The Biden administration wants to plunk down about $2.3 trillion, but the GOP’s head man says $800 billion would be plenty.
The subject is infrastructure spending, and the object is to revitalize America’s roads, rails, electric grid, water systems, and more. The “more” is a big sticking point in these big plans, with Biden and the Democrats also adding in hundreds of billions to, among other goals, bolster caregiving for elderly and disabled Americans and to renovating and retrofitting more than 2 million homes.
Senate Majority Leader Mitch McConnell, meanwhile, says $800 billion is enough to go around, up from the $568 billion first put forth by a group of Senate Republicans in response to the White House proposal put forth as the American Jobs Plan.
Some points of agreement on what constitutes infrastructure
The negotiations may be picking up steam this week, and even the smaller amount favored by Republicans could still have a major effect on improving the infrastructure that American businesses, indeed much of our daily life, depends on.
For instance, improved highways, air travel, seaports, and railways would help improve the flow of goods, making investments in warehouses and other logistics an even better bet than they are now. That flow includes helping to boost exports by, for instance, improving long-neglected locks and dams to improve traffic down the Mississippi to the Gulf of Mexico.
Both parties agree on that part of the infrastructure debate. But the Democrats and their push for more healthcare spending — including expanding Medicaid — would seem to point to a potential boon for the long-term care industry, often not included in the typical notion of infrastructure.
Housing is another area that could be a major play for real estate investors, lending itself to everything from major residential real estate investment trusts (REITs) to individuals and small groups who could access what presumably would be a hugely replenished source of public funds to finance projects of all sizes.
And then there’s commercial real estate (CRE).
From the Great Depression to the Great Recession to now
A recent article posted by REjournals.com lays out the history of massive infrastructure spending as a tool for economic revitalization from the Great Depression through the Great Recession. Titled “Why CRE Lenders Want to See Infrastructure Investment,” the piece argues specifically that “the CRE community may have plenty of reasons to get behind these goals.”
For instance, the author points to Economic Policy Institute research that shows a first-year increase of $29 billion in GDP and 216,000 net new jobs from just $18 billion injected into infrastructure. And that’s just talking about what’s traditionally thought of as infrastructure — roads, bridges, ports, utilities, etc.
That all supports a bustling economy able to support not only more jobs but to spur suburban development that takes advantage of improved connectivity to the city center and access to expanding commercial activity all along the way.
Simply put, the piece says, “Although numerous factors contribute to property values, making it easier to access a building tends to boost economic activity associated with the building.”
The article also cites another study that “found that infrastructure — including transportation, utilities, and telecommunications — is the most important factor influencing real estate investment and development decisions in cities around the world.”
That includes ours.
The Millionacres bottom line
How to pay for all this is already the crux of the matter. “A billion here, a billion there, and pretty soon you’re talking real money,” the late Sen. Everett Dirksen (R-Illinois) was famously quoted back in the day. Now we’re talking trillions.
But it does seem that there could be a rare bipartisan agreement coming down the possibly soon-to-be-repaved road here. To get us out of the pandemic economy, something has to be done, it would seem, and addressing all these deferred maintenance needs on a national basis would be a great place to start.
“As the necessity for infrastructure improvements and job creation converge, it’s a compelling argument for significant investment in the nation’s public assets,” the REjournals article says. “That’s a reason for optimism for the CRE industry.”
And for every other vertical in the big kaleidoscope that is the U.S. economy and the people and business it comprises.