The digital divide has become a bigger issue in recent years - with inequalities thrown into relief during the remote-everything of the pandemic. This allotment seeks to link up millions living in rural and lower-income communities with reliable internet access.
Companies who receive a share of this government funding will need to have lower-priced plans on offer and allow customers to compare costs. A programme to subsidise internet and related tech for low income families is also on the books. More Videos Biden's answer to reporter draws laughter After months of debate, Congress passed the historic infrastructure package late last week. Funding for highways and roads, bridges, rail, the power grid, water systems, airports, broadband and public transit will get a big boost.
Biden touts that the spending will grow the economy and create jobs. While many economists agree, it could be months before Americans see the real effects -- unlike the federal coronavirus pandemic relief that delivered money directly to their pockets within weeks.
Money could be released within six months. Most of the funding will pass through the US Department of Transportation and either will be awarded to states annually based on a formula or disbursed through a competitive grant program.
In terms of many employment and social goals that might plausibly be met through infrastructure spending, this is a mixed bag of results.
Spurring employment opportunities for non-white workers in the U. However, employment generated through these projects skews away from black workers, and overall infrastructure investments do not generate employment that skews toward non-white workers generally. Similarly, infrastructure investments tend to generate employment that skews very heavily male. For those concerned generally about securing equal access to occupations for women, this could seem like a strike against such investments as employment policy.
Finally, on the downside, infrastructure investments generate jobs disproportionately for workers older than For countries experiencing severe youth employment problems, this is a real concern. However, these genuine concerns could argue more strongly for creating complementary policies to infrastructure investments, rather than arguing simply for not undertaking these investments, the latter of which would, of course, do damage well beyond employment outcomes.
For example, regulatory, policy, and legal levers should be used to ensure that jobs in construction and manufacturing are indeed open to workers of all genders, races, and ethnicities. But some of the news about the employment outcomes that would be expected from infrastructure investments even without complementary policies can be seen as hopeful. For one, the jobs generated would boost demand for workers without a four-year university degree.
This is a group that in the United States in recent decades has seen the worst wage outcomes, so anything boosting demand for their labor would be a positive. Importantly, this group remains the large majority of American workers. Further, the jobs generated by infrastructure investment are predominantly middle-wage jobs—and the share of jobs generated in the bottom quintile is very small.
This is most welcome in an economy that has had extraordinary difficulty in generating decent jobs for most of the labor force in the past decade. Besides their direct impacts on the labor market, an increase in infrastructure investments has been shown by a large and growing research literature to yield large economic returns and carry the potential to boost productivity growth.
Given the sharp deceleration in U. Further, because traditionally disadvantaged workers non-white minorities, workers without a four-year college degree, and young workers particularly benefit the most from any reduction in overall unemployment, infrastructure investments that boost overall productivity carry the potential to also hit many social and employment goals.
All in all, if policymakers were determined to ensure that any spending flow directly employed as much labor as possible in the U. But given the large potential benefits of infrastructure investments stemming from its boost to productivity growth, macroeconomic stabilization, and job quality, and given as well that any direct and supplier employment generation disadvantage is quite mild, concerns about employment generation should certainly not preclude infrastructure investments in the United States.
Further, developing countries assessing the impacts of infrastructure spending should take heart that much of the labor-intensity disadvantage of infrastructure investment may be particular to the United States and maybe its advanced-country peers. Josh Bivens joined the Economic Policy Institute in and is currently the director of research and policy. He has authored or co-authored three books including The State of Working America, 12th Edition while working at EPI, edited another, and has written numerous research papers, including for academic journals.
He earned his Ph. This work was prepared for a project undertaken by the International Labour Organization ILO to study the employment impacts of infrastructure spending. Financial support from the ILO is gratefully acknowledged.
Since the Great Recession of and the attendant brief resurgence of fiscal policy as a macroeconomic stabilization tool, there has been an ongoing debate about the size of fiscal multipliers: how much economic activity GDP is spurred by an increase in government spending.
