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7 Nov 2021

New Infrastructure bill could have Positive Impact on Economic Growth

The Index Today

According to economists, the newly passed $1 trillion infrastructure bill by the congress will to some degree boost the economy in the short run and strengthen the nation for upcoming decades.

The new bill includes additional $550 billion which will be allocated towards broadband networks, road maintenance, subway systems, railways and power plants. Economists agree that having a strong infrastructure will help productivity as it provides workers with more ease of transportation and mobility, leading to an overall growth in the standard of living. Adie Tomer, a transportation expert said, “The infrastructure bill should increase labor productivity in the long term in the exact ways the American economy needs.”

According to Economists at Moody’s Analytics, labor productivity will grow by 0.03% every year up until 2031. This means, the overall economy will improve by 1.93% every year in comparison to the 1.9% estimate provided by the Congressional Budget Office. The new spending plan will come into full effect with supply chain bottle necks easing up in the near future. The plan will focus on encouraging workers from construction industries instead of creating new job spaces.

In 2016, the Congressional Budget Office estimated that for every dollar spent on investment by the government will lead to an output increase of 5 cents in the private sector. However, despite the positive outlook of the plan, there is still a risk that infrastructure spending may not pay off as expected. Economists are doubting if pre-pandemic levels of mass transit will ever go back to normal levels.

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