The American Jobs Plan Gets Serious about Infrastructure and Climate Change

On March 31, 2021, President Biden announced the American Jobs Plan, a sweeping proposal that dedicates over $2 trillion to create jobs through repairing and upgrading infrastructure, revitalizing manufacturing, and valuing the caregiving economy.

Q1: What has Biden announced and how big is it in context?

A1: The American Jobs Plan is the second plank of Biden’s “Build Back Better” agenda to both “rescue” the economy from the Covid-19 recession and “recover” in a way that addresses underlying structural constraints and takes advantage of future economic opportunities. The first component, the $1.9 trillion American Rescue Plan, passed earlier in March.

Broadly, the American Jobs Plan can be divided into four buckets (see chart below). The largest is spending on buildings, schools, and aged care. Transportation infrastructure is the second-largest bucket, notable for the $174 billion it proposes to spend on electric vehicles (EVs). Various investments in jobs, manufacturing, and innovation comprise the third-largest destination of funds. Investments range from greater funding for research and development (R&D) in areas such as climate change, to technological deployment through federal procurement and manufacturing incentives and active labor market policies, such as a Dislocated Workers Program. The final bucket includes $311 billion for utilities infrastructure, such as broadband, the electricity grid, and water.

The jobs plan makes a considerable investment in climate change-related priorities. In the broadest terms, around 56 percent of total spending could be understood to address challenges related to climate change—by way of comparison, around 12 percent of the 2009 American Recovery and Reinvestment Act (ARRA) was climate related. Because the total spending announced under the American Jobs Plan is around 3 times greater than the ARRA, total climate spending in the package is roughly 10 times that under Obama’s stimulus package.

In terms of economic impact, the two “Build Back Better” packages together amount to around 20 percent of U.S. GDP. The ARRA, on the other hand, only spent the equivalent of 5 percent of GDP, though the two plans differ slightly in the number of years over which spending is spread. In a global context, the United States already had the largest fiscal response to the Covid-19 crisis of any country. If the American Jobs Plan passes, the amount of money directed at the crisis—both Covid-19 and climate—would dwarf all other nations, though Germany, the United Kingdom, Italy, and Spain have all spent more as a share of economic activity.

Q2: What are the plan’s likely sticking points?

A2: The plan’s reception among lawmakers has been mixed. Sticking points arise regarding which projects the plan should include, the size of overall investment, how to fund projects, and how to pass the bill.

Biden’s plan to bundle initiatives to address climate change with other economic and social investments is likely to foster greater public support than a standalone climate or energy plan. However, it was an early source of reticence among some lawmakers and could diminish bipartisan support in Congress. Conservatives in particular have expressed reservations about the breadth of the plan, which goes well beyond transportation, broadband internet, and other basic physical infrastructure projects. Perhaps for this reason, Republican leadership has labeled it a “Trojan horse” for progressive priorities and deficit spending.

Other lawmakers have taken issue not with the priorities of the plan but its investment levels, arguing the plan lacks ambition. Biden’s plan is similar in many respects to the THRIVE Act, a proposal first introduced in 2020, recently reintroduced in both the House and Senate, and endorsed by a wide range of progressive groups. However, the proposals depart significantly with respect to the magnitude of investment. Specifically, Biden’s plan for about $2.25 trillion over eight years is less than a quarter of the $10 trillion figure called for by progressive groups. While this point of contention is not likely to hold back the plan, it does highlight a clear divide among proponents of climate action with respect to the rate and scope of envisioned progress.

Another source of pushback challenges Biden’s proposed funding strategy. The strategy is built around Biden’s “Made in America Tax Plan,” detailed within the American Jobs Act announcement. It seeks to eliminate all fossil-fuel tax breaks and reverses some of President Donald Trump’s 2017 tax reform initiative by raising the corporate tax rate and discouraging companies from seeking tax havens abroad by offshoring jobs and headquarters. These proposed measures have galvanized the new Coalition to Protect American Workers, the first major conservative group formed in response to Biden’s plan. The coalition recently established a website and campaign strategy, citing benefits of Trump’s tax cuts and suggesting that Biden’s plan could damage U.S. investment and competitiveness.

Taking these points together, there remains a question of whether the proposal can pass through the House and Senate, and with whose support. While Biden has expressed desire for bipartisan support and “good-faith negotiation,” prospects for the needed Republican buy-in appear slim. As a result, Democratic leadership is also contemplating passage by way of budget reconciliation, the tactic employed to pass the American Rescue Plan along party lines in early March.

Q3: How does the plan address systemic issues with U.S. roads and bridges?