The broadest case that public spending can boost economic activity comes directly from the accounting identity for GDP identified as national output, or Y , in the identity below :. Increasing government spending directly increases gross domestic product, per 1. Further, it is theoretically possible that each dollar of increased government spending or tax cuts can lead to more than a dollar of increased economic output. This boosts the income of food and clothing retailers, who can then go out and increase their spending on other items.
We can express this by having consumption spending be composed of an autonomous component C0 and a component that depends on disposable that is, after-tax income c 1- t Y. This allows us to rewrite our identity for GDP as:. The higher is the MPC, the larger is the multiplier. It is largely differences in the MPC that lead to differences in estimated multipliers for different sorts of fiscal support. Textbook macroeconomics clearly teaches that the most effective way to use discretionary fiscal policy to boost economic activity is to finance this support with increased debt.
However, textbook macroeconomics also clearly teaches that even deficit-financed fiscal policy support may not boost overall GDP in many economic circumstances. This increased competition may well raise overall interest rates, and some private-sector borrowers may decide at these higher rates to not engage in the investment or consumption project they would have engaged in at lower rates.
Hence, the extra activity spurred by fiscal policy crowds out some degree of private-sector activity by pushing up interest rates. In the extreme, this crowding-out can be complete, leading to no increase at all in economic activity stemming from large increases in fiscal support. These simple mechanics of crowding out, however, assume that interest rates move sharply enough, and assume as well that economic activity is responsive enough to these interest rate movements to materially negate the impact of increased fiscal support.
However, when overall weakness in the demand for loanable funds say, in the aftermath of the burst housing bubble has pushed interest rates all the way down to zero lower-bound or ZLB , it dims the prospects for fiscal support to completely overwhelm this intense downward private pressure on rates and push interest rates up high enough to begin choking off more privately supported activity than the fiscal support is supporting itself.
Yet many arguments expressing skepticism about the efficacy of ARRA leaned clearly on the role of crowding out in rendering it ineffective. The importance of the ZLB on interest rates in contemporary debates should be stressed.
The primary reason why there was much stronger and more widespread support among macroeconomists for discretionary fiscal support for the economy in than in any other recession in recent memory is entirely explained by the fact that interest rates were at the zero bound. This bound both constrains the ability of the Federal Reserve to fight recessions with its own conventional tools and hence adds to the desirability of expanding the portfolio of countercyclical policies , and substantially allays the fear that increased fiscal support will lead to crowding out.
If fundamental economic forces have pushed interest rates down to zero or as close to zero as they can effectively go, in the case of longer-term rates , that should allay fears that increased government borrowing will lead to upward pressure on these rates so intense that it leads to great withdrawal of investment spending in the economy.
Another argument against the efficacy of discretionary fiscal support concerns the notion of Ricardian equivalence: the notion that an increase in deficits will be recognized by households as a future tax increase, and hence will spur them to increase their own savings to build up wealth to pay these higher future taxes. There are a couple of reasons to doubt that the full Ricardian effect of rising private savings sterilizes increased public dissaving.
Second, many households particularly in a downturn associated with financial market distress may be liquidity-constrained, preferring a marginal dollar of consumer spending over a marginal dollar of savings, but currently unable to borrow.
To the extent that public dissaving relieves this constraint, it can increase current spending. Lastly, if the fiscal boost from dissaving comes in the form of spending say, on infrastructure projects , then there is no reason why private saving should rise to pay off this extra public debt one-for-one in the current year.
So, the Ricardian equivalence mechanisms do not mean that it is impossible for any kind of public dissaving to boost overall spending in a given year. Besides the mechanics of crowding out and Ricardian offsets, however, the case against discretionary fiscal policy stabilizations has also rested on issues of timing.
Because fiscal policy support is often associated with lags both in deliberation the inside lag as well as implementation the outside lag , many macroeconomists have argued that fiscal policy support may arrive too late, that is, after an economic recovery had already spontaneously begun.
