The House of Representatives passed a $1.2 trillion infrastructure bill, formally called the Infrastructure Investment and Jobs Act, late Friday after months of debate, by a 228-206 vote, with 13 Republicans voting in favor and six Democrats voting against it.

The measure, already approved in the Senate, is the first milestone in President Biden’s economic agenda. President Biden said he’ll sign the landmark bill into law soon.

Meanwhile, the second piece of his agenda, a roughly $2 trillion social spending bill that is still being negotiated, will take longer to push through Congress.

A key part of President Joe Biden’s economic agenda, the infrastructure agreement calls for $550 billion in new federal spending on top of previously approved funds. The bill is an ambitious plan to upgrade and modernize the nation’s roads, bridges, water systems, broadband access, and electric grid, starting in 2022 and lasting through the decade.

The bill calls for investing $110 billion for roads and bridges, $66 billion for rail, $65 billion for power grid infrastructure, $65 billion for broadband, $63 billion for water and wastewater infrastructure, $47 billion for cyber and climate resilience, $39 billion for public transit, $25 billion for airports, $24 billion for environmental remediation, $19 billion for ports and waterways, $16 billion for electric vehicle infrastructure and electric mass transit, and $11 billion for road safety. Please see the appendix to this note for additional spending detail.

There are offsets to minimize the impact on future budget deficits, including repurposing existing COVID-19 funds, delaying Medicare rebates, and receiving funds from past and future auction sales of wireless-spectrum space. Accounting for these offsets, the Congressional Budget Office (CBO) estimates the infrastructure bill would add $256 billion (1.1% of GDP) to the deficit over the next decade.

While modern infrastructure provides important long-term productivity benefits, we expect the near-term economic impact to be modest because the spending will take a few years to ramp up and will be spread over the rest of the decade. The second $2.0 trillion bill would provide a separate boost to fiscal spending and consequently economic activity.

This traditional infrastructure investment should be beneficial for industrial and materials companies. We are favorable on the industrial and material space and this could bolster their outlook. Utilities could stand to benefit from increased investment in water and energy infrastructure. Many communication services and technology firms will likely benefit from increased investment in broadband.

Please see our 2020 special reports, The Case for Infrastructure Spending and 5G Technology Investment Implications for additional detail on infrastructure and advanced communication investment implications. Also see our 2021 special report Clean Energy Investment Implications for additional detail.

Meanwhile, we remain positive on our outlook for the economic recovery from the pandemic. Leading economic indicators remain encouraging, while we see signs the economic headwind from the recent virus surge is abating. Importantly, service activity is strengthening as the Delta variant fades, with the October Services PMI (a timely business survey) jumping to a record high. This suggests a significant acceleration in services activity after a temporary lull in the third quarter that was caused by the surge in the Delta wave. All 18 industries in the ISM survey expanded, signaling a broad-based expansion.

Friday’ labor market report showed better-than-expected October job growth of 531,000, led by 164,000 jobs in leisure and hospitality which was hard hit by the pandemic. With over 10 million current job openings, we see further labor market gains in the coming months. Consumers are also healthy and there is pent-up demand, which we see being released as the pandemic fades. Businesses are confident and profits are coming in better than expected, which supports future spending and hiring plans.

Appendix: Additional Details of the Infrastructure Investment and Jobs Act Spending

Roads, Highways, Bridges: $110 billion. In addition to construction and repair, the funding also helps pay for “congestion relief” in American cities. $303.5 billion over five years for Federal Highway programs, a 35% increase from previous bills. Overall package includes $40 billion in dedicated resources for bridge repair, replacement and rehabilitation, which is the single largest dedicated bridge investment since the construction of the interstate highway system.

Rails (primarily Amtrak): $66 billion. The largest investment in passenger rail since the creation of Amtrak 50 years ago, with funds earmarked for high-speed rail, safety improvements, and grants to modernize Washington, D.C., to Boston route.

Power Grid: $65 billion. The bill would fund updates to power lines and cables, as well as provide money to prevent hacking of the power grid. Clean energy funding is also included.

Broadband: $65 billion. Includes funding to expand broadband in rural areas and in low-income communities. Approximately $14 billion of the total would help reduce internet bills for low income citizens.

Water Infrastructure: $63 billion. This funding includes $15 billion for lead pipe replacement, $10 billion for chemical clean-up, and money to provide clean drinking water in tribal communities.

Cybersecurity and Climate Change: $47 billion. The Resilience fund will protect infrastructure from cybersecurity attacks and address flooding, wildfires, coastal erosion, and droughts along with other extreme weather events.

Public Transit: $39 billion. Funding here provides for upgrades to public transit systems nationwide. The allocation also includes money to create new bus routes and help make public transit more accessible to seniors and disabled Americans.

Airports: $25 billion. This allocation provides funding for major upgrades and expansions at U.S. airports. Air traffic control towers and systems would receive $5 billion of the total for upgrades.

Ports and Waterways: $19 billion. Half of the funds in this category would go to the Army Corps of Engineers for port infrastructure. Additional funds would go to the Coast Guard, ferry terminals, and reduction of truck emissions at ports.

Electric vehicles: $16 billion. The bill would put $7.5 billion into a national network of electric vehicle chargers. It would also put $7.5 billion toward electrifying buses and ferries. These actions, according to the Biden administration, are meant to create jobs but also help tackle global warming by decarbonizing major components of American transportation systems.

Environment: $24 billion. The bill would also commit $21 billion to environmental remediation, particularly to clean up Superfund and brownfield sites, PFAS abandoned mines, and orphaned gas wells.

Road safety: $11 billion. The bill invests in transportation safety programs, including a new program to help states and localities reduce crashes and fatalities in their communities, particularly among cyclists and pedestrians.

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