A3: The American Society of Civil Engineers gives U.S. infrastructure a C- grade, with 43 percent of roads and highways in “poor or mediocre” condition. Climate change is accelerating deterioration, as extreme weather batters infrastructure. Traditionally, states hold responsibility for transportation infrastructure, but the federal government contributes funds. Federal funding for roads and highways comes from fuel taxes and goes into a federal trust—80 percent of revenues go to roads, 20 percent to public transit. However, for a variety of reasons, revenues have stagnated while construction and maintenance costs have increased. Chiefly, Congress has not raised the gas tax since 1993, instead moving cash from other sources to keep the trust afloat. This creates a dilemma, since raising the gas tax is politically unpalatable. Some advocates have proposed switching to a tax per mile traveled instead of per gallon consumed. Despite some high-profile support, the idea has a range of opponents, from privacy advocates concerned about data-sharing to environmentalists concerned it could advantage gas guzzlers. The American Jobs Plan largely side steps these questions, injecting $115 billion for improvements without an accompanying user tax. This is not a long-term solution but could provide a backstop as Congress decides whether to change or replace the gas tax.

Q4: What are the climate and energy implications of the plan’s infrastructure provisions?

A4: From the perspective of emissions mitigation, the most climate-relevant provisions address transportation and electric power. Transportation is the highest-emitting sector in the United States, making up 28 percent of the country’s greenhouse gas (GHG) emissions. The American Jobs Plan addresses both mass transit and EVs. Biden pledges $85 billion for public transit and $80 billion for Amtrak. The lifecycle GHG emissions of public transit options are consistently lower than those of cars and SUVs on a per-passenger-mile basis. By moving people who might otherwise drive single-occupancy vehicles to high-capacity trains or buses, mass transit efficiently avoids some GHG emissions while also reducing traffic congestion and wear and tear on roads. Further, subways run on electricity, so the emissions associated with metro travel will decrease as the power sector is decarbonized.

Turning to road transportation, President Biden’s plan directs $174 billion to EVs. EVs can go a long way in reducing emissions in this sector. Thanks to federal procurement power, the White House has a lot of leverage for one part of the plan—electrifying all 645,000 vehicles in the federal fleet. Making a dent in the rest of the over 276 million vehicles on U.S. roads, however, requires individual drivers and private fleet owners to choose to adopt EVs. To this end, Biden pledges point-of-sale rebates and tax incentives for consumers buying EVs. Some have concerns that running on electricity might make EVs more carbon-intensive than running on gasoline. However, high energy efficiency makes EVs cleaner than gas-powered vehicles, even in coal-heavy regions of the country. Although the upfront cost of a new EV is presently higher than that of an equivalent gas-powered car, they are expected to reach parity within the next few years and with used cars by the end of the decade, even without taking tax incentives into account.

Lots of EVs means lots of charging stations, and the American Jobs Plan includes funding for 500,000 nationwide. Determining the exact number of chargers needed per vehicle is a complicated process, but a National Renewable Energy Laboratory study estimates the United States will need about 628,000 public chargers to accommodate 15 million EVs in 2030. This suggests Biden’s target will get the United States close to where it needs to be.

Another major category of green infrastructure in Biden’s plan is $100 billion for electric grid infrastructure. Expanding transmission is key to the buildout of renewables, as it allows for renewables to take advantage of the best resources and increase utilization of existing generation. The responsibility of permitting transmission lines rests largely with states, so an important but not yet specified issue is the extent to which the federal government aims to influence states, leverage rarely used federal authority, or seek new federal authority. The plan also includes an extension and expansion of renewable energy tax credits and would introduce a clean electricity standard (likely 100 percent by 2035), which are not explicitly infrastructure spending but would likely play a pivotal role in helping build out more zero-carbon generation.

Q5: What are the plan’s implications for resilience and vulnerable communities?

A5: The American Jobs Plan acknowledges the role that power and social inequality have played in shaping connections among climate, environment, and human infrastructure, with considerations for just transition, environmental justice, and resilience. Its investments build upon Biden’s Justice40 Initiative to deliver 40 percent of the overall benefits of climate investments to disadvantaged communities.

In its push for the development of a resilient, low-carbon economy, the plan supports aspects of a just transition, which would remedy costs and hardships that some workers and communities will face as the energy system is transitioned away from fossil fuels. For example, it plans to invest $100 billion in workforce development infrastructure and worker protection. The plan envisions a new Dislocated Workers Program, with $40 billion in funding to support workers who have lost “jobs through no fault of their own” and to provide career services and skills development for in-demand jobs in clean energy, among other sectors. Another $48 billion is outlined to strengthen connections among high schools, community colleges, and technical career paths and create 1 to 2 million new registered apprenticeships. This investment, and an additional $12 billion, explicitly seeks to target workers penalized by structural racism and economic inequities, especially people of color, women, and formerly incarcerated individuals. The plan also emphasizes the need for broader protections to reduce discrimination, protect wages and benefits, and promote collective bargaining among workers.

