Opinion: Federal infrastructure investment could help put Americans back to work
When the new Congress meets in January, a major infrastructure program is likely to be on the wish list of both political parties. Joe Biden has also spoken favorably about allocating $2 trillion in investment for America’s decaying infrastructure.
The economic benefits of an infrastructure program could be substantial. But as a new analysis by the Coalition for a Prosperous America reveals, the rewards would be far greater if Congress makes certain to include strict federal "Buy American" requirements.
Last July, the House passed a Democrat-sponsored infrastructure plan, the Moving Forward Act. CPA’s analysis of the bill found that its five-year, $1.5 trillion infrastructure plan could create as many as 2.5 million U.S. jobs by 2025.
Such a program would deliver sorely needed improvements for the nation’s deteriorating infrastructure. The problem, though, would be if federal funds were spent on imported supplies — reducing much of the potential benefits. However, if the same infrastructure plan included strict Buy American provisions, the program could generate a 33% larger boost to gross domestic product and create a total of 3.3 million jobs through 2025.
Over the past 90 years, Congress and federal agencies have made numerous attempts to favor the spending of federal dollars on American-made products. Unfortunately, these “Buy American” laws have often contained loopholes allowing federal agencies to purchase imported goods.
Strengthening such laws — either through administrative rule-making or congressional legislation — could ensure that every possible dollar is spent on American-made goods. That would boost the U.S. economy while making sure that components also adhere to America’s world-leading safety and quality standards.
In 2017, the American Society of Civil Engineers gave America’s overall infrastructure a D-plus, reflecting deteriorating roads and bridges, many of which need upgrading or replacement. There’s clearly a need for large investment in basic infrastructure, since America’s roads, bridges, highways, schools, water facilities, electrical transmission systems and other key components of national infrastructure have suffered from decades of neglect.
But infrastructure investment is also likely to include growth sectors like renewable energy and electric vehicles. There is general agreement that these industries will grow in the next decade. And so a federal investment program could give U.S. producers a shot in the arm to start gaining market share in these advanced industries.
CPA estimates that loopholes in current Buy American laws could mean a five-year, $1.5 trillion infrastructure plan still allowing as much as $75 billion in annual spending to go to imported products. That includes large volumes of imports for electric vehicles and broadband equipment, and basic commodities like steel and cement.
However, enforcing strict Buy American rules would reduce imports, increase spending on American-made goods, boost GDP an additional $117 billion annually, and create 780,000 jobs in the first year alone. That’s an increase of roughly 33% compared to forecasts for the Moving Forward Act under its current framework.
At a time when U.S. manufacturing has declined in employment and output, a trillion-dollar federal program could play a vital role in turning things around. Manufacturing of broadband equipment, for example, is dominated by China. A federal infrastructure program could be the first step toward restoring American R&D and manufacturing in this critical industry.
Similarly, China leads the world in electric vehicle production and related technologies like lithium-ion batteries. A federal infrastructure program could accelerate the domestic development of these sectors and turn them into viable, growing businesses. This also extends to pharmaceuticals and medical equipment — two sectors that proved to be in troublingly short supply at the start of the COVID-19 pandemic. Federal support for new hospitals and medical supply chains should come with requirements demanding strict sourcing from U.S. producers.
Today there are 10.7 million Americans unemployed and another 6.8 million who have stopped looking for work. A trillion-dollar infrastructure program could help to put many of them back to work. That should be a top priority for the new Congress — an infrastructure package that includes strict Buy American requirements to benefit as many U.S. workers as possible.
Jeff Ferry is chief economist at the Coalition for a Prosperous America.