Question

Macroeconomic

28. Irma? Harveye Need to laIk About Infrastructure. Now. Shortly after President Trump took office, bi- partisan hopes were raised of a $1 trillion infra- structure plan that the president said he'd like to see implemented. The hopes have gone. The president's $4.1 trillion budget now proposes spending of $200 billion in infrastructure over the next 10 years. Source: Natural Resources Defense Council, September 8, 2017 a. Explain how $1 trillion of infrastructure spending could be paid for. b. Explain the effects of $1 trillion in infra- structure spending on employment and unemployment.

Answer 1

$1 trillion infrastructure plan

a well-designed package of infrastructure spending can improve public welfare, increase the nation's capital stock, and thus enhance economic output. Ultimately, increased infrastructure can be an important element of an overall economic growth strategy.

• $315 billion to repair and improve ground transportation infrastructure, including $140 billion of grants and direct spending to repair roads and bridges, $115 billion for public transit system maintenance, $50 billion to improve Amtrak and other rail infrastructure, and $10 billion for the Transportation Investment Generating Economic Recovery (TIGER) program.

• $140 billion for the Highway Trust Fund to ensure its solvency through at least 2027.

• $115 billion to modernize water and sewer systems through the Environmental Protection Agency and Department of Agriculture grant programs.

• $80 billion to support energy grid improvements and research. The plan would also consolidate most existing renewable energy tax incentives into three new credits.

• $70 billion in spending on air and water transportation infrastructure, with $40 billion allocated for additional Federal Aviation Administration funding and competitive airport improvement grants and $30 billion going towards the water, harbour, and seaport projects.

• $70 billion to support large-scale transformative projects ($40 billion) and performance incentives as well as various smaller-scale projects such as bicycle facilities, pedestrian routes, and fueling stations for alternative fuel vehicles ($30 billion).

• $62 billion in additional federal support for affordable housing and lead remediation initiatives through a combination of direct funding and enhanced tax incentives, such as expanding the Low-Income Housing Tax Credit.

• $50 billion to assist states, school districts, and community colleges in school construction and modernization projects.

• $40 billion to provide universal high-speed internet through a Universal Internet Grant Program and other efforts.

• $25 billion to help communities better prepare for disasters through new grants and loan programs.

• $20 billion for expanding federal infrastructure financing programs and creating a new infrastructure bank to promote private financing of infrastructure.

• $35 billion in additional infrastructure spending, including $15 billion to address public land infrastructure backlogs, $10 billion for VA construction and improvements, and $10 billion to improve tribal infrastructure

Effect of $1 trillion in infrastructure spending on employment and unemployment

The second most cost-effective solution is unemployment benefits. Every $1 billion spent created 19,000 jobs.

Unemployment benefits create so many jobs because the unemployed must spend all the benefits received. They buy necessities such as groceries, clothing, and housing right away. Retailers and manufacturers respond to the added demand by hiring more workers to keep up.

These benefits also help keep the unemployed from becoming homeless. It is more difficult for them to find a job if they lose a steady address.