These arguments went so far as to claim that the fiscal support could arrive late enough to push an economy directly into overheating, leading to inflation and interest rate spikes. Because monetary policy tends to operate with a much-shorter inside lag, recent decades have seen a growing but not universal agreement among policymakers and macroeconomists that most recession-fighting responsibilities should be borne by central banks, and not by Congress and the president.
Ironically, the case against discretionary fiscal stabilizations seems to have achieved its greatest foothold among policymakers and economists just as this crucial timing argument was clearly losing much of its force. While recessions between and were indeed quite short and recoveries tended to follow rapidly after business cycle troughs, recessions since have taken progressively longer time before economic resources were again fully utilized.
Given this record, it seems very hard to give credence to worries that fiscal support legislated during a recessionary period will come so late that it will push an already-recovered economy directly into overheating.
We will end this discussion by noting a glaring disconnect between the amount of political controversy surrounding the increase in budget deficits associated with automatic stabilizers and those associated with discretionary fiscal support say, for example, the ARRA passed in the United States in Yet ARRA was a much larger political controversy than the much larger increases in deficits associated with the role of automatic stabilizers during the Great Recession.
For example, many criticisms of ARRA leveled by economists opposed to it invoked the problem of crowding out as the reason why it would not work to stabilize economic activity. But very few economists none, in fact, that this author could find argued in that the rising budget deficits driven mechanically by the slowing of economic growth should be closed rapidly through policy action.
If concerns over crowding out were not thought to apply to these large increases in deficits stemming from automatic stabilizers, then it is far from obvious why they would apply to increases stemming from discretionary fiscal measures either. After all, the market for loanable funds does not know which increment of increased federal government demand for borrowing is discretionary i.
Further, the types of public dissaving associated with rising deficits driven by automatic stabilizers specifically, falling taxes and increased government transfers are much more likely to engender a full Ricardian offset from rising private savings in theoretical models tax cuts in particular are fully sterilized in the most rigid Ricardian models.
The U. Given this near-completely sanguine acceptance among policymakers and applied macroeconomists of the large increases in budget deficits stemming from automatic stabilizers, timing lags associated with discretionary fiscal policy interventions are the only source of worry about the potential effectiveness of ARRA that make much analytical sense. Given the track record of long recoveries from recessions in the early s and early s, and given that as of December —four years after the previous business cycle peak and two-and-a-half years after the official end of the recession—employment remained 5.
Of course, there is a more cynical reason why many policy analysts had no problem at all with the much-larger increases in budget deficits that predated ARRA: they took place under a different presidential administration.
In recent years, the debate about the size of economic multipliers in the U. Contemporaneous estimates of the effect of infrastructure projects undertaken in a slack economy when the monetary authority was highly likely to fully accommodate the increase in federal debt in the United States relied, understandably enough, on models and estimates of prior fiscal policy interventions.
So, for example, when the CBO released its quarterly report on the effect of ARRA on economic activity and employment, it relied on multipliers estimated in this previous literature. However, it is clearly true that a good estimation of macroeconomic multipliers is challenging. By far the most important first step in obtaining estimates of multipliers that are applicable to the effect of ARRA on the U. Importantly, this means situations during which unemployment rates were high and capacity utilization rates were low, as well as situations where interest rates were quite unlikely to rise in response to increased fiscal support, either because the central bank had moved to lean against the fiscal impulse or because private-sector demand was so high that the increase in marginal borrowing done by the federal government rapidly pushed up interest rates.
Many studies did not follow this rule of looking only at fiscal support in these specific conditions. Many studies instead looked at fiscal support undertaken over very long stretches, and unsurprisingly found small average multipliers. But these small averages could well be the result of very large multipliers during times of high unemployment and low interest rates, combined with low or even negative multipliers during times of increased fiscal support when unemployment was already low and interest rates high see Romer for more on this point.
This obviously rules out some of the more prominent claims about the effectiveness of fiscal policy, such as those of Barro and Redlick This study looked at increases in deficit-financed government spending undertaken since World War II to obtain an estimate of multipliers. They use military spending as the measure of government spending. Their empirical results are dominated by World War II and Korean War periods, when very large increases in military spending were not accompanied by large increases in economic activity.
