Repair of infrastructure such as roads, expansion of electric vehicle charging stations, etc.
Economic growth and employment effects are expected to be weaker than expected
▲ In the photo, U.S. President Joe Biden explains the infrastructure bill at the White House on the 6th (local time). Washington DC/AP Yonhap News
The infrastructure budget, which is at the heart of President Joe Biden’s economic policy, has finally passed the House of Representatives. The optimism that the US economy will be revitalized by the infrastructure budget is mixed with pessimism that the bill will be positive for economic growth, but the impact will not be as great as expected.
According to the Wall Street Journal (WSJ) on the 6th (local time), the US$1.2 trillion (about 1424 trillion won) infrastructure budget bill, which President Joe Biden has been focusing on since his inauguration, was passed by the House of Representatives the night before and signed by the president. leaving only
Along with social welfare spending, this bill, one of Biden’s signature policies, aims to repair and strengthen aging physical infrastructure such as roads, bridges and railroads, and to improve the quality of life of the people and lead to job creation. In line with the growing trend of eco-friendly vehicles, the budget is also being used to expand electric vehicle charging stations.
“This is a monumental step forward,” Biden said. “This infrastructure bill will create millions of jobs with a huge once-in-a-generation investment,” he said.
Japan’s Nihon Keizai Shimbun (Nikkei) said, “In the United States, public-private investment in next-generation industries has revitalized the economy, such as the information highway initiative during the Bill Clinton administration in the 1990s that led to the distribution of the private Internet.” Although there are concerns about the fiscal deficit, I decided that the Washington price was essential for job creation and competitiveness improvement,” he explained. In fact, in the House of Representatives, six Democrats voted against the escalation of the climate change crisis, but the bill passed with 13 Republicans backing nonpartisan.
The WSJ said, “All kinds of commuting infrastructure, from cars, buses and bicycles, will be improved, railway lines will be expanded, and airport facilities will be upgraded. there,” he explained.
However, some economists do not expect the infrastructure bill to have a huge effect. Moody’s, a global credit rating agency, estimates that the bill would increase U.S. gross domestic product (GDP) by 0.17 percent ($34 billion) by the end of the year and 0.5 percent by 2026. And this effect is expected to disappear as spending gradually declines. In particular, Moody’s estimates that the US GDP will grow by only 0.12% ($39 billion) by the end of 2031 compared to when the bill was not passed.
In terms of employment, the effect is not expected to be significant. Moody’s estimates that the law will create a cumulative 566,000 jobs by 2026. However, most of the jobs will be temporary, with net employment growth expected to reach 75,000 by 2031.
“The problem is that people don’t want to return to work,” said Kent Smeters, an economics professor at the University of Pennsylvania. It is analyzed that the government’s huge expenditures do not lead to large-scale job creation.
Professor Smeters also predicted that “the interest rate hike and the federal debt problem could also act as a cause of weakening the effectiveness of the infrastructure bill.”
The Congressional Budget Office estimated that in 2016, for every dollar of federal capital investment, private sector production increased by about 5 cents per year. But Mark Scrivener, a transportation expert at the liberal think tank Reason Foundation, points out that “there is a risk that governments will be pouring money into projects that may not yield much.”
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