On March 31, President Biden traveled to Pittsburgh to announce his $2-trillion plan to rebuild the nation’s infrastructure.
The proposal would spend:
- $621 billion on transportation infrastructure to build and repair bridges, roads, public transit systems, ports, and airports, while also supporting the further development and adoption of electric vehicles.
- $300 billion to improve drinking-water infrastructure, expand broadband access, and upgrade electric grids.
In his speech, President Biden acknowledged that the first question about the proposed legislation from Republicans in Washington will be, “How will you pay for it?”
The President said he will fund the spending by raising the corporate tax rate to 28%. The tax law passed in 2017 had lowered the top corporate rate from 35% to 21%.
Individuals may have to pay higher taxes, as well, but the President promised no one earning less than $400,000 annually would face a tax hike.
Senate Minority Leader Mitch McConnell has already said he would oppose the legislation because of the proposal to increase taxes. However, recent Senate votes have come down to Senator Joe Manchin, who has expressed his support of the infrastructure plan.
More than infrastructure
Some critics are suggesting it’s wrong to label this an “infrastructure” plan, given that it covers so much more. The proposal does recommend spending $400 billion to improve the care for elderly and disabled Americans, and $300 billion to build and improve affordable housing and to construct and upgrade schools.
The infrastructure plan is called the “American Jobs Plan,” and it is very focused on creating jobs for American workers. To that extent, it would eliminate the tax deductions that corporations can currently receive for offshoring jobs.
If passed, the legislation would complement executive orders the President signed earlier this year to encourage consumers, companies, and federal agencies to Buy American.
The President emphasized that all contracts for the infrastructure and building projects will go to companies with “American products all the way down the line and American workers.”
At Emles, we see the revitalization of American manufacturing as a long-term growth opportunity for investors. All of the existing and proposed spending to support American companies and workers could expand these opportunities considerably.
Investors may seek to capture this opportunity with the Emles Made in America ETF (AMER), which focuses on businesses with headquarters and manufacturing footprints in the United States. It is designed to help investors gain significant exposure to companies that stand to benefit from deglobalization and the growing importance of domestic manufacturing.
Another Emles ETF that may stand to capitalize on the Buy American program and infrastructure plan, particularly with the requirements for federal agencies to focus on U.S. contractors and the commitment for additional federal spending, is the Emles Federal Contractors ETF (FEDX). FEDX invests in companies that have higher exposure to U.S.-based federal contracts and thereby benefit from the predictable long-term revenue these contracts can provide.
Senate rules will again determine legislation’s fate
House Speaker Nancy Pelosi said she hopes to have a House version of the legislation ready by July 4. In the Senate, 10 Republican senators would need to come on board for the bill to pass. If they didn’t, the Democrats would have to use the budget reconciliation process so the legislation could pass with a simple majority, drawing on the 50 Democratic senators, plus Vice President Kamala Harris as the deciding vote.
Tags: ETF, Federal Contractors, Growth, Manufacturing