However, by the onset of World War II the economy enjoyed more-than-full employment; the unemployment rate by was 4. Further, wage and price controls were passed in part to contain inflation that would have resulted from excess aggregate demand.
Some notable studies that did not suffer from this problem, however, were Eggertsson ; Hall ; Ilzetzki, Mendoza, and Vegh ; and Woodford Unsurprisingly, given that they are actually all estimating the central parameter of interest—the effect of fiscal support in depressed economies near the ZLB on interest rates—all these studies find that the multiplier on particular forms of fiscal support direct government spending, in particular is well over 1 and often close to 2.
They also estimated a vector autoregression VAR model to predict what GDP would have been with no fiscal support based on its pre-ARRA trajectory and historical relationships between key variables and then compared that prediction with its actual post-ARRA performance. The estimates in this report on the impact of infrastructure investment rely heavily on the CBO and CEA multiplier estimates. As the next section will note, however, these prospective estimates have been largely vindicated by retrospective, more direct empirical estimates of the effect of the components of ARRA.
Now that ARRA has largely run its course, there is now actual data to try to test to see if one can directly estimate its impact on economic activity.
Again, however, this is much harder to do than is often recognized. The problem with this approach is that much ARRA funding expanded unemployment insurance and food stamps, for example was contingent on economic circumstances, with more money mechanically going to states that have a bigger contraction of economic activity. Simply examining correlations between state-level spending and economic activity could well find a negative correlation, but one that is driven by a chain of causality that runs from depressed economic activity to more ARRA funds.
A series of attempts to do this came from John B. Taylor , who used aggregate time series evidence on personal income and consumption to estimate the impact of the tax rebates and some social transfers particularly the increase in unemployment benefits contained in ARRA, along with tax rebates that were passed in and in the name of providing fiscal support to the economy.
Taylor used these results to argue that one could not reject the hypothesis that the tax rebates and transfers had no impact on personal consumption spending. Taylor runs a time-series regression of personal consumption expenditures PCE as the dependent variable.
His sample period runs from the first quarter of to the first quarter of As the coefficient on stimulus payments does not register as statistically significant at the 95 percent confidence level, Taylor takes this as evidence stimulus payments did not work, i.
More specifically, the ARRA tax rebates and transfers took place in the midst of a collapse in overall spending and against the backdrop of a financial crisis. When they add a dummy variable for the post period to the same time-series regression run by Taylor , they find that stimulus payments are both statistically and economically significant determinants of consumption spending.
Again, the key challenge in doing this is to avoid the problem of endogeneity of state receipts—that is, the problem of states with the most depressed economic activity receiving more ARRA funds by design.
What is good stabilization policy focusing more money on more depressed areas makes for quite difficult evaluation. Wilson uses instrumental variables to avoid the endogeneity problem. All of them seek to isolate the purely exogenous portion of ARRA fiscal relief allocated to state governments. Through controls in his regression say, by including the change in state unemployment , Wilson is able to isolate that component of increased state aid that is orthogonal to its economic performance.
Wilson finds that the ARRA fiscal relief is positively correlated to state employment growth, and the result is both economically and statistically significantly as well as robust to different specifications. Feyrer and Sacerdote also use state-level variation in ARRA spending flows to estimate its impact. They, like Wilson , also utilize instrumental variables to control for endogeneity of ARRA state spending.
The second instrument, state population, is assumed to be negatively correlated with ARRA spending flows. One rationale for this is that the structure of the Senate with each state, regardless of size, having the same representation tends to favor small states. Whatever the precise mechanism of the inverse relationship between state population and per capita ARRA spending, it holds in the data.
Further, because both instruments—mean seniority of the House delegation and state population—are clearly driven by historical trends that predate the Great Recession, they are unlikely to be systematically correlated with macroeconomic performance in the state during and The Feyrer and Sacerdote results are not precisely estimated the overall multiplier for the stimulus package in various specifications runs from 0.
