It may be years before Americans are driving over new bridges or plugging their electric vehicles into a new highway charger funded by President Joe Biden’s infrastructure package. But some of the money could be released over the next six months, providing a jolt to a backlog of projects across the country.
After months of debate, Congress passed the historic infrastructure package late last week. Once signed into law, it will deliver $550 billion of new federal investments into America’s infrastructure over five years. 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.
This year’s formula funding will go out within the next six months, and the application process will open for some of the grant programs during the same period, Transportation Deputy Secretary Polly Trottenberg said at a news conference Tuesday.
“The good news is we know that local transportation agencies have a lot of projects and are ready to start investing the money right away,” Trottenberg said, adding, “but we want to be careful on setting expectations.”
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The bigger projects, like rail, will take more time and planning. The department is also planning on hiring more staff to help stand up the new grant programs.
But now that states and localities know the money is coming, they could start laying out their plans.
Over the weekend, Biden said people could start seeing the effects “within the next two to three months,” noting that it will begin with “people being told they’re going to be working … and things are going to move.”
What gets funded first
Money moving through the existing formula fund programs is expected to get out the door quickest. A lot of those funds will go to state departments of transportation for highway maintenance and repair. States will be getting roughly one-third more in formula highway funding than the year before.
“We could see a lot more contracts going out next year in advance of spring construction,” said Jeff Davis, senior fellow at the nonprofit Eno Center for Transportation.
States are also expected to quickly receive formula funding for transit projects and bridges. Money for airports and Amtrak could also be handed over soon, Davis said.
The funding for electric vehicle chargers will also be distributed through a formula, but it’s a new program that the Department of Transportation will have to design first.
Grant programs will take more time
The timing is unclear for the more than $100 billion that will be allocated through competitive grant programs. The Department of Transportation will have to set the criteria, then solicit and review applications from state and local governments before announcing the awards.
“The competitive grants will probably be the slowest to come out,” said Susan Howard, program director of transportation finance at the American Association of State Highway and Transportation Officials.
“It will be a real heavy lift for DOT to get this level of discretionary funding out the door,” she added.
The Department of Transportation will set the criteria for the new funding, making sure the money goes to projects that help meet the Biden administration’s goals of combating climate change and advancing equitable access to transportation.
For years, existing federal grant programs for road, rail, transit and port projects have not had enough money to meet demand. Last year, applications received for the Infrastructure for Rebuilding America program, known as INFRA, collectively requested $6.8 billion, more than seven times the funding available.
“Those programs are significantly oversubscribed. I expect a lot of those applicants to tweak their applications and resubmit for the new funding,” said Elaine Nessle, executive director of the Coalition for America’s Gateways and Trade Corridors.
Projects that may already have some preliminary engineering work done and environmental permits secured may be some of the first to put the money to use, she added.
Economic impact
The investments are likely to have more of a long-term impact on job creation than an immediate boom since the labor market is already tight.
“Infrastructure spending has a bigger effect on jobs when we’re in an economic recession,” said Jon Huntley, senior economist for the Penn Wharton Budget Model.
“The benefits of infrastructure spending take a while, but are very, very long lasting,” he added.
Over the long run, the improved highways and bridges, as well as the investment in a stronger broadband network, could make workers more efficient and smooth out friction points in the supply chain.
A Moody’s Analytics report found that the infrastructure spending will create more than 800,000 jobs by the middle of the decade.
Similarly, S&P Global found that a $1 trillion investment in infrastructure would lead to 883,600 new jobs by 2030.
Huntley noted that he doesn’t expect the spending package to increase inflation because of the time it will take for the money to be released.
While the legislation includes a multitude of measures to pay for the spending – without raising taxes – it is expected to add $256 billion to the federal budget deficit over the next 10 years, according to the Congressional Budget Office.