Thoughts Around the Infrastructure Proposal04/05/2021

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Last week, President Biden announced a $2 trillion infrastructure and green energy proposal as part of the American Jobs Plan. This package includes new spending on transport infrastructure, manufacturing, R&D, housing and elderly care. This spending is anticipated to be spread over eight years and paid for over 15 years with higher taxes, most notably a hike in the corporate tax rate from 21% to 28%. This plan partially addresses the much documented and most pressing problems around repairs to our nation’s infrastructure. Despite the impact on corporate taxes, given the rally in U.S. equities, investors have embraced this plan as a potential catalyst to future economic growth.

Since the most recent $1.9 trillion American Rescue Plan was passed quickly and in full, there is optimism that this infrastructure proposal will likewise pass rapidly. However, given the partisanship in Washington, we are not optimistic. For the plan to avoid a filibuster, Democrats will need to win over 10 centrist/budget-conscious Republicans. However, that is unlikely since it includes large social spending and Republicans may not reverse the Trump tax cuts. The most likely scenario is that the infrastructure plan is reduced and passed during the budget reconciliation process in the fall. Under this special procedure, as long as it affects federal spending and revenues, with some exceptions, a bill can be brought up for a vote and pass with a simple majority.

For more insights, download our full commentary.

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Commentaries are published by Cetera Investment Management LLC, an SEC registered adviser owned by Cetera Financial Group. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers.

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