Wharton Analysis Predicts Trump’s Infrastructure Plan Could Create 1M Jobs

Jun. 19--President Donald Trump's new $1 trillion infrastructure plan could create one million jobs, according to a recent analysis from the Penn Wharton Budget Model.

The infrastructure plan, which is still under construction by the Department of Transportation, would fund typical infrastructure projects such as roadways or bridges. But it is also expected to include projects that expand rural broadband and 5G wireless and even upgrade water systems. The federal aid would also help state and local governments make up for recent infrastructure budget cuts stemming from the COVID-19 pandemic.

"Federal infrastructure aid has a very different effect in these economic times," says Jon Huntley, a senior economist for the Penn Wharton Budget Model who performed the analysis. "It's going to allow the state to continue to employ that person who otherwise would not be employed."

Since the start of the pandemic, more than 42.6 million Americans have filed for unemployment. Earlier this month, a group of economists declared that the United States entered a recession in February, when initial layoffs began.

The Wharton program analyses the financial implications of public policies. Huntley's prediction that the new infrastructure plan could create a little more than a million new jobs -- a rough estimate based on a previous Wharton analysis of the CARES Act -- might seem like only a drop in the bucket at a time of record unemployment.

But Guy Ciarrocchi, president and CEO of the Chester County Chamber of Business and Industry, argues that the plan would have long-lasting effects beyond short-term job creation. "They're really jobs that are needed, but they're jobs that have a multiplier effect," he said. "They improve people's quality of life and opportunity and access to information."

Chester County and surrounding areas also need funding for basic upkeep of roads and transportation systems, especially once more businesses and offices start to reopen. As more people start to drive again after months of lower traffic, Ciarrocchi worries that road damage will intensify.

Ciarrocchi also believes that expanded broadband might be the most significant of the infrastructure projects. Pennsylvania's economy ranked 44th out of all 50 states in 2019 for growth, jobs and the business environment. And Ciarrocchi attributes some of this shortfall to the lack of internet availability in poor or rural areas. The limited access to internet "is a disincentive for businesses to stay here," he said.

Both Huntley and Ciarrocchi note that water and storm system maintenance is also in dire need of funding.

Susan Hardwick, the executive vice president and chief financial officer of American Water, agrees. The American Water Works Association estimates that $1 trillion will be needed over the next 17 years to improve and safeguard water infrastructure.

"Now more than ever, public health, economic development, manufacturing, commerce, and much more are dependent on clean and reliable water," Hardwick wrote in an email.

Hardwick, like Ciarrocchi, says investing in infrastructure can create jobs outside of the water industry. Referring to a 2017 report from the U.S. Water Alliance, she wrote that "for every $1 million invested in water infrastructure, it is estimated that upwards of 15 jobs are generated throughout the economy." Some of those jobs are in the design and construction of water infrastructure, but Hardwick thinks that others will come indirectly from continued spending after initial investments.

This kind of job creation will be one of the big short-term benefits of the infrastructure plan, as Huntley states in his analysis. But the key to reaping all of those benefits, he argues, is timing. The longer the plan takes to start, the less useful it will be in creating jobs and increasing revenue.

News of Trump's plan comes right as the Democratic-controlled House prepares its own $1.5 trillion infrastructure package. That package will provide aid for infrastructure involving roads, housing, water, education, and broadband with an emphasis on green policy. Speaker Nancy Pelosi has said she expects to pass the package in the House before July Fourth.

Speed is critical, Huntley said. "To the extent that the administration wants this plan to help people stay employed and stay in their homes and be able to continue to buy necessities, it's important they move quickly."

That means Huntley's rosy estimations of a $720 billion GDP and a little more than a million new jobs start to fall as the economy returns to normal.

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