BREAKING: GOLDMAN SACHS ANALYSIS SHOWS AMERICAN JOBS PLAN WILL BOOST GDP
On Sunday, Goldman Sachs released “US Economics Analyst, Infrastructure Economics” a new analysis of American infrastructure and the potential benefits of President Biden’s proposed American Jobs Plan, a $2.25 trillion investment in physical, digital, and human infrastructure.
Analysts estimate that the American Jobs Plan would add about 1% to the level of GDP in the coming years, and raise the long-run level of potential output by about 0.5%.
KEY FINDINGS SUMMARIZED:
U.S. infrastructure is in need of investment:
- Much of the core infrastructure in the U.S. was constructed in the 1950’s-60’s and has aged considerably in recent decades. Goldman estimates that restoring the average age of that core infrastructure to its 1970 level would cost $2-4 trillion.
The American Jobs Plan would boost GDP in both the short and long term:
- The American Jobs Plan would directly boost U.S. economic output when the spending occurs, and the resulting increase in productive public capital will eventually raise the level of potential GDP in the long term.
- Goldman estimates that the American Jobs Plan will “add about 1% to the level of GDP in total in coming years.”
- Goldman’s analysts also estimate that the American Jobs Plan and its investments in physical infrastructure would raise the long-run level of potential output by about 0.5%.
- That growth doesn’t include investments in research and development or human infrastructure, both of which are also economic engines.
From Goldman Sachs’ US Economics Analyst, Infrastructure Economics:
“Infrastructure spending from the Biden plan would peak at around 0.5% of GDP from 2023-2026. The new spending would raise total infrastructure investment to around 4.5% of GDP, the highest level since the early 1970s. Infrastructure is only one part of the next round of fiscal measures, which we expect will add about 1% to the level of GDP in total in coming years.
Studies suggest that a 1% increase in the public capital stock raises the level of long-run output by about 0.1%, with somewhat larger effects from core infrastructure than from other projects. These numbers imply that the White House infrastructure proposals would eventually boost the level of potential GDP of about 1⁄2%. This estimate does not include the potential effects of other proposed fiscal measures such as research and development funding or new social benefits, nor of course does it capture the environmental benefits of the American Jobs Plan.”