U.S. Infrastructure, Clean Energy Spending Spurs Investment, Business Activity

Government funding for clean energy projects and infrastructure—and a related surge in private investment—is powering the United States economy as it filters through businesses and communities across the country.

“It’s been like watching a well-oiled relay race,” Diane Swonk, chief economist for KPMG, told the Washington Post. “Just when one part starts to drag—housing, for example, or manufacturing—it’s offset by strength somewhere else.”

The U.S. government has announcedsome US$299 billion in spending, which spurred another $503 billion in business investment, reports the Post. Business spending on infrastructure, like manufacturing plants, transportation equipment, and software, rose 56% in the most recent quarter, making up 15% of the economy.

“While it’s difficult to tell exactly how much of that growth directly resulted from the Biden administration’s policies, economists say the uptick in business activity is striking at a time when higher borrowing costs and tighter lending standards have curtailed other investments.”

Its effects on the economy come a year or two ahead of schedule, said Swonk. “We’re getting renewed strength from infrastructure spending and other stimulus that is adding to the economy in a big way.”

The boost has come at an important time, notes the Post. Strong consumer spending kept the U.S. economy out of a recession but it has moderated in recent months. After spiking by 4.2% at the start of the year, consumer spending rose only 1.6% in the last quarter.

Americans are “spending less on hotels and dining out, and more on necessities such as health care and insurance,” the Post explains. “The boost in infrastructure spending, both by governments and private companies, has helped bolster overall economic growth.”

As a result, several economists who predicted a recession this year now say the country appears poised to avoid a downturn, the Post says.

“At a high level, the laws are doing exactly what they were designed to do: They are getting money out the door to fund state and local projects,” said Adie Tomer, a senior fellow at Brookings Metro who focuses on infrastructure policy and urban economics. “We know governors, mayors, and county executives have been waiting to get started. Now the federal government is willing to pick up part of the tab, and they’re ready.”

In one example, North Carolina-based Thomas Built Buses has seen a spike in demand for its electric buses—almost entirely driven by federal infrastructure funding that offers $375,000 per vehicle. Not only is this leading to more electric vehicles on the road, but the burst in business is also pumping money and jobs into the economy.

President Joe Biden’s administration anticipates much more infrastructure spending to come over the next decade: an estimated $3.5 trillion, including $1 trillion in private investments, through three key pieces of legislation: the Inflation Reduction Act, the CHIPS and Science Act, and the Infrastructure Investment and Jobs Act.

But it remains to be seen whether those outcomes will help garner support for Biden’s re-election. Much of the funding flows through local governments—which can then take much of the credit—and the benefits of many of the infrastructure projects will not be felt for years down the road, the Post notes.

“It’s going to be a hard road for the Biden administration to explain to the American people what they’ve delivered and why it’s important,” Tomer said. “It’s hard for people to know why their road got repaved at a certain time or who paid for it.”

Already, though, Biden is leaning into a new shorthand, “Bidenomics”, that Republicans originally coined in the hope of saddling the administration with responsibility for an economic downturn. In recent campaign stops, the president has sought to turn the intended insult into a symbol of success.