US: Boom, Bust, Bang: Economic Implications of the American Jobs and Made in America Tax Plans

The administration’s American Jobs Plan and Made in America Tax Plan aim to address the need for infrastructure investment in the US. The Plans include a variety of provisions that might bolster GDP growth in the short run, but dampen growth for a period of time. The effects of the tax hikes might even curtail some of the benefits of infrastructure investments and precipitate inflation, challenging the central bank’s aim to keep interest rates low for longer. Importantly, the bang for the buck of the provisions will depend upon when projects can get underway and the state of the economy when they do. Despite potentially sizable, long-run multipliers from federal infrastructure investment, the types of projects will determine how much productivity and GDP growth will be generated over the long term.