WASHINGTON – If there’s one thing President-elect Donald Trump, Congress and a lot of Democrats can agree on, it’s the need for more spending on bridges, roads and other infrastructure. And corporate America and lawmakers are salivating at the prospect of a windfall.
“Infrastructure” is “the happiest word in American politics,” said Jason Grumet, president of the Bipartisan Policy Center, a Washington think tank.
At least for now. A presidential transition website this week said Trump will invest about $550 billion in new projects. But he hasn’t spelled out his priorities. Nor is it clear how much of that total would be new federal spending and how much would come from the private sector. And Congress might have its own ideas.
Two of Trump’s advisers, Wilbur Ross, a private-equity investor, and Peter Navarro, a University of California at Irvine business professor, released an analysis Oct. 27 suggesting that the federal government could provide tax credits – a form of subsidy – to investors in infrastructure and recapture lost revenue through taxes on higher wages and contractor profits. The credits would cover $137 billion, or 82 percent, of the equity investment needed for $1 trillion of infrastructure, according to the analysis.
If Trump relies too heavily on the private sector, though, his initiative could fall far short of the new investment that businesses and economists say is desperately needed. According to the White House Council of Economic Advisers, the average age of U.S. infrastructure – including water and sewer facilities, streets and highways, and electric power plants – is two to three decades and has increased steadily since the late 1960s.
For the time being, however, infrastructure spending has become a rallying cry. In his acceptance speech Wednesday morning, Trump again pledged to make such spending a top priority.
“We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals,” Trump said. “We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it.”
Marcia Hale, president of Building America’s Future, a group representing a variety of city and state officials and former officials, called on Trump to make an infrastructure plan part of his first 100 days in office.
“The president-elect is a builder at heart. A developer,” Hale said. “Every president who goes through that door is hit with stuff that he is not familiar with. This is the one thing he knows. This is a passion for him, and he’s very comfortable in this space.”
Plans to boost government infrastructure spending have been on the table for years. In his fiscal year 2016 budget proposal, for example, President Obama asked Congress to support a $478 billon, six-year public-works plan for roads, railroads and ports. He tried to bundle that with business tax reform. Funding for the infrastructure plan would have been offset with the windfall from a temporary tax adjustment that would have encouraged corporations to bring back profits parked overseas.
But Republicans in Congress, who said they were concerned about the federal deficit, blocked Obama’s proposals. Those lawmakers could prove an obstacle for Trump, too. Senate Majority Leader Mitch McConnell, R-Kentucky, favors linking infrastructure plans to comprehensive tax reform.
Meanwhile, leading economists have made the case for more infrastructure spending.
“Economists and politicians of all persuasions recognize that this can create quality jobs and provide economic stimulus without posing the risks of easy-money policies in the short run,” Lawrence Summers, who served as Treasury secretary under President Bill Clinton and as an economic adviser to Obama, wrote in September. “They also see that such investment can expand the economy’s capacity in the medium term and mitigate the huge maintenance burden we would otherwise pass on to the next generation.”
By increasing the economy’s productivity, infrastructure spending also boosts tax revenue.
But Harvard economics professor N. Gregory Mankiw cautions against possible waste. “The term ‘infrastructure’ is broad, encompassing everything from useful public capital to bridges to nowhere,” he said. “Bridges to nowhere can create jobs in the short run, but they are still not worth spending taxpayer dollars on.”
Traditional infrastructure companies stand to benefit. Shares of heavy-equipment-maker Caterpillar climbed more than 10 percent this week. Chicago Bridge & Iron shares rose 5.3 percent. Fluor, a construction firm, was up 9.7 percent.
Energy infrastructure would be another winner. Trump has said he will support oil and gas pipelines, including the controversial Keystone XL pipeline, which Obama rejected.
That’s welcome news for the members of North America’s Building Trades Unions, half of whom spend at least part of the year working on energy projects, including pipelines, wind turbines and petrochemical plants.
Since the election, the chief executives overseeing three stalled energy projects have called NABTU President Sean McGarvey to say that they hoped to proceed and that the union would be supportive.
“Clinton’s program was pretty detailed. President-elect Trump’s is not,” McGarvey said. “But he talked about one bigger and huger than hers. We take him at his word that he’s going to pursue it. We’ll be supportive in any way we can.”