The Real Economy: January 2022
The infrastructure package will modernize the economy
THE REAL ECONOMY |
The $1.2 trillion Infrastructure Investment and Jobs Act will increase productivity, reduce business costs, cut carbon emissions, improve living standards and have the potential to lift economic growth above the current long-run rate of 1.8%.
Once one accounts for spending at the state and local level, infrastructure spending will reach nearly $3 trillion over the next eight years. This represents the most significant modernization of the nation’s infrastructure since the middle of the 20th century.
There are near-term macroeconomic benefits to infrastructure investment—the multiplier effect with real interest rates being negative is likely larger than the 1.25 per dollar spent on traditional hard infrastructure. But the most encouraging benefit of the initiatives will take place over the long run as they bring a payoff to both productivity and growth that will be greater than our estimate suggests.
In this month’s The Real Economy, we take an industry-by-industry look at the significant impact that The Infrastructure Investment and Jobs Act will have on productivity and growth in the American economy. We also look at the prodigious savings that American households built up during the pandemic. They are starting to spend that down now, an encouraging sign for the economy.
IN THIS ISSUE
This legislation represents the most significant modernization of the nation’s infrastructure since the middle of the 20th century.
After building up prodigious savings during the pandemic, American households are starting to spend that cash.