Remember the Fern Hollow Bridge that collapsed in Pittsburgh January 28, 2022? Then-President Biden was scheduled to speak in Pittsburgh that very day. Seems that the bridge suffered extensive corrosion and should have been repaired years prior.
Speaking of infrastructure, I travel a good deal all over the US visiting my 100 retirement plan clients. I know to avoid certain streets because of unrepaired potholes. Nothing quite like a pothole jolt to rattle your teeth and destroy the front-end alignment of your rental car.
It was against that backdrop that I read with some puzzlement Office of Management and Budget Acting Director Vaeth's memo instructing the heads of Executive Departments and Agencies to temporarily freeze Federal grants and loans. The freeze would allow the new administration "time to review agency programs and determine the best uses of the funding for those programs consistent with the law and the President's priorities". Among the areas targeted for scrutiny are disbursements to programs implementing the "green new deal".
The "green new deal" (or possibly the Inflation Reduction Act) focuses on infrastructure improvement. While I am not a civil engineer (but rather a 401k advisor with 36 years of industry experience under my belt), what I have read is infrastructure in the US is in need of repair. The Fern Hollow bridge is but an example. Roads, bridges, and even the electrical grid need to repaired and improved.
While dated, a 2018 study showed traffic congestion cost the US economy $87 billion that year. Flight delays cost the US economy $33 billion in 2019. A World Bank 2022 study found that every public dollar invested in infrastructure led to $1.50 in resulting economic activity, with a bigger effect during a recession. Doing nothing about infrastructure repair and improvement does not seem to be a sound approach.
And while not explicitly stated in Acting Director Vaeth's memo, there seems to be a focus by the new administration on defunding sustainable or renewable energy programs. Given the issue of climate change (the cost of the recent LA fires looks to be between $30 - $250 billion), one might argue that climate change and its causes need to be addressed. Ignoring climate change is not an option in business. A March 2023 Department of Energy study warned that climate change is destabilizing the insurance industry, driving up prices and pushing insurers out of high-risk markets. This directly impacts consumers, their wallets, and their ability to save for retirement.
Finally, my thoughts turned to my non-profit retirement plan clients who partly rely on Federal grants and loans for their ongoing operations. For example, the proposed freeze would impact "programs that support medical research, caregivers, state-run veterans nursing homes, veterans cemeteries and more". I suspect it was not the intent of the memo to impact veterans who served this country.
Impacting cash flow to my clients and other non-profits could result in layoffs if the impact is sustained. Rising unemployment could also result. And yes, an unemployed person is hard pressed to save for retirement making the idea of "retire with dignity" that much more difficult to achieve.
The Parting Glass
I would like to think that the total consequences of the temporary Federal freeze were not fully considered when the memo was released. While then-candidate George Bush made fun of "trickle-down economics", calling it voodoo economics, there is something to be said for the trickle-down nay cascading effect that the Federal freeze could have. The freeze does not appear to be good for America or the American retirement dream.