Biden’s plan also addresses several issues of environmental justice, such as the greater health risks associated with pollution and higher proportional costs for basic energy needs, and places particular focus on limited mobility among low-income and minority groups. Its proposed investment of $85 billion in public transit is accompanied by express acknowledgement that households of color are more likely to rely on limited, aging, and inefficient public transportation options. This observation is backed by empirical research which suggests that improvements in public transportation may foster more equitable and inclusive cities. In addition to limited mobility, the plan’s transportation initiatives account for disproportionate, negative impacts associated with historic development of highways and expressways. Biden’s plan proposes $20 billion to support community-led plans to relocate highways and revitalize urban cores, with more equitable designs for multimodal infrastructure or greenspace. More than two dozen U.S. cities have already considered or implemented plans of this sort, so this investment could provide leverage for the evolving expressway teardown movement.

Another prominent commitment to environmental justice is embodied in a $111 billion proposal to upgrade and modernize the United States’ water systems. While the Flint water crisis drew national attention to the issue, aging water infrastructure continues to impose public health hazards and costs in thousands of communities nationwide, particularly for disadvantaged groups. In addition to immediate health hazards, poor water quality and infrastructure is connected to economic decline, social unrest, and increases in crime. The plan includes $45 billion to expand existing programs administered by the Environmental Protection Agency, in addition to $56 billion in grants and low-cost loans to states, tribes, and disadvantaged communities across the country. Drinking water contaminant management and rural small water systems are supported by an additional $10 billion in funding.

The plan supports investment to reduce and withstand climate hazards as the number, severity, and cost of weather and climate-related disasters grows over time. The plan notes that people of color and from lower income communities are more susceptible to immediate climate-related impacts, such as flooding or power outages, and more long-term impacts, such as continued loss of income. Prevention and preparation initiatives include some existing programs, including the Federal Emergency Management Agency’s Building Resilient Infrastructure and Communities and Department of Housing and Urban Development’s Community Development Block Grants. Both recurring funding streams, the former focuses solely on disaster mitigation activities while the latter has also been used to support short-term disaster relief and long-term recovery. While these measures improve the fortitude of existing infrastructure, the plan generally skirts a controversial but increasingly recognized need for managed retreat, or strategies that focus on coordinating efforts to relocate people and assets out of harm’s way rather than “build(ing) back better.” A notable exception here is the provision of relocation assistance to vulnerable tribal communities.

Q6: How does the American Jobs Plan address institutional and procedural problems with U.S. infrastructure spending?

A6: The plan includes several ideas for improving the process of infrastructure spending, which has long been plagued by high costs, slow implementation, and poor quality. For example, the cost per mile of interstate construction has more than tripled to be the most expensive among rich countries, even as it takes decades to build a new subway line. A new Grid Deployment Authority would use existing rights-of-way, such as along roads and railways, to expedite new high-voltage transmission lines. This has been tried before, but if successfully implemented, it could cut down on permitting red tape and local siting opposition that has held back necessary transmission infrastructure investments. The plan also announced a Clean Energy and Sustainability Accelerator—a “Green Bank”—which would have the authority to co-invest its $27 billion alongside the private sector, which can increase project quality and the speed of new technology deployment. Meanwhile, those who view labor disputes and cumbersome environmental reviews as key sources of high infrastructure costs are likely to eye Biden’s plan with some skepticism, as it contains no cost-cutting provisions on these fronts. Another notable feature in the plan is its intention to “eliminate exclusionary zoning and harmful land use policies,” which inflate housing and construction costs and significantly increase the time it takes to build new housing, although it is unclear exactly how this would work.

While these announcements are not likely to grab as many headlines, the success or failure of the American Jobs Plan could well hinge on how well these institutional and procedural innovations perform.

Lachlan Carey is an associate fellow with the Energy Security and Climate Change Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Morgan Higman is a fellow with the CSIS Energy Security and Climate Change Program. Stephen Naimoli is an associate fellow with the CSIS Energy Security and Climate Change Program.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2021 by the Center for Strategic and International Studies. All rights reserved.

Morgan Higman

Morgan Higman

Former Fellow, Energy Security and Climate Change Program

Lachlan Carey

Stephen J. Naimoli