Economist: Infrastructure Bill Offers Some Long-Term Benefits

By Jeffrey Bellant November 09, 2021

On Nov. 15, President Biden is expected to sign the $1.2 trillion infrastructure bill, which includes $550 billion in new spending, after months of negotiations. The bill passed with bipartisan support and it’s the first of two pieces in the president’s economic plan. 

Cox Automotive Senior Economist Jonathan Smoke expects the bill’s benefits to take time to kick in.

“The passed bipartisan infrastructure bill will have a larger effect over the longer term by boosting longer term economic growth,” he said.

“Specifically for auto demand, investing in roads and bridges maintains and potentially expands demand over time especially if new roads and bridges support population growth and new construction.”

Smoke added the legislation also focuses on electric vehicle charging infrastructure, which should boost EV sales in the future.

“Neither of those will have any impact in the short term, where our dynamics are being driven by constrained new vehicle production,” Smoke said.

He expects the infrastructure bill will have “a slight impact on GDP in future years.”

The bill doesn’t address inflation or the historic jump in the CPI report this past week.

Smoke said the bill will have “likely little impact on inflation over the longer term.”

The proposed follow-up bill – a massive reconciliation bill being hotly debated – could offer some positives and negatives.

However, it is far from clear what will end up in the final bill as the Democrats try to cobble votes to pass it.

“The Build Back Better package will create some economic gains but also will have some costs through new taxes that will offset some of those gains,” Smoke said. “It is likely that the added incremental growth would also produce a slight increase to the inflation trend, especially if it boosts consumption of specific goods and services such as childcare.”

Biden is more optimistic.

 “Generations from now, people will look back and know this is when America won the economic competition for the 21st Century,” he said in a statement after passage of the infrastructure bill. 

In total the infrastructure bill includes: $110 billion for roads and bridges; $66 billion to boost rail; $65 billion for the power grid; $55 billion to improve the nation’s water supply and replace lead pipes; $50 billion to respond to emergencies including droughts, wildfires and major storms; and $7.5 billion for electric vehicle charging stations.

The bill also addresses specific safety issues in the auto industry. It includes updates to NHTSA’s New Car Assessment Program, distracted driving prevention and autonomous vehicles. Included are a set of deadlines for the U.S. Department of Transportation to issue rules on automatic shutoff for keyless ignition systems, updated headlamp standards and a requirement for new vehicles to be equipped with drunken and impaired driving prevention technology.

The Department of Transportation is going to require automakers to build new technology into new cars to prevent drunk driving.  The top ideas being floated are passive monitors for drivers’ breath, eye scans to check focus and infrared touch tests on ignition buttons.

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Last modified on Friday, 19 November 2021 03:48