After months of talking about it, the Senate finally decided to pass President Joe Biden’s $1 trillion infrastructure bill on August 13. Just one day later, the Senate also passed the $3.5 trillion spending package that could bring some big changes to America’s current laws. On August 24, the House of Representatives gave the first round of thumbs-ups to both bills and is set to make a final vote by the end of September. That’s roughly $4.5 trillion that could potentially be added to Uncle Sam’s budget.
Now, $4.5 trillion is a lot of money, but it’s easy for us to brush that number aside because we’re not paying for it, right? . . . Right? Well, we hate to burst your bubble, but someone’s got to pay for it eventually. And the truth is, when the government spends money, it affects all of our wallets. So, let’s take a deeper dive into what these bills are about and find out where our money comes in.
What’s in Biden’s $1 Trillion Infrastructure Bill?
The $1 trillion bill, called the Infrastructure Investment and Jobs Act, passed the Senate with a bipartisan majority—aka 19 Republican senators agreed with 50 Democratic senators that this bill is a good idea.1 It would add roughly $550 billion to the pile of money already set aside to improve American infrastructure over the next five years.
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If the word infrastructure makes you think of planes, trains and automobiles, you’re not far off track. This pricey plan would pay for updates to national roads, bridges, railways and the power grid. But it also includes things like building and upgrading public schools, expanding access to high-speed internet, adding more green energy options, and a whole lot of other things.
The White House first announced the act in late July and said the goal is to “grow the economy, enhance our competitiveness, create good jobs, and make our economy more sustainable, resilient, and just.”2 Here’s a closer look:
Next Steps: How the $1 Trillion Infrastructure Bill Could Become Law
Again, the Infrastructure Investment and Jobs Act has passed in the Senate, and House members gave it the round-one approval on August 25. (Note: Bills need to be approved twice in the House before they can move forward.) But things are looking hopeful for this infrastructure bill. House Speaker Nancy Pelosi even said she’s committed to passing it by September 27.3
Of course, that doesn’t mean that anything is set in stone. If the House decides to make any change to the act at all, the new version of the bill would be sent back to the Senate for approval, and the typical merry-go-round of Congress would start back up again. But if the House agrees on it as is, it will go to President Biden’s desk where he’ll have 10 days to either sign or veto the bill. (Spoiler: He’s expected to sign it.)
All that to say, it could be weeks—even months—before this spending plan is a done deal.
What’s in Biden’s $3.5 Trillion Spending Package?
Okay, this second bill is part of President Biden’s Build Back Better plan that includes many of the projects he had said during his candidacy that he would tackle if elected. The bill is more focused on the “human infrastructure” side of things, like the American Families Plan, health care, education and climate change policies. Here’s a breakdown of some of that spending:
Next Steps: How the $3.5 Trillion Spending Package Could Become Law
While the first $1 trillion infrastructure bill was bipartisan, this $3.5 trillion portion of the package currently has a lot more Democratic support than it does Republican. It passed in the House but was split along party lines—meaning all 220 Democrats voted yes and all 212 Republicans voted against. And even then, some House Democrats have threatened to vote against this part of the bill unless the $1 trillion infrastructure bill is passed first.4 But more liberal Democrats have said they’ll only vote yes if both bills are a package deal.5
Bottom line: It looks like there could be a bit of a hold up for this part of the spending package. So, let’s focus on the $1 trillion bill for now.
Who’s Paying for Biden’s Infrastructure Plan?
Here’s the big-ticket question. The two senators who led the negotiations for the $1 trillion infrastructure plan say that it comes with $519 billion dollars of offsets—which means they actually have a plan to pay for about half of the cost.6
That plan involves using leftover money that was set aside for emergency COVID-19 relief—like unemployment benefits—and money from delaying the Medicare rebate, corporate tax fees, and new tax regulations on cryptocurrencies.7 But they also claim that passing this plan will generate about $53 billion of economic growth, which is essentially saying it will partly pay for itself.8
But . . . that’s not enough to cover $1 trillion (let alone $4.5 trillion if both bills become law). So, where’s the rest of the funding coming from? Well . . . no one seems to exactly know. President Biden has suggested some of it will be paid for by taxing some of the largest corporations (including 55 companies who “didn’t pay a single penny in federal income tax”) and households earning more than $400,000 a year.9
Even with all that “planning,” though, the infrastructure bill is still expected to add at least $256 billion to America’s debt between now and 2031.10 You can just imagine Uncle Sam swiping his credit card for all those new roads and things, not thinking too hard about how he’s going to actually pay for it.
