Nearly two-thirds (63%) of middle-market executives say the country’s struggling infrastructure is limiting the growth of the national economy, according to a new RSM survey shared exclusively with CNN Business. The survey, conducted in partnership with the United States Chamber of Commerce, also found that 60% of those executives say the state of infrastructure is hurting local economies as well.
“The archaic nature of America’s infrastructure holds back the national economy, the local economy, and the businesses that constitute the heart and soul of the real economy,” Joe Brusuelas, chief economist at RSM, said in an interview.
The survey, conducted in April, focused on the middle market sector of the economy, which, as the name suggests, encompasses firms larger than smaller firms but not as large as larger firms. powerful with familiar names. These roughly 2,000 companies have revenues of between $ 10 million and $ 2 billion and employ approximately one-third of the US workforce.
When asked about 21 specific initiatives – improving highways, bridges, ports, railways and more – at least 63% of executives said these improvements would have minor, moderate or significant benefits for their business’s day-to-day operations, RSM investigation found.
“The middle market signals to the political authority that we need to improve overall efficiency and productivity because roads, bridges, waterways and broadband technology conditions are holding us back,” Brusuelas said. “We have to invest in the future.
Support for the modernization of certain infrastructure elements is even stronger: the security of telecom networks (95%), local roads or highways (94%), telecom networks such as 5G (94%) and the energy network (90%).
It is important to note, however, that the RSM issues offered no compromise in performing these upgrades. In other words, there was no mention of how the power grid overhaul might force companies to pay Uncle Sam more taxes.
“As a business community, we hope something will be done about infrastructure,” Tim Ryan, CEO of accounting and consulting giant PricewaterhouseCoopers, told CNN Business.
Ryan, whose company advises Fortune 1000 companies and many mid-market companies, said there was still debate about how to pay for infrastructure improvements and what should be included in the plan.
“It is clear that we as a country need to make progress on infrastructure,” said Ryan.
White House: “It’s not a stimulus”
Infrastructure talks between Biden and Republican Senator Shelley Moore Capito collapsed on Tuesday. The White House is now focused on negotiations with a bipartisan Senate group led by another West Virginia lawmaker: Democratic Senator Joe Manchin.
Biden officials expressed cautious optimism on the way forward on Wednesday.
“There is a reason why the infrastructure, although extremely popular, was not realized: because it is difficult,” a White House official told CNN Business. “The president is committed to doing it.”
Republicans have argued that Biden’s $ 4.5 trillion program to rebuild better, which includes the U.S. Plan for Families, would backfire by overheating the economy with more spending.
Senate Minority Leader Mitch McConnell recently warned that Biden’s current budget proposal “would drown American families in debt, deficits and inflation.”
However, unlike the $ 1.9 trillion stimulus package enacted in March, Biden’s infrastructure proposal and America’s plan for families are long-term investments that do not include improved unemployment benefits, small business loans or stimulus checks.
“It is not a stimulus. It will not be deployed as soon as the ink dries on the legislation,” a second White House official told CNN Business.
Inflation is there. How long will it last?
The White House, like the Federal Reserve and many economists, is betting that the return of inflation will not last.
“We’re going to see some short-term challenges with inflation, but that should subside once we get through and out of this crisis,” the second White House official said.
Pay for infrastructure
Beyond the substantial price of the infrastructure package, one of the main sticking points is how to pay for it. The Build Back Better program calls for raising $ 3.5 trillion by raising taxes for corporations and the wealthy.
Republicans and many business groups, including the US Chamber of Commerce, oppose the cancellation of Trump’s tax cuts that lowered the corporate rate to 21%. They argue that increasing the tax rate to 28%, as proposed by Biden, would make American businesses less competitive on the world stage. (Biden has also signaled his willingness to consider other options, such as imposing a 15% minimum tax on all corporations.)
Biden officials suggested there was an irony among Republicans’ concerns about inflation and their desire to avoid raising taxes.
“When you pay for something, you take money out of the economy. It helps reduce the expansionary effects of everything we do,” the second White House official said. “If your main concern is inflation, then you should be very concerned about the other side of the equation.”
Brusuelas expressed concern that Washington would fail to take advantage of current low borrowing costs to make overdue investments in the country’s infrastructure.
“If they don’t,” the RSM economist said, “there’s going to be hell to pay”.