Chodorow-Reich et al. They also surmount the endogeneity of state ARRA spending by utilizing instrumental variables. The instrument they choose is the component of increased federal Medicaid spending directed toward states that is unrelated to changes in economic circumstances. The formula that determines the amount of federal aid directed toward states for Medicaid is driven by a number of factors that are related to the state of the economy for example, the change in beneficiaries over the previous period, the change in the unemployment rate in the previous period, and the change in average spending per beneficiary.
But the formula is also influenced by the amount of Medicaid spending in the state in the period before the recession began, and this is not plausibly related to subsequent developments in state economies. The Chodorow-Reich et al. Conley and Dupor is the last study to use state-level variation in ARRA spending to assess its impacts.
Conley and Dupor find no statistical evidence that ARRA created or destroyed private-sector jobs in the aggregate. They instead parse private-sector jobs into three rather unconventional categories: goods-producing; a bundle of service-sector industries that includes health, education, leisure, hospitality, business, and professional services a bundle they call HELP ; and all other non-HELP service industries.
Not enough justification is given for this unique parsing of service-sector industries. In their benchmark finding, no industry groupings—none of the private industry groups nor the public sector—show any statistically significant relationship to ARRA spending. Further, the specific regression estimated by Conley and Dupor makes their results not directly comparable to the other state-based econometric estimates of the specific impact of ARRA. Instead, their preferred econometric specification uses the difference between state aid received by ARRA and negative state revenue shocks as the key independent variable.
This specification seems more appropriate for answering a general question as to how state employment is affected by net negative revenue shocks, but, given the state-specific shock, it does not then tell us how ARRA aid specifically impacted employment growth. The simplest way to state the inability to directly compare the Conley and Dupor studies and those of others in this vein is that the estimated multipliers cannot be compared because the multiplicands are different.
This issue of the size of the multiplicand is also the key issue in regards to Cogan and Taylor This study does not exploit cross-state variation in ARRA spending to assess its impacts, but instead tries to account for the drag imposed by state and local government spending cutbacks in blunting the overall support to the economy provided by the government sector as a whole.
Cogan and Taylor find that states cut back their own purchases by more than the ARRA provided to them in aid. Noting that state and local spending is fungible with respect to the ARRA flows transferred to state and local governments, Cogan and Taylor interpret this finding as demonstrating that ARRA did not boost government purchases materially and hence could not have had an effect on economic activity.
But again, their paper is about the size of the multiplicand , not the multiplier , of ARRA spending. Given the failure to find statistically significant results from their measures of ARRA spending net of state and local contraction, neither Cogan and Taylor nor Conley and Dupor can actually reject the argument that the simple size of ARRA was insufficient to measurably impact state-level trends in economic activity and employment, and not that the marginal effectiveness of a dollar spent by ARRA was low.
This is an important point. Cogan and Taylor and Conley and Dupor are essentially assuming that states would not have cut back their own spending as much had ARRA funds not been allocated to them; this is the heart of their argument about fungibility.
But, as shown by McNichol , even with the ARRA state aid, state and local governments had very large budget shortfalls in and and indeed are expected to see shortfalls for years to come. Given that most states have balanced budget requirements, this means that one cannot plausibly say that state spending would have been higher in the absence of the ARRA funds.
In fact, relative to any plausible counterfactual, state spending must have been higher following the receipt of Recovery Act funds. To argue that the Cogan and Taylor and Conley and Dupor papers are not estimating comparable multipliers to other state-based studies is not to say that their findings are of no note to applied macroeconomists and policymakers. The CBO , for example, has actually reduced its estimate of the likely impact of infrastructure spending increases that are managed through grants to state and local governments precisely because of the worry that these governments will reduce their own spending in response to the grants.
