What’s in Biden’s $2.3T infrastructure plan for startups, small businesses?

President Joe Biden described the aim of his $2.3 trillion American Jobs Plan, unveiled March 31 at the Carpenters Pittsburgh Training Center in Pennsylvania, as “building America’s backbone” while also creating good jobs. To be paid for over eight years, primarily through corporate taxes over a 15-year period, the proposal targets spending on overhauling and modernizing the country’s infrastructure. While Democrats hope to pass the AJP by July, there are likely to be many changes before it becomes law.

The nation’s infrastructure needs are large

According to an April 2021 report from Moody’s Analytics, the country’s infrastructure investment has steadily declined as a share of the national GDP since the 1950s and 1960s, when it hovered around 6%. Infrastructure investment today as a share of GDP is currently well below 2% of GDP, its lowest level since World War II, per Moody’s.  Consequently, much of the national infrastructure has been steadily aging, with the average highway nearly 30 years old and many of the nation’s dams even older. Since maintenance has been deferred in many cases, the urgency of additional spending for replacement rather than repair has intensified, which could augur a better reception in Congress for the plan.

What qualifies as infrastructure under the AJP?

The plan’s definition of infrastructure is expansive, encompassing funding for the repair of roads, bridges, ports and airports; affordable housing; the expansion of clean energy initiatives; the deployment of broadband service; supply chain improvements; strengthening of electric grids and essential services, along with a slew of other initiatives.

Key beneficiaries

Construction: The immediate and obvious beneficiary of the plan is the construction sector. Many small and medium firms stand to profit from the vast scope of work to be done. Biden seeks to have 20,000 miles of highways and main streets across the country reconstructed. This in and of itself is good news for many small enterprises, as macro construction projects typically filter down to subcontractors. There are also 10 bridges recognized as essential to the American economy and whose repair is deemed urgent under the plan, which brings further scope for engagement from engineering and construction firms.

Broadband: The administration plans to increase broadband connectivity across the U.S., especially in rural and agricultural markets, and to reduce the price of broadband for all with $100 billion earmarked for the initiative. The plan also targets underserved communities by providing a short-term subsidy on broadband access to low-income households.

Semiconductor manufacturers: The plan would invest $50 billion in domestic semiconductor manufacturing. The administration said the goal of the spending is to secure U.S. leadership in a global market that relies extensively on chips.

Clean-energy producers: The proposal would implement a “clean energy standard” meant to push utilities to wean altogether from using carbon-emitting sources over about the next 15 years. Renewable energy firms would receive direct payments for R&D, and federal buildings would be ordered to use only clean power sources.

Higher education: Colleges and universities could receive tens of billions of dollars earmarked for research. This includes $40 million to modernize and upgrade research labs countrywide.

Electric vehicle manufacturers: The AJP targets $174 billion for companies that make electric vehicles.  This comprises tax credits, subsidies to makers, consumer incentives and spending on 500,000 new electric vehicle charging stations.

The AJP also allocates $31B to the creation of small business incubators

The plan envisions a national network of small business incubators and innovation hubs to be developed with $31B in funding. The money would come in the form of programs that give small businesses access to credit, venture capital and R&D dollars. Additionally, funding is allocated for community-based small business incubators and innovation hubs to support the growth of entrepreneurship in underserved communities.

The plan from a startup perspective

Many VCs are of the opinion that even though semiconductors and hardware for broadband services fall outside their traditional sphere, spending in this arena will have a positive impact. Startups are expected to begin building off the planned broadband and 5G capabilities that impetus would deliver, for example.

Meanwhile, chip manufacturing and hardware applications that are usually high in capital requirements would be able to build on capabilities already present. Once greater broadband access becomes a reality, an ecosystem of connected communities that were previously subserviced will open up new avenues. This will bring large parts of the country into the mainstream fold.

In addition, myriad industries with a sizeable number of startups and VCs attached would also be impacted by the plan. For example, electric vehicles and their corresponding infrastructure are slotted for a $174 billion allocation. Renewable energy sources and R&D into clean energy are slated to receive $180 billion.