Biden’s Infrastructure Spending Plan Directs Billions Toward Tech

Increased infrastructure spending has been one of the key promises of President Biden's campaign. With more details emerging about the administration's infrastructure spending plan, we want to look at sectors and industries that could be affected by Biden’s plan. Note: This is a developing story, and we will continue to update the article as more information becomes available.

On August 10, 2021, President Biden announced his $1 trillion infrastructure plan for overhauling and upgrading the US' infrastructure, combined with the $3.5 trillion infrastructure agreement announced in July that focuses more on human infrastructure programs. The human infrastructure plan will expand Medicare funding and coverage, support affordable childcare and free college education initiatives, and create pathways for employment. The bill also will look to transform the country’s energy systems to address climate change needs. The White House says the bill will grow the economy, enhance competitiveness, create jobs, and make the country more sustainable.

According to the administration, this increased focus on the nation's infrastructure will position the country well for the future, and long-lasting effects on economic growth are expected. Businesses and consumers in the US are projected to see lower transportation costs, lower commute times, better internet service, etc. According to the New York Times, this is the most ambitious infrastructure spending program in more than half a century. And, as the NYT further explains:

"If approved, the spending in the plan would end decades of stagnation in federal investment in research and infrastructure — and would return government investment in those areas, as a share of the economy, to its highest levels since the 1960s."

The American Society of Civil Engineers (ASCE) believes that this infrastructure plan is not too ambitious of a proposal. Since 1998, America’s infrastructure has earned a consistent D- grade from the American Society of Civil Engineers (ASCE). Though it improved slightly to C- in 2021, the ASCE said the country is spending only half of what is required to support its infrastructure—which over time will result in significant economic loss, higher costs to businesses, consumers, and manufacturers, and public safety concerns. The report also estimates that the gap between the country’s infrastructure needs and its likely spending on those needs is projected to top $2.6 trillion by 2029 and more than $5.6 trillion by 2039. Biden is also pitching his plan as an investment to help communities of color, rural Americans, and others burdened by decay or lagging modernization.

POTENTIAL OPPORTUNITIES IN TECH

When government spending increases, it typically means that the money that is being spent must flow somewhere. In this case, with infrastructure spending likely rising in the coming years, there is a wide range of potential recipients.

While many of these infrastructure and infrastructure-adjacent industries may benefit from the passing of the proposal, much of the plan is still earmarked for areas that political opponents do not consider infrastructure. It is worth noting that not everything that the Biden administration is planning to do will necessarily materialize. In fact, the measure faces a potentially rocky and time-consuming path in the House, where Speaker Nancy Pelosi and a majority of the nearly 100-member Progressive Caucus have said they will not vote on it unless and until the Senate passes a separate, even more, ambitious $3.5 trillion social policy bill this fall. The infrastructure bill needs approval from both chambers of Congress before it could get signed into law.

Indeed, Wall Street firm Goldman Sachs warned clients that more tax hikes are almost certainly coming. The bill includes new tax reporting requirements for cryptocurrency transactions, meant to help fund the bill’s enormous price tag.

Biden announced during his presentation of the American Jobs Plan in March that half of the infrastructure and jobs package could be paid for by raising corporate taxes from 21% to 28%, which would generate $1 trillion in additional revenue. Biden proposed raising the top individual income rate from 37% to 39.6% for incomes above $400,000 (this was the 2017 rate for incomes above $418,400, before the Trump Tax changes) and doubling the capital gains tax from 20% to 39.6% for investment gains over $1 million.

“We still believe the White House will propose increasing capital gains and individual top marginal rates even though these were not in today’s plan,” wrote Alec Phillips, chief U.S. political economist at Goldman Sachs. These tax hikes can negatively impact companies in the sectors discussed above, which may neutralize the positive effects of the infrastructure bill.

It is also not guaranteed that the sectors discussed will benefit on a longer-lasting level, even if President Biden's infrastructure plans are enacted. In some cases, there may be short-term effects that wane over the years, as infrastructure spending is not guaranteed to persist in the coming years.

Finally, concerns of rising costs for materials and inflation, which may be exacerbated by the plan’s price tag, may impact the bottom line of companies within these industries.

Sources: BGBC. “Biden’s Infrastructure Plan: What is Construction’s Opportunity.”; SmartAsset™, Aug 10, 2021. “Inside Biden’s $4.5 Trillion Infrastructure Plan.”; CNBC, Aug. 10. “How the $1 trillion infrastructure bill will direct billions toward tech spending.”; Washington Post. Mar 2021. “Biden’s infrastructure plan faces controversy over price tag and design.”