How Could the Infrastructure Plan Affect Your Wallet?
- Infrastructure upgrades will save you money. The terrible state of our infrastructure system is apparently going to cost families an estimated $3,300 in disposable income (that’s how much money you have left after you subtract necessary expenses) every year until 2039.11 That’s about $63 a week! As the American Society of Civil Engineers puts it, “When we fail to invest in our infrastructure, we pay the price.”
- You’ll save on your commute. The $1 trillion plan would invest in public transportation and electric vehicles, and the White House says that will ease congestion and slash commute times.12
- Cheaper (and faster) internet. That $65 billion to bring every American affordable, fast internet goes for every American—even those who currently have good internet service. When President Biden first introduced the idea back in March, he said the goal was to “drive down the price for families who have service now, and make it easier for families who don’t have affordable service to be able to get it.”13
- More, better-paying jobs. The White House claims that the infrastructure investment will create “millions of jobs, good-paying jobs.”14
- Increased homeownership. The pandemic led to a major housing shortage, causing home prices to skyrocket. An increase in affordable housing options and down payment grants will increase the housing supply and help to cool down this hot housing market.
- It could help small businesses and farm owners. Part of the proposed $3.5 trillion agreement would prevent taxes on small businesses and family farmers, help them recruit and keep workers by providing federally funded paid leave, give them more access to credits, and more.
These infrastructure bills (and their hefty price tags) aren’t all sunshine and rainbows. As we talked about, they’re going to add billions of dollars to the government’s mounting pile of debt. And when the collectors start calling Uncle Sam, he’s going to need to figure out some way to pay up. And that’s where it might start affecting your wallet:
- It could hurt small businesses. Wait, what? Didn’t we just list this as a benefit? Yeah, we’re a little confused too. The Biden administration claims 97% of small-business owners would be protected from tax rate increases, but the Tax Foundation says that’s misleading.15 According to their study, about 25% of small businesses (defined by the census as fewer than 500 employees) would be at risk of getting slapped with Biden’s corporate tax rate hike.16,17
- Corporations could fire back. Remember when we said part of the plan to pay for this infrastructure bill is to raise the corporate tax rate? You probably didn’t think much of it, because if you’re not a corporate executive, what’s the big deal? Well, if those corporate executives think the tax rate increase is too much, they might take their business elsewhere—like to a different country. That could mean fewer jobs or even pay cuts for the average American worker.
- It could mean higher taxes. According to a recent study, President Biden’s plan to increase corporate taxes will lead to higher taxes for lower- and middle-income taxpayers within the next 10 years.18
- It could affect your investments. It’s not just the rich who have a stake in the game. About 107.8 million taxpayers have some ownership (stocks, bonds, IRAs, etc.) in U.S. corporations, and if they’re getting hit with taxes, it could trickle into those retirement investment accounts.19
- It could decrease (or eventually eliminate) Social Security payments. Experts have predicted that the Social Security fund will be empty by 2035, but a recent study says that all the extra government spending from the pandemic could have it running out by 2032.20,21 And that study doesn’t even factor this new infrastructure bill into the equation. But the idea of Social Security getting cut shouldn’t scare you, because here’s the thing: It’s not enough for you to comfortably retire on anyway.
Look, you can’t force Uncle Sam to get smart with his money. But you can take control of your own. The government is never going to take care of you as well as you can take care of yourself, and that’s why it’s so important that you get out—and stay out—of debt, build up your savings, and invest wisely.
If you’re out of debt and have 3–6 months of expenses saved up, you should be investing at least 15% of your income in a good retirement account that will best fit your needs. That way, when it comes time for you to retire, you’ll have your own money and you won’t have to worry about disappearing Social Security funds. Take that, government!
Not sure how to plan for retirement? Connect with a trusted investment professional to start exploring your options. We recommend SmartVestor Pros. These experts will work with your individual needs and help you build wealth—and confidence—for your future.