In his recent State of the Union address, President Biden announced new standards to require that all construction materials used in federal infrastructure projects be made in America. But is it possible? And even if it’s possible, is it wise?
The answer to both questions is “Yes, but it won’t be easy.”
Even before Biden’s $1.7 trillion infrastructure bill, the U.S. was in a “construction deficit.” To meet pent-up demand for bridges, hospitals, schools and multifamily housing, we need to construct another two and a half trillion square feet by 2060 — the equivalent of building another New York City every month for the next 40 years. The increased demand created by the bill will only make this more challenging. And ramping up U.S. manufacturing capacity on multiple fronts at the same time multiplies that challenge.
Before we issue an ultimatum on construction materials, we need to consider the unique challenges the industry is already facing.
Materials shortages are ongoing. Our ability to ramp up production varies widely depending on the material — for example, it’s far easier to do this with materials like lumber than with concrete. The latter is one of the key materials needed for federal infrastructure projects, but there’s an acute shortage right now. In 2021, concrete shortages were reported in 48 states last year and costs rose significantly — 15% in December 2022 compared with the previous year.
Concrete production is tough to ramp up because it needs to be done regionally, and its production is highly energy-intensive. Concrete, which is heavy and voluminous, can’t be easily transported across long distances, so building a huge production facility in one area doesn’t solve the lack of supply in another part of the country. Lumber supply, by contrast, is easier to ramp up because it’s much easier to ship. When you factor in how prohibitive shipping and production costs are in different parts of the country, and their environmental ramifications, it becomes clear that the country needs to get a lot better at manufacturing these materials more cost-effectively and sustainably.
Costs are rising. Materials used in commercial construction are 38% more expensive than they were in February 2020, with prices for commodities like iron and steel up 56% since then. This is highly problematic for the those building our nation’s infrastructure projects, and the taxpayers funding them.
It takes years to plan and line up the financing and builders needed to get large-scale projects off the ground. The infrastructure projects that were approved over the past few years were planned with the assumption that builders would be able to source materials from a global market, where many materials are cheaper because of comparative advantages in production, and because some countries have artificially kept materials cheap to boost exports.
Restricting the supply base to American-made materials is going to make staying on budget challenging for builders who are struggling to find materials at reasonable prices from the global market, let alone just in the U.S.
Labor is tight. Layoffs have made headlines recently, but last week’s jobs report highlighted what commercial contractors already know: the unemployment rate is at a 54-year low of 3.4%, and it’s incredibly difficult to find skilled labor right now. The fact that contractors are having to scramble to find the workers needed to complete projects only adds to inflationary pressure on projects.
Does all this mean we shouldn’t try to “buy American” when it comes to construction, particularly when it comes to projects funded by our national government? No. But it does mean we need to take a nuanced approach, and be creative when it comes to solutions so that we don’t unintentionally deepen the construction deficit we’re already in.
We need to increase our investment in more sustainable construction materials such as low-carbon alternatives to Portland cement. We need to modernize our manufacturing capabilities so we can become resilient and self-sufficient. We need to train workers on new technologies like 3D printing, and help them find materials at the best prices. And we need to recruit more people, including women, minorities and young people, into the construction industry.
Crucially, we need to bring construction workers all over the country into the conversation, since they’re the ones who have had to fight endless supply chain disruptions, materials shortages and inflation over the past three years. We need to consider the burdens this new legislation puts on them, and develop tools that make buying American not just a soundbite, but a practical reality.