The White House and Senators Reach an Infrastructure Deal

Impact on Wall Street

President Joe Biden announced last week that the White House has reached an infrastructure deal with a group of 10 senators from both sides of the aisle. The roughly $1 trillion package includes plans to improve the nation’s roads, bridges, and broadband infrastructure. Lawmakers and the White House will now work to pass the bipartisan plan and a separate Democratic proposal. This will require delicate negotiations in the Senate, which is split 50-50, and the House, which is narrowly controlled by Democrats.

Shares of construction and materials companies climbed on the agreement, including heavy machinery maker Caterpillar (CAT) and materials supplier Martin Marietta Materials (MLM).

Nuts and Bolts of the Plan

The plan includes $579 billion in new spending. $312 billion will be invested in transportation, $109 billion will go toward roads, bridges, and other large projects. $66 billion will be spent on passenger freight and rail, and $49 billion will pay for public transit projects.

It also includes $65 billion for broadband infrastructure, in order to help close what is known as the “digital divide.” Just $15 billion will be invested in electric vehicle infrastructure and electric buses and transit, which is far lower than what Biden initially proposed.

Paying for the Plan

Republicans and Democrats still need to work out how to pay for the plan. Republicans have said they will not alter their 2017 tax cuts, and President Biden has said he will not increase the gas tax or electric-vehicle user fees.

The two sides are now discussing other options, including ramping up IRS enforcement to make sure that wealthy people are paying the full amount of taxes they owe. Additionally, part of the plan may be funded with unused state and local pandemic relief funds.

Thursday marked an important step for the infrastructure bill, but there is still more work to do. Lawmakers and investors will be carefully monitoring discussions in Washington.

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