Dean Barber

Trump’s “National Rebuilding”: How Do We Pay for It?

In Corporate Site Selection and Economic Development on March 12, 2017 at 10:45 am

Infrastructure underpins our everyday lives and the economy of the United States.

It goes well beyond roads and bridges, which we commonly think of, but includes drinking water and sewer service, the delivery of electricity, as well as railroads, transit systems, ports and broadband.

Since 1998, the American Society of Civil Engineers has been chronicling the decline of infrastructure category by category. Every four years it publishes a report card to the nation, and the latest assessment, which came out last week, assigned a grade of “D+” to U.S. infrastructure.

This should come as no great surprise as crumbling infrastructure has been making headlines for decades now. And since 1998, the U.S. has yet to score better than a D-plus.

This year’s score matches the country’s 2013 performance, whereas the cost of getting the country’s infrastructure up to speed have only gone up.

A Timely Report

What may make this latest report significant is its timeliness. It comes at the early stages of a new administration in which a president is using his bully pulpit to advocate in favor of a “national rebuilding.”

In his victory speech on election night, President-elect Donald Trump pledged to rebuild “highways, bridges, tunnels, airports, schools, hospitals” to make U.S. infrastructure “second to none.”

In his first address to Congress last month, President Trump invoked Dwight D. Eisenhower in his call for $1 trillion infrastructure spending.

“Another Republican President, Dwight D. Eisenhower, initiated the last truly great national infrastructure program — the building of the interstate highway system. The time has come for a new program of national rebuilding,” he said.

We have few details as of yet on the current administration’s initiative to steer as much as $1 trillion in public and private funds to U.S. infrastructure over the coming years. If it actually happens, it would likely mean a huge sustaining jumpstart to the economy, which last year grew by only by a tepid 1.6 percent.

As many economic developers and business professionals know, infrastructure spending not only creates direct and indirect jobs, but it also amplifies a community’s (and thereby our nation’s) ability to compete in a global economy. In short, we would be in a race with a newer and faster car.

The Bugaboo

But will Trump’s infrastructure plan actually happen? I’m no Washington insider, so I cannot predict with great confidence. The good news is that virtually everyone agrees the nation’s aging infrastructure is in need of fixing.

“President Trump is on to something when he calls for a national rebuilding,” ASCE President Norma Jean Mattei said in presenting the study. “But Congress and the American people have to pay for it.”

And therein lies the bugaboo. There is no agreement within Congress as of yet on how to pay for it, either by raising taxes, turning to private investment, or simply borrowing more money.

ASCE is advocating that the federal gas tax be raised by 25 cents and indexed to inflation. The ASCE notes that the current tax of 18.4 cents per gallon hasn’t been raised since 1993 and so hasn’t kept up with inflation and growing needs.

A Once-In-A-Generation Opportunity

Larry Summers, former Treasury Secretary under Bill Clinton, says the money to pay for an increase in infrastructure spending should be borrowed.

“A moment of unprecedentedly low interest rates should be a moment of unprecedentedly high investment,” Summers told CBS News. “And it’s a tragic irony that it’s a moment of unprecedentedly low investment.”

During the presidential campaign, then candidate Trump floated the idea of issuing billions of dollars in tax credits to private companies to take on these projects themselves. But in his speech before a joint session of Congress, he appeared to back off of that plan, calling for a $1 trillion infrastructure package financed through “both public and private capital.”

Officials with the U.S. Chamber of Commerce and the American Association of State Highway and Transportation Officials testified before the Senate Subcommittee on Transportation last week that there must be more public investment and that existing funding mechanisms to get dollars to states should be used.

“The needs are great, and the resources are limited,’’ said Ed Mortimer, the chamber’s executive director for transportation infrastructure. “This is a once-in-a-generation opportunity to modernize America’s infrastructure.’’

Speed the Process

The administration convened a meeting on March 2 with 15 cabinet members and agency leaders to discuss funding, projects, and possible changes in policy, regulations and statutes to speed the process.

President Trump met last week in the White House with business leaders, including billionaire Elon Musk, to discuss ways to encourage public-private partnerships. From that meeting, The Wall Street Journal reported that Trump is considering a plan that would require states to begin infrastructure projects within 90 days of receiving federal funding.

The president’s plan would pressure states to streamline their local permitting process, emphasize renovation of roads and highways over the construction of new ones and prioritize projects that are ready to quickly begin construction, according to the Journalreport.

“We’re not going to give the money to states unless they can prove that they can be ready, willing and able to start the project,” Trump said during a private meeting with aides and business executives, according to the newspaper.

“We don’t want to give them money if they’re all tied up for seven years with state bureaucracy,” he added.

The National Governors Association provided the White House with a list of 428 priority projects from 49 states and territories on Feb. 8 that it had solicited from the states.

Slow Going for Our Northern Neighbor

Assuming the administration will push forward with an infrastructure plan, there’s probably some things that Trump can learn from our northern neighbor.

Prime Minister Justin Trudeau’s plan to stimulate the Canadian economy and boost long-term growth with an infrastructure spending program has been slow to say the least. Some 17 months after his election win, Trudeau’s government has completed only eight of the 1,274 roads, bridges, and other projects it has approved.

“The hardest lesson to learn from Canada’s experience with infrastructure spending so far is just how long it takes for ‘shovel-ready’ projects to actually break ground,” Frances Donald, senior economist at Manulife Asset Management in Toronto told Bloomberg.

Also during last week’s meeting, Trump asked for more details about Musk’s Hyperloop project that would use small vehicles to transport people and goods through low-pressure tubes at high speeds, the White House said. The president also expressed interest in both new high-speed railroads and auctioning the broadcast spectrum to wireless carriers.

Despite the Tweets

Despite the president’s loose-cannon tweets, often factually wrong and revealing an unflattering side, measures of business and consumer confidence are soaring.

The Consumer Confidence Index is at a 15-year high and in early March, while Gallup’s U.S. Economic Confidence Index, a measure of how Americans rate current economic conditions, rose to the highest level in its nine-year history.  Jobless claims just hit the lowest level in 44 years.

Clearly, a Trump bump is happening, due in part to expectations of a more business-friendly environment under the current administration, which has proposed or endorsed the cutting of corporate taxes, a lessoning of regulations, and infrastructure spending.

Of course, expectations are one thing. Getting things done are another. I’ll be waiting just like you to see if words becomes actions.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. BBA helps companies and communities. Mr. Barber is available as a keynotes speaker and can be reached at dbarber@barberadvisors.com.

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