Thursday 18 March 2021

Points experts

The « Biden » infrastructure package in 5 questions

Inès Belhajjam

Strategist

Bastien Drut

Chief Thematic Macro Strategist at CPR AM

While the Biden administration has just successfully passed a $1900 bn stimulus package (sometimes referred to as the “Biden Plan”), attention will now turn to the infrastructure package that was included in Biden’s campaign promises. The infrastructure needs in the United States are urgent and huge investments must be made if the administration is to meet its climate objectives. However, major infrastructure programs are particularly difficult to implement, because of the diversity of actors involved and of the projects to be implemented, but also because the federal government has very few infrastructures of its own. In fact, there are many pitfalls. Weren’t we already talking about a major infrastructure package under the Trump presidency?

This paper aims to provide an update on the topic by answering the 5 following questions:

  •  What are the infrastructure needs in the United States?
  •  Who owns the infrastructures in the United States?
  •  What are the ambitions of the Biden plan in terms of infrastructure?
  •  What does the Biden plan include for energy infrastructure?
  •  What is the political context for the passage of an infrastructure package?
What are the infrastructure needs in the United States?

In 2017, the public spending infrastructure in the US was 2.3% of GDP, the lowest since World War II. Many infrastructures have not been renovated in decades, and the average age of the nation's infrastructure continues to rise.

However, the United States’s infrastructure needs are significant. This year, the ASCE (American Society of Civil Engineers) gave a C- grade to US infrastructure (ASCE conducts this assessment every 4 years). While the United States has made modest and incremental improvements in some infrastructure categories, such as airports, drinking water systems, waterways and ports, 11 of the 17 infrastructure categories assessed are classified as Category D, in poor condition.

More than one-third of U.S. bridges need repair or should be completely replaced, according to federal data analysis by the American Road & Transportation Builders Association, an infrastructure investment advocacy group. In addition, 43% of major U.S. roads are in poor or mediocre condition, according to the National Transportation Research Group.

Recent power outages in Texas illustrate the vulnerability of America's energy infrastructure. The majority of transmission and distribution lines were built in the mid-20th century and have a life expectancy of about 50 years, which means they are already obsolete. According to the Infrastructure Report Card , the U.S. underinvestment in the electric grid is strongly affecting industries due to inefficiency of electricity supply. The financial services, communications and e-commerce sectors are the most affected because of their high dependence on telecommunications and, consequently, on the electricity grid. The cost impact to businesses (lost productivity, additional costs due to increased reliance on secondary generators, monitoring equipment, and backup strategies) is expected to cost each household an average of $5,800 between 2020 and 2039.

In addition to the obvious safety concerns raised by the lack of maintenance of existing infrastructure, these investments are necessary to enable sustainable long-term economic growth. In addition, the challenge of climate change justifies the implementation of “green” investments, either to meet the Biden administration's climate goals (comeback in the Paris agreement and probable announcement of a carbon neutrality goal by 2050), or to make infrastructure more resilient to climate disasters (in the last four years, extreme weather events such as forest fires, hurricanes and floods have cost the United States more than $6003 billion). So that will be an important part of the Biden infrastructure package.

Find the full document below.

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