Infrastructure investment will transform US economy - but immediate threat is inflation

US President Joe Biden's visit to the Port of Baltimore was intended to demonstrate the benefits the investment in new infrastructure money will provide nationwide. PHOTO: REUTERS

WASHINGTON - The issue of prices has acquired new and immediate urgency in the United States, as the latest data shows that inflation has risen to a level not seen for more than 30 years.

Federal data on Wednesday (Nov 10) cast a pall over President Joe Biden's trip to Baltimore to showcase his signature infrastructure Bill that he promised will bring down prices and create jobs.

The consumer price index (CPI), which tracks inflation in a range of staple goods and services, rose 0.9 per cent in October, higher than expected.

That tops off the last 12 months at 6.2 per cent inflation - the highest annual rate since November 1990.

Speaking at the port of Baltimore on Wednesday, President Biden laid out some of the ways his US$1.2 trillion (S$1.6 trillion) infrastructure Bill, which he will sign on Monday, will create well-paid jobs, tackle climate change by transforming the economy, and bring prices down.

With an eye on China, the Bill will also fundamentally ensure America's competitive edge. And politically, it gives the President a chance to prove he is genuinely pro-working class.

The Bill is "the ultimate blue-collar blueprint to rebuild America", he said.

The high inflation rate has a lot to do with global and internal supply chain disruption. Renewed demand is meeting less supply, driving prices up.

And inflation is expected to persist. Last week, Federal Reserve chairman Jerome Powell told reporters that shortages and bottlenecks would persist "well into next year".

But explanations are cold comfort to Americans who are finding their household bills going up - and that, too, at the beginning of the Thanksgiving and Christmas holiday season.

The Biden administration is scrambling to address this.

Earlier this week, the Transportation Department said port authorities could redirect savings from other projects towards supply chain challenges.

The Port of Savannah, Georgia - one of those most badly hit by congestion - will be able to mobilise US$8 million to create pop-up container yards.

"The costs for low-wage households to cover their commuting costs, grocery bills and rents are eating into the jump they have seen in wages," Ms Diane Swonk, chief economist at Grant Thornton, wrote in an analysis. "The public is angry."

Certainly, the infrastructure Bill will introduce transformational change.

The Bill includes money for an additional 500,000 electric vehicle charging stations across the country, and affordable high-speed broadband Internet for every American.

One of the first visible indications of this will be more crews at work across the country laying high-speed fibre optic cable, Commerce Secretary Gina Raimondo said on Tuesday.

Meanwhile, the high inflation rate has given Republicans ammunition against the President - forcing him to continue to sell hard the benefits of the Bill.

"This Bill is going to reduce the cost of goods to consumers and businesses, and get people back to work, helping us build an economy from the bottom up and the middle out… where everybody is better off," he insisted.

"It lays out concrete steps… over the next three months to invest in our ports and to relieve bottlenecks," he added.

"It represents the biggest investment in ports in American history. And for American families, it means products moving faster and less expensively from factory floor, through the supply chain, to your home."

The administration is also stressing the longer-term transformational effects of the Bill.

"We're in a competition for the 21st century and who's going to own it," the President said in an obvious reference to China.

"America still has the most productive workers in the world and the most innovative minds in the world," he said. "But other countries are closing in. We risk losing our edge if we don't step up now."

Mr Biden added: "The longer-term view means building greater resilience to withstand both the shocks and disruptions we can anticipate as the world continues to change: pandemics, weather extremes, cyber attacks, or whatever else comes our way.

"And they're all going to come our way. You know it. We need to be ready."

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