Will US investment bills truly boost productivity and labour force?

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US Investment Bills: Potential for Productivity and Labour Force Growth Debated

US Treasury Secretary Janet Yellen asserts that the recently approved bipartisan infrastructure package and President Biden's proposed social and climate spending plan will significantly enhance US productivity and expand the labour force. Yellen projects that these legislative measures will foster higher rates of productivity and positive economic shifts, ultimately increasing the nation's productive capacity. This optimistic outlook is supported by the anticipated impact of investments in child care and universal pre-school, which are expected to facilitate greater participation in the workforce, particularly for mothers.
Impact of Child Care and Pre-School Investments on Workforce Participation

Investments in affordable child care, as outlined in the "Build Back Better" bill, are poised to enable more American mothers to re-enter the workforce. Studies indicate a substantial number of parents with young children have previously had to leave jobs or alter their employment arrangements due to childcare challenges. Similarly, the provision of universal pre-school is anticipated to help parents maintain their employment and contribute to the development of future workers, thereby improving their long-term earning potential and educational outcomes.
Projected Revenue Generation and Deficit Reduction

Secretary Yellen estimates that the proposed tax provisions will significantly boost government revenue and contribute to deficit reduction over time. These measures include imposing higher taxes on wealthy individuals and enhancing tax compliance efforts, which are projected to generate approximately US$400 billion. Further revenue is expected from closing tax loopholes utilized by affluent taxpayers, estimated at another US$400 billion, and from a surtax on high earners making over US$10 million annually, which is expected to yield an additional US$200 billion. Yellen maintains that these revenue-raising measures will ensure the overall package does not increase the national debt.
Counterarguments Regarding Labour Force Impact

Conversely, some policymakers dispute the projected positive effects on the labour force. US Representative Kevin Brady has argued that the spending bill could exacerbate existing labour shortages. His concern stems from the proposed removal of work requirements from the child tax credit, which he believes may disincentivise individuals from seeking employment, potentially leading to a reduction in the workforce. This perspective suggests that rather than expanding the labour supply, certain provisions might have the opposite effect.

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Will US investment bills truly boost productivity and labour force?

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