US Senate Spending Bills
On August 10, 2021, the US Senate passed a bi-partisan infrastructure funding bill worth $1.1 trillion (see more here). The Senate bill allocates about 10% toward roads & bridges and smaller amounts for rails, ports, airports, and EV charging stations. According to Statista, in 2018, the US spent 0.52% of its GDP on inland infrastructure. For comparison, China’s 5.57% 2018 infrastructure investment led the world. While South Korea spent 1.65%, Switzerland 1.17%, Japan 0.95% the UK 0.92%, Canada 0.53%, Mexico 0.37% and Portugal spent the least at 0.37%.
Additionally, on August 11, 2021 the US Senate narrowly approved a $3.5 trillion budget bill (see more here). Among the spending passed in the Senate budget bill is an expansion of Medicare and climate and initiatives. Spending in this bill is to be paid for with penalties for carbon pollution and a more aggressive IRS.
US House Spending Bills
Separately, on August 24, 2021, the US House of Representatives passed, by party-line vote, a $3.5 trillion budget and advanced a $1.0 trillion infrastructure spending bill. The House appropriations bill includes increased spending on Medicare, tax credits, child-care, and ‘green’ initiatives among other spending.
The $4.5 trillion in proposed budget & infrastructure spending bills comes on the heels of $6.4 trillion in COVID relief bills all signed into law since December 2019. They are, the $1.9 trillion American Rescue Plan, the $2.3 trillion Covid Relief Bill and the $2.2 trillion CARES Act. According to the St. Louis Federal Reserve Bank, US Federal debt stood at $28.5 trillion through the second quarter of 2021.
An Object in Motion . . . ?
As mind numbing as these numbers might look, bond markets do not appear to be concerned. Yields on the benchmark ten-year US treasury bond stood at 1.30% on August 30th. Nevertheless, it does raise the question how long can US federal borrowing continue unabated and unaffected?
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