By: Kendall Jones on April 8th, 2021
What Biden's Infrastructure Plan Means for the Construction Industry
Last week, President Biden unveiled the American Jobs Plan, an ambitious $2 trillion infrastructure plan. In addition to investing in rebuilding the nation’s crumbling roads and bridges, there would be strong focus on resiliency and sustainability. The plan would also focus on improving drinking water infrastructure, energy infrastructure, and high-speed broadband infrastructure.
The American Jobs Plan would also invest in building and upgrading public schools and community colleges, childcare facilities, affordable housing, VA hospitals and clinics, and federal buildings. Like most major infrastructure plans, there’s a big focus on jobs creation to make it all happen, which is welcome news to the construction industry. The plan also includes items not typically found in an infrastructure spending plan like investing in research and development, improving manufacturing supply lines, electrifying vehicles, addressing climate change, and improving racial and gender equity.
So, how much money are we talking for future construction projects and what’s the timeline for putting the plan into action? Let’s start by looking at how much would be spent in some key areas. The American Jobs Plan calls for investing:
- $115 billion to modernize 20,000 miles of bridges, highways, roads, and main streets
- $20 billion to improve road safety
- $85 billion to modernize public transportation stations, tracks, signals, and power systems
- $80 billion to address Amtrak’s repair backlog
- $25 billion in airports including terminal renovations and multimodal connections
- $17 billion in inland waterways, coastal ports, land ports of entry, and ferries
- $20 billion in infrastructure to reconnect urban neighborhoods cut off by highways
- $25 billion for projects too large or complex for existing funding programs
- $50 billion to improve infrastructure resilience
Water & Sewer Infrastructure
- $45 billion to replace 100% of the nation’s lead pipes and service lines
- $56 billion to modernize water, wastewater, and stormwater systems
- $10 billion to remediate polyfluoroalkyl or perfluoroalkyl substances in drinking water
High-Speed Broadband Infrastructure
- $100 billion to build high-speed broadband infrastructure to reach 100% of the nation
- $100 billion in electric power generation and transmission, including clean energy
- $5 billion to remediate and redevelop idle industrial and energy sites
- $213 billion in affordable and sustainable housing
- $100 billion to build and upgrade public schools
- $12 billion for community college construction
- $18 billion to modernize Veterans Affairs hospitals and clinics
- $10 billion to modernize federal buildings
- $40 billion to upgrade laboratories, including brick and mortar facilities
This plan sounds great for the construction industry, with lots of additional money being spent on infrastructure and construction projects. The problem is, as of now, it’s just a plan. Sure, there’s even an outline of where changes to the corporate tax code will raise the $2 trillion price tag over 15 years to fund the plan.
First, a bill would need to be introduced in the House or Senate, goes to committee, gets debated and voted on, once it passes it goes to the other house of Congress and the same thing happens, then the House and Senate work together to reconcile their versions of the bill, and then on to the President to sign into law. Simple, right? Plus, infrastructure is supposed to be one of those few bipartisan issues that everyone can get behind and support.
Recent History of Presidential Infrastructure Plans
Let’s take a look at what history has to say on the matter. President Trump released a massive infrastructure plan in 2018 which would have used $200 billion in federal funds to spur on $1.5 trillion in private investments. Trump also pushed for a fourth stimulus package to help mitigate the effects of the coronavirus pandemic that would have included $2 trillion for infrastructure improvements. Neither came to fruition.
President Obama tried multiple times to get a large infrastructure plan passed as well as introducing a national infrastructure bank to attract private investment. Other than the short-term reauthorization of existing infrastructure spending bills, the best Obama could muster was a five-year, $305 billion transportation infrastructure package back in 2015.
Funding Infrastructure Spending
And, yes, infrastructure packages tend to get bipartisan support in Congress, but there’s typically disagreements about how much is being spent and where the funding will come from. One of the topics generally discussed is the Highway Trust Fund.
The Highway Trust Fund is a major source of funding for federal highway and mass transit construction and improvement projects. A majority of the revenue that funds the Highway Trust Fund is generated through the federal gas tax which is 18.4¢ per gallon for gasoline and 24.4¢ per gallon for diesel fuel. The last time the federal gas tax was raised was back in 1993.
The problem is simple economics. For years, the Highway Trust Fund was generating less than it was spending and Congress has had to authorize transfers from the Treasury’s general fund to keep the HTF from going insolvent. With COVID-19 keeping many people from driving as much, the revenue from gas taxes has taken a significant blow. Add in the fact that vehicles are far more fuel-efficient, meaning less gas to go further, not increasing the federal gas tax in 28 years, or finding another means of generating revenue, means the HTF will continue to face insolvency.
Potential Impact on Construction Industry
A massive infrastructure bill would be a boon to the construction industry. That kind of investment would result in a lot of new projects and increase construction spending while also creating a significant number of good paying jobs in the industry. But, until there’s a infrastructure spending bill introduced and it starts making its way through the legislative process, the American Jobs Plan remains a pipe dream.
About Kendall Jones
Kendall Jones is the Editor in Chief at ConstructConnect. He has been writing about the construction industry for years, covering a wide range of topics from safety and technology to industry news and operating insights.