This past week, the House of Representatives passed a 1.2 trillion dollar bipartisan infrastructure package, the result of months of negotiations and compromises put forth by the House Majority. It was, however, held up for several months- because of another, larger, partisan infrastructure package. To understand why, keep in mind that the House majority party is, in actuality, very politically diverse. Some of the more progressive members of the majority believed that if they didn’t hold up the bipartisan bill, they wouldn’t get the larger package that they wanted. Meanwhile, the more moderate members were concerned that the spending price of the larger package would come back to hurt them in next year’s midterm elections, and wanted to stall it for as long as possible in order to avoid political discomfort.
Nevertheless, a proper discussion of what’s in the package deserves to be had in order to further make any conclusions about its efficacy. Here’s a good example: the package has around a hundred billion dollars for road and bridge repair, 66 billion dollars for railroads, 65 billion for power, another 65 for broadband, and numerous other provisions. When combined with a larger infrastructure package, these investments would revitalize our aging transportation and communication frameworks. However, what will finance these provisions? The White House says it plans on paying for the bill through enhanced funds for the IRS and tax increases on the wealthy. There might, however, be an element of deficit spending, like what financed the COVID-19 relief bill earlier this year.
The economic effects of the bill could vary widely. Investing in roads and bridges is sure to improve long-term productivity, a positive aspect that could prove useful when competing economically with other nations. However, excessive deficit spending can always prove challenging for lending behavior and interest rates in the short term. With another package looming on the horizon, it’s worth looking at it a bit more critically. However, investment in our public works system is sorely needed, and an infrastructure bill is one of the best ways for the government to improve economic efficiency and quality of life.