Page 8 - ISQ July 2021

INVESTMENT STRATEGY QUARTERLY

Estimated Spending on the Proposed American Jobs Plan

Infrastructure at Home Transportation Businesses Caretaking
$726 billion $621 billion $580 billion $400 billion
Affordable and Education Electric vehicles Rail Manufacturing and Care for elderly and
sustainable housing $137B $174B $80B small business disabled people
$213B $300B $400B

Bridges and roads Infrastructure
Other $28B $115B resilience
Water Broadband Electricity $50B Research and Workforce
development
$111B $137B $100B Transportation development $100B
inequities
$45B $180B
Public transit Ports* $42B
$85B
Other $30B

Source: White House, Overview of “American Jobs Plan,” as proposed, March 31, 2021
*Airports, water transit, and ports
$100 billion each for water, electricity, broadband, and education with the education, childcare, and expanded leave provisions in
infrastructure. We view these provisions as the most likely to pass the AFP under reconciliation rules, as these may be viewed more as
in a final package given overall strong bipartisan support, but the policy provisions than spending/revenue. As such, we view the
scope of the funding for these priorities remains a moving target. bulk of the programs under the AFP as more politically challenging
We also see a foreign policy angle to this aspect of Biden’s to work into a final package, thus they are more likely to be
infrastructure agenda that raises the political urgency around an Democratic campaign proposals tied to the 2022 midterms.
infrastructure bill. The domestic manufacturing aspect of the
proposal is directly aimed at securing the ability for the U.S. to Overall, we view the two plans as a menu of policy options for
remain economically competitive with China. As such, Biden’s lawmakers to debate and advance in a legislative package. We see
strategy can be viewed as putting the U.S. on the footing to sprint the most likely final bill having a core focus on traditional
ahead, rather than hold China back, through economic policy. infrastructure, tied to several AFP priorities – most likely an
Biden’s proposal seeks significant investment (around $250 billion) extension of the CTC and some new education funding. This brings
in domestic research and development of next-generation the final spending total to the $2-3 trillion range, depending on the
technologies. Specific sectors targeted for funding are final funding levels for individual provisions.
semiconductor manufacturing, as well as clean energy technologies
including: energy storage, carbon capture, hydrogen, advanced EXPECT PROPOSED TAX CHANGES TO BE DIALED BACK
nuclear, rare earth separation, wind, and biofuel. Expect this to be a Much attention has focused on the proposed tax changes as
significant selling point by the administration as it looks to secure revenue sources for Biden’s infrastructure priorities, which we
bipartisan support for Biden’s infrastructure agenda. broadly view as some of the most fluid aspects of ongoing
negotiations. The ultimate corporate tax rate, adjustments to
The second phase of Biden’s policy reforms - the American Families personal taxes for wealthy taxpayers, and the fate of state and local
Plan (AFP) — focuses more on social programs with around $1.8 tax (SALT) adjustments continue to be the top issues of the tax
trillion in spending and tax credits. Broadly, the plan envisions $500 debate in Washington. As we have previously highlighted, the
billion toward education and around $450 billion for childcare revenue source with the most political support in Biden’s
programs and paid leave. The plan also proposes extending the infrastructure agenda is a higher corporate tax rate, but at a lower
expanded Child Tax Credit (CTC) under the American Rescue Plan rate than the proposed 28%, likely in the 24-25% range. Moderate
through 2025, tying it to the expiration of the personal tax code Democrats are reportedly uneasy with the political consequences
provisions of the 2017 tax law. However, there are potential issues of raising the capital gains rate to the proposed ordinary income

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