However, this does not mean that assessments of the all-else-equal impact of infrastructure spending have been reduced because of economic evidence. Rather, it means that policymakers should strive to ensure perhaps through maintenance of effort requirements for the receipt of federal grants-in-aid that state and local governments do not sterilize any of the stimulative effect of grants by reducing their own spending.
If, for example, ARRA funds road improvements in Manhattan, many of the employees working on that project will surely come from New Jersey and Connecticut. Second, much of the economic activity spurred by the direct spending components of ARRA infrastructure investments in particular is quite input-intensive; bulldozers and concrete for building roads, for example.
Given this, money spent paving roads in Florida may well have spurred economic activity in bulldozer factories in Ohio and concrete plants in Alabama.
Lastly, much of the re-spending effects of the Recovery Act are also likely to leak across state borders. If highway projects in Arizona provide the purchasing power to construction workers to buy new cars, this second-round spending effect will be felt in automobile-producing states like Michigan, not directly in the receiving state of Arizona.
In the end, what is striking about the actual econometric estimates of the specific effect of the Recovery Act and its components—including infrastructure investments—is how cautious model-based estimates like those of the CBO, CEA, and private-sector forecasters were relative to what was actually estimated. Develop and improve products. List of Partners vendors.
Thirteen Republicans and all but six of the House Democrats voted for the bill and sent it to the President's desk to be signed into law. Progressives had threatened to vote against the measure but at the last minute agreed to support it after moderates promised they would back the companion social safety net and climate bill, officially known as the Build Back Better Act, provided an upcoming cost score by the Congressional Budget Office CBO showed that the plan would not add to the budget deficit.
The CBO score and vote on the bill is expected the week of Nov. And middle-class families get a tax cut. The President said he planned to sign the bipartisan legislation "soon," but not until after the weekend, to allow legislators who helped pass the bill to attend the signing ceremony. While passage of the bipartisan Infrastructure Investment and Jobs Act creates a path to invest billions of dollars in roads, bridges, water systems, transit, and broadband, passage of Build Back Better and the massive investment in human infrastructure it represents is not ensured.
That all depends on whether the CBO estimate finds the legislation does not add to the deficit and whether Congress settles the current stalemate regarding the omnibus budget bill and debt ceiling. Amid all the rancor over infrastructure are the twin matters of the debt ceiling and government funding. The fiscal year ended Sept. Unable to pass a budget resolution, Congress kicked the can down the road with a continuing resolution to suspend the debt limit and provide funding through Dec.
Absent a budget resolution or another continuing resolution, the government will shut down at midnight Dec. These events are related because Republicans have said that Democrats should raise the debt ceiling without GOP help by using the reconciliation process. This has produced a stalemate since Democrats have said they fear that process would be risky. Here is what is in the bill that just passed, what's in the revised Build Back Better agenda, and what the original Build Back Better bill included.
The new spending includes:. 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. Includes funding to expand broadband in rural areas and in low-income communities. The Resilience Fund will protect infrastructure from cybersecurity attacks and address flooding, wildfires, coastal erosion, and droughts along with other extreme weather events.
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. This allocation provides funding for major upgrades and expansions at U. These monies would be used to clean up superfund and brownfield sites, abandoned mines, and old oil and gas wells.
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. Appropriations here are to address highway, pedestrian, pipeline, and other safety areas with highway safety getting the bulk of the funding. Ongoing drought conditions in the western half of the country will be addressed through investments in water treatment, storage, and reuse facilities.
The Biden administration asked for this funding to build significantly more charging stations for electric vehicles across the nation. With an emphasis on bus fleet replacement in low-income, rural, and tribal communities, this funding is expected to allow those communities to convert to zero-emission buses.
The outline below shows what in the Build Back Better Act has survived negotiations so far and what has not. The plan is designed to save most American families more than half of their spending on childcare by providing two years of free preschool for every 3- and 4-year-old in America and additional funding for childcare. Family and medical leave. Permanently authorizes the first-ever national paid family and medical leave guarantee for U. The proposal extends the expanded Child Tax Credit for one year and provides additional funds to extend the expanded Earned Income Tax Credit.
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