US President Joe Biden has unveiled plans for a massive infrastructure program for the United States.
It’s only been a few weeks since President Biden’s Democratic Party ushered in a mammoth coronavirus stimulus package. This package, which included direct cheques and support for vaccination programs, cost US$1.9 trillion.
New infrastructure bill on the table
But now that that law has been passed, the Biden administration is now turning its attention to infrastructure. According to the White House, President Biden stated that the ‘American Jobs Plan’ will be the largest American jobs investment since World War Two and “will create millions of jobs”.
Biden’s proposal is set to cost approximately US$2 trillion, but that cost will be spread over 8 years. Here are some of the details from the President’s address:
The American Jobs Plan will build new rail corridors and transit lines, easing congestion, cutting pollution, slashing commute times, and opening up investment in communities that can be connected to the cities, and cities to the outskirts, where a lot of jobs are these days. It’ll reduce the bottlenecks of commerce at our ports and our airports… modernize 20,000 miles of highways, roads, and main streets that are in difficult, difficult shape right now. It’ll fix the nation’s 10 most economically significant bridges in America that require replacement.
It will also reportedly include funding for more modern infrastructure, such as internet connections and electric vehicle charging stations.
This package will not be entirely funded with debt, like the stimulus package was. President Biden is proposing a raft of changes to the American tax code to help come up with the extra cash.
This most prominently includes raising the US corporate tax rate to 28%, from the current level of 21%. It also includes various tax loophole closures and plans for a “global minimum tax rate” for companies.
What does this proposal mean for ASX shares?
Any large stimulatory program in the United States, the world’s largest economy, is likely to have positive flow-on effects for the global economy, which of course includes Australia. As such, this package is likely to be a piece of good news for S&P/ASX 200 Index (ASX: XJO) companies.
Infrastructure requires a lot of raw commodities, such as copper and iron ore for steel. As such, this plan could be beneficial for ASX mining companies in particular, such as BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO).
Of course, this plan is only a plan at this stage. Biden will need to wrangle it through the US Congress, where his party only holds slim majorities in both houses. This could result in significant changes to the measures we’ve discussed. Particularly around the tax plans.
But this space is certainly one to watch for any ASX investor.