ECON-431 Fiscal Policy in the US

The Infrastructure Investment and Jobs Act, passed in 2021, is a sweeping legislation aimed at modernizing America's infrastructure. With an investment of around $1.2 trillion, this Act focuses on upgrading roads, bridges, public transportation, and expanding access to high-speed internet across the country. In addition, it allocates funds for improving water systems, upgrading airports, and investing in clean energy initiatives. The funds are anticipated to create numerous jobs while addressing long-standing infrastructure deficiencies, ultimately aiming to enhance the nation's competitiveness and quality of life.

According to this Wall Street Journal article, the Bipartisan IIJA aimed to reshape American construction but has faced challenges. The Build America, Buy America provision expanded requirements for the use of American-made products in federally funded projects. However, according to the article, the law’s broad definition of infrastructure has led to difficulties in implementation, with agencies struggling to understand its implications across various programs. The creation of a Made in America Office to oversee compliance and waivers has added complexity, increasing time and costs for government purchases, potentially inflating project expenses by up to 25%. While domestic production is essential for defense and security products, the law’s stringent requirements extend to non-essential items, making construction in the US more challenging.

This Wall Street Journal article critiques the infrastructure bill as the cause of rising prices and supply chain disruptions. The author argues that increased costs for materials and labor are already affecting construction projects, potentially diminishing the impact of the $1 trillion infrastructure law and limiting the number of infrastructure projects that will be completed. There is also concern among state and local officials that higher prices could lead to prioritizing easier and less ambitious projects, potentially exacerbating inflation in the construction industry. Despite hopes for technological advancements and new job opportunities from federal spending, there are worries that labor shortages may occur, limiting the effectiveness of the infrastructure bill.

The Brookings Institution is critical of the Infrastructure Investment and Jobs Act and its implementation progress, after its two-year anniversary. Firstly, the authors argue that competitive grant allocation is progressing slowly compared to other forms of spending, suggesting inefficiencies in the allocation process. Secondly, while the Biden administration is credited for not overtly politicizing the grant-making process, past experiences raise concerns about the possibility of political influence in funding allocation. Thirdly, economic concerns such as inflation and higher interest rates are seen as potential obstacles, which could lead to higher costs and hinder the practicality of projects, establishing doubts on the sustainability of the investments. Lastly, there are concerns about the capacity of applicants to handle the volume of opportunities created by the IIJA and fulfill the requirements of transparency and accountability in managing the substantial federal funding.

The CHIPS and Science Act, passed in 2022, is a legislation designed to bolster American semiconductor production and scientific research. With a focus on enhancing domestic semiconductor manufacturing capabilities, the Act provides significant funding for research and development in semiconductor technology, aiming to reduce reliance on foreign suppliers and strengthen national security. In addition, it allocates resources to advance scientific research in areas such as artificial intelligence, quantum computing, and advanced materials, with the goal of maintaining America's leadership in critical technological fields. Overall, the act aims to foster innovation, create jobs, and reinforce the nation's strategic position in the global semiconductor industry and scientific research landscape.

This Washington Post article is critical of the claim which President Biden made on August 11, 2022: “Investments in the CHIPS and Science Law will create more than 1 million construction jobs alone over the next 6 years building semiconductor factories in America." This claim was heavily disputed by Sarah Ravi, a spokeswoman for the Semiconductor Industry Association: “…the statement made about 1 million construction jobs is not accurate.” To support this statement, Ravi explained how a $50 billion investment would create an additional 6,200 construction jobs and the CHIPS and Science Act authorized $280 billion for funding.

The Wall Street Journal takes an even more critical position towards the CHIPS and Science Act than the Washington Post. WSJ claims that the Act would be unsuccessful as it is not targeting the main issues of the semiconductor industry. For example, the CHIPS and Science Act allocated $1 billion towards carbon removal. This article claims that this is almost hypocritical because semiconductor chips are built from silicon. In addition the CHIPS and Science Act is rewarding Intel with more funding despite a “disastrous” quarter and finishing third in the semiconductor industry behind TSMC and Samsung.

The New York Times takes a more optimistic approach in supporting the CHIPS and Science Act. This article claims that the CHIPS and Science Act will succeed in “leveling the playing field” and making the United States an international competitor in the semiconductor industry. More specifically, the author explains how factories for computer chips are incredibly costly but more so in the US as governments in other countries provide subsidies for such projects. The CHIPS and Science Act will provide the necessary subsidies to domestic factories in the U.S. to help them compete. Supporters of this Act want to keep both production and knowledge of computer chips within the United States.