the past week. The plan also includes things that fall under the umbrella of what folks are calling human infrastructure or social infrastructure. This includes increasing patient access for medical care, caregiving services for the elderly and those with disabilities, and funding for schools and child care. While most everyone agrees these programs don’t fall under the traditional infrastructure definition, arguing over terminology (e.g. social infrastructure vs public investment) is a bit pedantic. What ultimately matters is what program areas do receive increased public funding and what are those impacts on the economy and society more broadly.

Overall economists are very supportive of infrastructure as it typically raises productivity in the economy. With improved transportation and broadband access, goods, services, workers, and consumers can more efficiently move around. A lot of these projects fall under the banner of “public goods” which really means they are things everybody uses and are important but the private sector tends not to build, or not enough on their own. If I’m going to build a road, I’m going to build it where I need it for my business and then maybe not left everyone else drive on it otherwise it will get congested and if I do let them drive on it I will probably charge them a lot of money because it was expensive to build it in first place and I’d like to make sure it is profitable for me.

In terms of how any potential federal packages will impact Oregon it’s too early to say. Our office’s expectations are that much of this funding, should it come to pass, will be shared via some sort of standard formula where each state will get their fair share. As such, the overall economy will get a boost in the years ahead but the impact in Oregon will likely be the same as in the typical state. Of course this is all pending the details of any actual policies that do get passed.

That said there are possibly some areas where Oregon could see an outsized impact. Included in the initial proposal are funding related to Affordable Housing, domestic manufacturing, and child care. For Affordable Housing and child care we know the need is proportionately greater in a place like Oregon where housing affordability is worse and child care costs are higher. These are needs across the country, but if some of the additional federal funds were to be disbursed in part based on need and not just overall population, Oregon may see a greater boost, but that is unknown today. Additionally, given Oregon has a somewhat larger manufacturing industry than other states (15th in GDP, 18th in jobs) than a boost to domestic manufacturing is likely to impact Oregon to a greater degree. Of course the details will matter and if there are sector specifics related to wood products, tech, food manufacturing or the like than even more so.

Finally, the caregiving aspects to the American Jobs Plan proposal ties in nicely with some research our office has in the works. First, next week we will share a few thoughts on the new, enhanced Child Tax Credit that passed as part of the COVID relief bill earlier this year and policymakers are looking to make permanent. Second, we will take a look at how the pandemic is affecting older workers and retirements. Third, the caregiver proposals specifically reminds me it is time to resurrect our office’s Aging Oregon series we were partway through when the pandemic hit. The next post in that series was going to be on nursing and residential care facilities. I am in the process of updating all of that and should have it ready in the next couple of weeks.

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