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$2 Trillion Proposal to Overhaul Infrastructure to Boost These Industries

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President Joe Biden has unveiled a $2 trillion dollar plan that will be implemented over eight years. The proposal is made up of two parts. The first is called the American Jobs Plan, details of which are now being discussed. Components of the second one, called the American Families Plan, will be revealed next month.

The plan has allotted $621 billion for bridges, roads, highways, public transit systems, EVs, railways, waterways, airports, etc. There’s a $300 billion allotment to boost U.S. manufacturing and supply chains; $111 billion for safe drinking water, including an overhaul of the water infrastructure; $100 billion for expanding high-speed broadband access; $100 billion to build a more resilient electric grid; $213 billion to produce, preserve and retrofit more than 2 million affordable and sustainable homes; $100 billion to build and upgrade public schools; $180 billion for R&D and futuristic technologies; and $100 billion for workforce development programs.

Everyone agrees that the infrastructure is required and the debate is mostly on where the funds should come from. Biden proposes to increase the tax on American companies from 21% to 28%. American multinationals are to pay at least 21% under the plan. The government also plans disincentives for offshoring jobs and transfer of profits to tax havens.  

In short, the plan is to rebuild America to make it future-ready, while bringing more employment to people and more revenues to the government.

Corporate America objects to bearing all of the pain because the benefits will be shared by individuals as well. Trade bodies have said that raising the tax rate will make American goods less competitive in the global market, thus defeating the purpose of the investment.

Individual taxes are not likely to increase as the president reportedly doesn’t support it. But corporate America’s call for user fees (like toll taxes for using roads and bridges) could be in.

Even if there’s some compromise on the tax rate, and the government can realize most if not all of the changes, it would still be a big deal for the economy. That’s because better infrastructure is a big boost to industry and in this case, is long overdue.

The focus on manufacturing, R&D and workforce development is the way to go. In the artificial intelligence (AI) era, there will be much fewer jobs available overall. So there’s the immediate need to train workers for the new normal, because many current jobs will become redundant. Stocks worth investing in today include AGCO, DE, TWI.

Big tech companies have obviously been targeted for their tax avoidance schemes and the large pool of offshore talent they use. But there could be room for partial workarounds before (or after) this becomes policy. Automation and artificial intelligence will also lead to significant cost reduction over the next decade.  

The proposal is positive for tech in general because of its focus on expanding high-speed broadband access. So any tech company offering tech supported services whether to consumer or corporate customers should benefit. And any company providing chips and other components to support the digitization should also benefit. Stocks in the industry worth investing in today are (MXL - Free Report) , (NXPI - Free Report) , (ADI - Free Report) , MTSI, ON, COHU, KLIC, UCTT, (ACLS - Free Report) , BRKS, XLNX, VSH, .

This is also particularly positive for steel producers, because the government is promising huge investments in infrastructure projects that consume tons of steel. The other segment that drives steel demand is auto where the drive towards electrification will also increase demand. Stocks in the industry worth investing in today include (MT - Free Report) , (FSTR - Free Report) , NUE, ZEUS, PKX, TX.

For the auto segment though it’s a mixed bag because for traditional auto makers, there’s the challenge of producing more EVs (requiring more R&D and other costs) even as government policy hits the legacy business. The EV adoption rate also needs to pick up. To that end, the government will be incentivizing people to buy EVs although it isn’t clear yet whether it will be extended to manufacturers that have already sold 200,000 vehicles. The current policy is to cap incentives when the manufacturers cross the 200,000 vehicle mark. So if you’re planning on buying a Tesla today, you wouldn’t receive an incentive.

The government also expects to have 500,000 charging stations by 2030. Charging stations will be key to boosting the adoption rate because the limited range on current generation EVs necessitates it.

Stocks in the industry worth investing in today include (DDAIF - Free Report) , STLA, (TM - Free Report) , YAMHF, HMC, (VLVLY - Free Report) , ASEKY, DOOO, THRM, MGA.

The focus on affordable housing and the electric grid are positive for vendors selling into the construction industry, whether it’s concrete, wood, electricals, lighting, or furnishing.  Stocks in the industry worth investing in today include (USCR - Free Report) , (BZZUF - Free Report) , CNR, MLM, WIRE, MYRG.

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