How Would You Like to Pay for This Trillion-Dollar Bill? Cash or Debt?

THE BRIEF

Let’s not get ahead of ourselves, but we may have another shot (after several failed attempts) at a trillion dollar infrastructure bill. Let’s see how far it gets this time…

• On June 18, the Democrats introduced the Moving Forward Act, a $1.5 trillion infrastructure bill set to be voted on before July 4.
• The US bill will set aside billions of dollars for infrastructure work (i.e. roads, bridges, etc.), 5G wireless infrastructure, public transit improvement and climate change initiatives amongst many others.

THE EXPLANATION

The Moving Forward Act factsheet outlines the $1.5 trillion plan to rebuild American infrastructure.

• Key funding: $300b for roads and bridges, $100b for public transit, $100b for schools and child care, $100b for affordable housing infrastructure, $100b for broadband internet access and $70b for clean energy infrastructure amongst many other billions.

Don’t celebrate too early, the bill is in the early stages of being drafted and is expected to be voted for in early July. After voting, the bill will go through several phases of negotiations and changes between the members of House and Senate before reaching the President for approval.

• Disagreements on the terms and how the government will pay for the spending could derail the bill before it sees the light of day.

If successful, the infrastructure bill will lead to job growth, putting the economy closer to the path of recovery. That being said, the federal government has attempted and been unsuccessful in passing an infrastructure bill for several years. In the last attempt on May 2019, the meeting ended with President Trump angrily walking out. Will a global pandemic be the tipping point of the infrastructure bill?

• John Creswell, Managing Director at Duff & Phelps Investment Management, expects a 30% chance of a big bill passing this year.

THE ACTION

The approval of an infrastructure bill will be a signal for future job creation that will benefit the economy. The following sectors and ETFs (What is an ETF?) stand to benefit from a spending frenzy:

• Construction and materials… Industrial Select Sector Fund ETF ($XLI)
• Wireless and broadband 5G… Defiance Next Gen Connectivity ETF ($FIVG)