It’s still early, and there will no doubt be a few revisions before it becomes law … if it becomes law. But details of President Joe Biden’s infrastructure spending plan are in.
To start, it’s ambitious.
Titled the “American Jobs Plan,” Biden himself billed it as a “once-in-a-generation investment in America” in the hopes of creating “the most resilient, innovative economy in the world.” He also said it would be “unlike anything we have seen or done since we built the interstate highway system and the space race.”
Those are big words, and they come with a $2 trillion price tag.
Biden said he’d have another set of proposals coming soon of roughly the same size called the “American Family Plan,” with another $2 trillion to be spent over the next decade. To put that in perspective, the $4 trillion in proposed spending represents 20% of the total U.S. economy. That’s huge!
I want to focus on the infrastructure plan today. It’s divided into six major categories:
- Building, repairing and upgrading roads, bridges, ports and airports.
- Replacing lead water pipes, upgrading the electrical grid and making high-speed internet available to all Americans.
- Building, retrofitting and modernizing over two million homes and other buildings to make them more accessible, more energy-efficient and more affordable.
- Improve the home healthcare system.
- Revitalize manufacturing, secure supply chains, invest in research and development and invest in job training.
- Create jobs that pay “prevailing wages in safe and healthy workplaces.”
Breaking this down, the first three would seem to be the most likely to survive congressional horse-trading. These are harder and more tangible. The second three are a little vaguer and don’t have much to do with “infrastructure,” per se. They may be valuable; that’s a matter of opinion, of course. But it’s a stretch to call them “infrastructure.”
Let’s focus on the key takeaways for us as investors.
Biden’s Infrastructure Plan Will Be Big for Certain Sectors
The first and most obvious is that we’re going to have a lot of demand for concrete, steel, copper and just about every other basic ingredient needed in large construction projects. We’re talking about 20,000 miles of highways as just the beginning.
This is a theme Adam O’Dell and I have been covering in Green Zone Fortunes. Even before the infrastructure announcement, we were bullish on basic industries because, after a decade of relatively light investment, we expect demand to outstrip existing supply in a post-pandemic recovery. The infrastructure bill is like throwing a large can of gasoline on that fire.
Here are some of the stocks we have highlighted recently:
- Research analyst Matt Clark hit on an infrastructure stock back in February, and it still rates a 99 in our Green Zone Ratings system. Click here to read more about it.
- Matt also has a “Strong Bullish” play as Biden tries to expand internet access across the country.
Secondly, the Biden administration is going big on electric vehicles. He wants to incentivize the construction of 500,000 electric vehicle charging stations and replace large swaths of public vehicles — everything from school buses to mail trucks — with electric alternatives.
To put that in perspective, there are only around 115,000 gas stations in the United States today. Biden’s plan would create more than four times as many charging stations as gas stations.
Again, that may not happen on the scale Biden envisions. But even if the final plan is half that size, it still represents a massive demand for electronics components, not to mention lithium to supply the batteries for all of the electric vehicles.
The Cost Issue and Tax Tips
All of these are opportunities. But there is also the cost factor. Taxes will almost certainly rise, particularly on Americans earning more than $400,000 per year.
So, tax planning is going to be really important in the decade ahead. As I wrote recently, there are ways to legally shield hundreds of thousands of dollars in income from the taxman each year. If taxes are indeed rising — and again, this has to get through congress first — legal tax avoidance becomes more critical than ever.
To safe profits,
Editor, Green Zone Fortunes
Charles Sizemore is the editor of Green Zone Fortunes and specializes in income and retirement topics. Charles is a regular on The Bull & The Bear podcast. He is also a frequent guest on CNBC, Bloomberg and Fox Business.