President Biden released his much-anticipated American Jobs Plan during a speech in Pittsburgh. The massive $2.25 trillion economic package includes $1.3 trillion for infrastructure spending and another $980 billion in investments in R&D, workforce development, manufacturing and eldercare. A number of specific policy proposals included in the eight-year spending initiative could impact equipment manufacturers.
The Association of Equipment Manufacturers (AEM) Advocacy Team prepared a top-level overview of the plan.
The American Jobs Plan proposes spending over $900 billion on traditional infrastructure assets such as roads and bridges, water systems, power grids, and broadband. As AEM noted in a statement shortly after the release of the plan, that’s a historic sum. The investments proposed reflect the comprehensive approach to upgrading U.S. infrastructure that AEM and the industry have long championed. The proposed investments in traditional infrastructure assets that the plan calls for would normally be cause for optimism for the equipment manufacturing industry and our customers.
Unfortunately, if advocating for federal investment in infrastructure has taught AEM anything over the years, it is that there are big hurdles to overcome in the legislative process. The American Jobs Plan has already been widely criticized by Republicans that it goes too far and deviates too much from the traditional definition of infrastructure. And then there is the question of the pay-for, which the advocacy team goes into more detail below.
AEM has long supported a user-fee approach to paying for infrastructure, but keep in mind that the investment levels proposed by the plan would not likely be met by a gas tax increase, electric vehicle fee, and/or a new vehicle-miles-traveled program alone.
One separate but parallel issue that equipment manufacturers will need to carefully watch over the coming months is where the infrastructure plan means for the prospects of Congress passing a long-term surface transportation reauthorization, affectionately known as the “Highway Bill” in Washington.
This important program, which is not addressed by the American Jobs Plan, expires on Sept. 30 following last year’s one-year extension. A bill that provides a long-term reauthorization is critical for state departments of transportation and contractors. Authorizers on the U.S. Senate Committee on Environment and Public Works and the U.S. House Committee on Transportation and Infrastructure are readying their draft bills, with AEM’s input, separately from the America Jobs Plan.
However, it remains to be seen whether there will be an appetite among lawmakers later this year for more spending on existing transportation infrastructure programs. The AEM Advocacy Team will be pushing hard to ensure a long-term reauthorization is secured before the September deadline.
Concerns about the lack of skilled workers to fill jobs in the manufacturing sector have been steadily growing over the past several years. This is certainly a major concern for the equipment manufacturing industry. Despite the growing chorus of concern, and millions of workers displaced by the COVID-19 pandemic, Congress continues to underinvest in workforce development programs. It is therefore welcome news that the American Jobs Plan proposes $100 billion for investment in workforce development programs and initiatives.
Since this is just a framework, and the final bill is likely to look very different, it is difficult to determine the benefits of these programs to the equipment manufacturing industry if implemented. But many of the workforce provisions included in the plan are ones that AEM has consistently advocated for.
Our industry has long championed federal programs that invest in training for displaced workers, and we appreciate the Biden-Harris Administration’s focus on helping prepare individuals from traditionally underrepresented populations, including women, for a career in industries that provide family-sustaining jobs and will allow them to build fulfilling careers.
The American Jobs Plan also allocates funding for STEM and career and technical education in middle and high schools. Increased funding for these programs helps teach children valuable skills and allows them to pursue their interests in great careers after graduation. Overall, the workforce development proposals in the American Jobs Plan prioritizes investments that have been neglected by the federal government for too long. That is welcome news for equipment manufacturers.
The American Jobs Plan has two key components to help U.S. companies improve their global competitiveness: the immediate investment in updating America’s crucial ports of entry and internal waterways and the long-term incentivization of next generation semi-conductor manufacturing.
President Biden is asking Congress to invest $25 billion in airports to improve the transit of goods and people. Additionally, the President is asking for $17 billion to be invested in inland waterways, coastal ports, and land ports of entry critical for our national freight movement. The chronic underinvestment in our nation’s inland waterways, which has resulted in delays and increased costs, is something that many equipment manufacturers are all too familiar with.
To secure critical supply chains for U.S. manufacturers, President Biden is calling for $50 billion to be invested in semiconductor manufacturing and research. Given the surge in demand for semiconductors, and the limited geographical locations of existing manufacturing facilities, the White House, Congress and U.S. manufacturers all agree how disruptions or limited access to these critical inputs slow down, and in some cases, shut down U.S. manufacturing operations.
With demand for semiconductors expected to grow exponentially in the coming decades, this federal investment will help create a domestic semiconductor manufacturing base. However, whether this federal investment will overcome market conditions, logistics, and scalability constraints remains to be seen.
Rural America was not left out of the American Jobs Plan, and that is a point that the Biden-Harris administration has been making considerable effort to highlight to stakeholders over the past week. The plan recognizes the need to invest in rural broadband, promote the adoption of climate-smart and drought-resilience technologies (such as precision agriculture), focus specifically on off-system rural bridges that are structurally deficient, bolster the biorefinery and bio-based product manufacturing assistance programs, and direct at least $3 billion toward rural transportation projects. These are priorities that AEM has long advocated for on behalf of equipment manufacturers, farmers and ranchers, and rural communities where many of the 2.8 million men and women of the industry live and work.
Treasury Secretary Janet Yellen introduced a plan to pay for the $2.25 trillion economic package by making drastic changes to the U.S. tax code, including raising corporate tax rates (to raise an estimated 2.5 trillion over 15 years). The top revenue raiser in the tax proposal, dubbed the Made in America Plan, is an increase to the corporate tax rate from 21% to 28%. The domestic corporate rate was previously lowered from 35% as part of former President Donald Trump’s 2017 Tax Cuts and Jobs Act. But international tax changes for multinationals, including increasing and strengthening the global minimum tax (GILTI), eliminating the deduction for foreign-derived intangible income (FDII), restricting corporate inversions, and potentially replacing the base-erosion and anti-abuse tax (BEAT) could raise an equivalent amount to the corporate rate increase. The tax plan also includes a 15% minimum tax on book income of large corporations and elimination of fossil fuel subsidies.
Both plans will now face the scrutiny and customary push-and-pull from Congress. House Speaker Pelosi (D-Calif.) wants to pass the American Jobs Plan by July 4. With razor-thin majorities and rank-and-file members seeing this as perhaps the last opportunity to advance their key policy priorities, reaching agreement on specific provisions will be a tough challenge.
On the tax side, U.S. Sen, Ron Wyden (D-Ore.), who chairs the powerful Senate Committee on Finance, along with U.S. Senators Sherrod Brown (D-Ohio) and Mark Warner (D-Va.) released their international tax reform proposal this week. It mirrors much of what the White House proposed on international taxation but leaves out several legislative details for future debate.
The AEM Advocacy Team is actively reaching out to key tax writers in the Senate and House to better understand their intentions and priorities and will closely review all proposals to determine implications for the equipment manufacturing industry. Additional updates will be shared as further details emerge.