U.S. President Joe Biden signs the Infrastructure Investment and Jobs Act on Nov. 15, 2021 in Washington, D.C. There are already signs that it and other legislation are providing growth and transformation, writes Laurie Hays.
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About the author: Laurie Hays is a financial journalist who spent 30 years at the Wall Street Journal and Bloomberg covering corporations.
Siemens’ U.S. CEO Barbara Humpton made an unusual plea for these politically fractured times in a recent Financial Times interview. She called on beneficiaries of infrastructure investment—her company is one of them—to tell voters how important that government policy is for the economy. The Biden administration championed infrastructure investment, and Congress passed it in bipartisan bills in 2021. But a change of government could imperil the tax breaks and subsidies that are just starting to modernize the U.S. economy and fight climate change.
Infrastructure investment is a “transcendent and nonpartisan issue,” she said. Businesses need to speak up, she added, “so that whoever is sitting in the White House or whoever’s legislating on Capitol Hill knows the importance of this to American workers, to American families, and frankly, to our national security.”
Humpton has a point. Republicans in the presidential race and in Congress are attacking Bidenomics. Former President Trump recently called automakers “stupid or gutless” for investing in electric cars. Nikki Haley, former governor of South Carolina, described Biden’s Inflation Reduction Act—focused on rebuilding American industry and weaning the country off fossil fuels—as a “communist manifesto filled with tax hikes and green subsidies that benefit China.”
To be sure, there’s a serious conversation to be had about the merits of Bidenomics. Heavy government spending runs counter to the Federal Reserve’s efforts to curb inflation. The incentives for U.S. industries are stirring up global subsidy wars. There are those who believe the government shouldn’t be putting its hands on the scales of winners and losers, or contributing public capital where the markets would have driven the private sector to get the job done.
JPMorgan Chase CEO Jamie Dimon is “in favor for the first time in my life of some industrial policy,” he said in an Economist interview. But he cautions that too much money is being spent too quickly, which can lead to mistakes, another good point.
But if it succeeds, Bidenomics could end up in the history books with FDR’s New Deal and Reaganomics’ trickle-down tax cuts.
Bidenomics is based on growing out the middle and working class and orchestrating the shift to a green economy. There are already signs that it’s providing growth and transformation. The economy is galloping along at a rate that the Fed seems unable to slow down. Unemployment scraped 3.4% this year for the first time since 1969, and is staying comfortably under 4%. The Institute for Supply Management’s index measuring U.S. factory activity rose three points since June—the biggest three-month gain since March 2021. The Biden administration says it has created 13.9 million new jobs, including 815,000 in manufacturing. Spending on construction for new factories is at an all-time high.
Moody’s economist Mark Zandi believes Bidenomics will make up about 0.4 percentage points of the 1% economic growth rate he’s penciled in over the coming year, he told Bloomberg News.
The three components of Bidenomics—the semiconductor-focused Chips Act, the IRA, and the Infrastructure Investment and Jobs Act—have become a forward strategy for hundreds of companies taking advantage of incentives to upgrade and build new production capacity.
“The IRA is working,” reads part of a July Bank of America report, which counted more than 270 new clean energy projects worth some $130 billion announced since the bill was passed in the summer of 2022. The bank identified dozens of companies that could benefit. The Chips Act pulled another $210 billion in private investments across 22 states as of late last year, according to the Semiconductor Industry Association of America.
Detroit executives are converting factories to all-electric cars and trucks. Intel, Micron, and Applied Technologies are building new semiconductor capacity with a boost from the Chips Act. The Infrastructure law is funding repairs for local roads, bridges, pipes, ports and high-speed internet connections.
Any whipsawing of the current government policy poses a high risk for companies already making billions of dollars of investment for a cleaner future and would be a waste of public and private time and money.
It didn’t used to be rare to hear from executives like Siemens’ Humpton. CEOs spoke up on affirmative action hiring after the murder of George Floyd, stopped doing business with gunmakers after a series of school massacres, and supported employees in anti-abortion states. Then came the conservative backlash against “woke,” and a series of red state policies that look an awful lot like retribution for business leaders speaking their minds. Plenty of companies have said they’re eager to participate in publicly funded projects, but Humpton seems alone in citing the looming risks to Biden’s economic policies and calling on her fellow leaders to speak out in support of federal economic policies that will broadly benefit the U.S. economy. They’re going to be on the ballot next year, whether voters know it or not.
We can argue about whether business should get involved in the politics of abortion or saving democracy (I vote yes), but this is about the economy. Business is already voting with its investment dollars. Now it’s time for business leaders to speak up and take a political stand.
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