President Trump’s State of the Union captured the attention of everyone this week. Trump took full advantage of this mandatory, yearly speech by establishing his budget, nation’s economic report, and outlining his legislative agenda. He hit on key topics, such as immigration, North Korea, and Guantanamo Bay. However the one subject matter that grasped the nerdy minds of all economists: INFRASTRUCTURE.
Donald Trump emphasized massive infrastructure spending a top priority for the upcoming year. He plans to pledge $1.5 Trillion to revamp the nation’s organizational structures and facilities.
Yes, you read that right. Trillion with a huge capital T. This plan is extremely essential for a strong foundation of the entire nation.
Infrastructure is one of few things both Republicans and Democrats have planned on their agenda. The debate on this issue is going to be how to fund the infrastructure bill, how much money to allocate for the infrastructure bill, and highlighting which cities and highways grasping the most money from the infrastructure bill.
You must be wondering why infrastructure is so important to the economy.
Public infrastructure investment is one of most common fiscal policies used by the government to fight recessions. The government stimulus spending is the classic Keynesian economics philosophy. Keynesian economics is a popular economic theory of total spending in the economy increases GDP output and inflation.
Coming back from the small tangent, the $1.5 Trillion infrastructure package creates new projects. Therefore, the new projects employees more people and creates more businesses for industrial companies.
Additionally, the increased employment leads to more citizens with more disposable income. As a result, the economy becomes more stimulated, since consumers will be spending more in the market. Consequently, businesses will make more revenues, which leads to more business prosperity.
As a good as this sounds, there are many critics of this plan. Since the United States economy is not in a recession, few economists believe the additional economic stimulus might lead to overheating in the economy. This can lead to overly excessive increase in inflation. Therefore, consumers will be buying goods at outrageous prices. Also, businesses will have to cut production, since input costs escalated.
All in all, despite all the economic controversy, America will finally get stable highways and smooth public roads.