It is the latest in a series of reports this week that show the economy is resurgent. Consumer confidence is jumping to a level that has not been reached since the pandemic and manufacturing activity began and has reached its highest level in nearly four decades. The S&P 500 also closed the week at a record high. Taken together, the numbers signal that the US is well on its way to a revival that is widely expected to see record growth later this year.
And that in turn has blunted one of the central pillars of the Biden administration’s argument about why the sprawling infrastructure plan is so badly needed, even after only $ 1.9 trillion in aid passed last month – that it was “jobs.” acts, as White House press secretary Jen Psaki put it this week, and “the first part of his recovery plan”.
Most lawmakers from both parties, however, agree that a major investment in the country’s infrastructure would be worth it, a move that Presidents Barack Obama and Donald Trump tried and did not take. However, it could become more difficult to spend trillions more to restore jobs as the economy stands ready to move into them on its own.
“Spending at a much smaller level, but more focused, would be better for the money,” said Rep. Kevin Brady of Texas, Republican chief on the House Ways and Means Committee. “We’re wasting way too much of those dollars on areas that are frankly unrelated to recovery.”
Biden tried to disprove those concerns on Friday, stressing that while the March employment data was promising, the economy still had a long way to go.
“Yes, we’ve made progress by starting a bottom-up and center-out economy. And yes, the American bailout plan lays the foundation for that economy,” Biden said at the White House. “But we still need the American employment plan to build on that foundation and to rebuild this country better.”
The White House’s argument might sound hollow, especially to Republicans, and possibly even some centrist Democrats, who have begun to put the brakes on the staggering amounts of cash being pumped into the economy. Congress passed roughly $ 5.4 trillion in emergency relief measures in less than a year, and the White House is now putting another $ 2 trillion to $ 4 trillion on the table.
“I don’t see much of an incentive or job argument that goes very far, even if some try to make it,” said Brian Riedl, a senior fellow at the right-wing Manhattan Institute. “The economic outlook for the second half of the year is strong. And it would have been strong without the next boom. “
Proponents of the infrastructure package claim that some more stimulus would benefit the economy – no one in administration wants to repeat the sluggish “unemployment recovery” after the great recession – that the broader goal is to strengthen the country’s infrastructure and make it more resilient to the effects of climate change while expanding access to clean water and broadband.
And that goal is well worth pursuing despite the record levels of cash that Congress has already appropriated over the past 12 months, proponents say – especially given the current low interest rate environment.
“We’re not going to fix 10,000 bridges just to get people to work. We’re going to fix them because those 10,000 bridges need to be repaired,” said Rep. Don Beyer (D-Va.), Who heads the Joint Economic Committee.
“While no incentive argument had to be made, there is a very powerful argument that the American employment plan is necessary,” he said. “Maybe you could call it something else – you would just call it the infrastructure plan.”
Some economists argue that infrastructure initiatives are so important that policymakers should be cautious about the fact that spending fatigue and the strengthening of the economy become the reasons not achieved this year.
Diane Swonk, chief economist at Grant Thornton, said it would be “a shame” if the earlier relief efforts were to crowd out infrastructure plans.
“It’s beyond a crisis point and just because we’re getting out of a pandemic doesn’t mean we shouldn’t,” she said. “All the more reason to do it. Because we already know that a rising tide doesn’t lift all boats and you don’t want to confuse the surge associated with releasing pent-up demand from the pandemic for long-term sustainability. “
These long-term benefits are the most important reason to adopt the infrastructure plan, according to supporters, as it would invest in projects that will pay for themselves within 15 years and benefit the country over decades.
And that increased amount of time is why most economists have allayed any concerns that another trillion dollar inflow of cash could be too much and too fast for the economy as a whole. Much of the money proposed under Biden’s Plan would not be spent at least a few years after it was signed, and it will be spread over eight years. Biden suggests paying for it, albeit for a longer period than originally spent, with tax increases for businesses.
“I don’t think this will exacerbate overheating concerns, which I have expressed in important ways,” said former Treasury Secretary Larry Summers, a vocal critic of the government’s $ 1.9 trillion bailout plan, which he warned he could inject too much money into the economy, boost inflation, and crowd out other progressive priorities.
The infrastructure proposal is not about “adding money to the economy in the short term, but rather creating the infrastructures and institutions that success in the 21st century requires”.