Trump's plan to update U.S.'s aging national infrastructure
Last year saw one of the most polarizing presidential elections in U.S. history. But one major issue cut across partisan lines to become a priority for supporters of both eventual victor Donald Trump and those of Hillary Clinton, Trump’s main rival: improving the country’s aging infrastructure.
U.S. infrastructure problems are severe, and, by all counts, the costs for fixing them are rising. The Global Competitiveness Index released at the World Economic Forum in Davos last year ranked the U.S. twelfth in the world in infrastructure, its lowest level in years. More than 60,000 U.S. bridges are rated as “structurally deficient,” and one estimate says that traffic delays alone cost the U.S. economy $50 billion a year. Some 2,000 water systems spanning all 50 U.S. states showed unsafe levels of lead in drinking water. The breakdown of California’s massive Oroville dam in February could just be the first of many similar failures, experts say.
The American Society of Civil Engineers, or ASCE, the U.S.’s oldest and largest engineering industry group, releases a report card on the country’s infrastructure health every four years. The new report card will not be released until March 6, but in the last one, from 2013, the overall grade based on evaluations of 16 categories was a paltry D+, a failing grade on the American grading scale of A (excellent) down to F (failing).
The ASCE said only four categories -- ports, railways, bridges, and solid waste -- earned a grade of at least a C, considered “mediocre,” and the lowest passing grade. The 2013 marks were marginally better than in 2009, but the upward trend, which has probably continued, has been modest.
“While the modest progress is encouraging, it is clear that we have a significant backlog of overdue maintenance across our infrastructure systems, a pressing need for modernization, and an immense opportunity to create reliable, long-term funding sources to avoid wiping out our recent gains,” ASCE said.
During his campaign last year, Trump vowed to spend at least $1 trillion over ten years to help resolve the problem -- an eye-catching sum roughly equivalent to the gross national product of Mexico, the world’s 15th largest economy (in her campaign, Clinton said she would have spent about a third of that amount over five years). But the ASCE estimates that even Trump’s figure is too low: the organization reported the U.S. needed to spend a total of $3.6 trillion -- more than the value of the world’s fourth largest economy, Germany -- over the seven years ending in 2020 in order to improve the situation. Good estimates of current infrastructure spending are difficult to come by, since they would include all levels of government and require precise definitions of what such spending would include. But it is clear the $100 billion a year Trump wants to spend would be an increase from current levels.
“The problem is that most infrastructure spending is for new projects, which attract more attention, rather than on maintenance of existing infrastructure,” said Douglas Holtz-Eakin, a former director of the U.S. Congressional Budget Office and now president of the American Action Forum, a policy research group. “It’s not always about how much money is spent, but about how it is spent.”
What is Trump’s strategy?
In public remarks, Trump almost always uses broad campaign-like terms to discuss his infrastructure goals: “We will rebuild our highways, our bridges, our tunnels, our airports, schools, and hospitals,” Trump promised at a February event in Florida, remarks closely echoing his campaign rhetoric. “We’re going to rebuild our crumbling infrastructure, which will become the best in the world.”
But leaked documents from the Trump transition team reveal a detailed plan. Among the first 50 projects the team would like to prioritize are a $12 billion plan for updating rail infrastructure connecting New York and New Jersey, $10 billion to modernize national air traffic control systems, $600 million for a new municipal rail system in Detroit, $12 billion for a high-speed rail system in Texas, $14.2 billion for expanding New York’s subway system, $2 billion for enlarging the international airport in Seattle, and $8.7 billion to expand and update Union Station in Washington D.C. That is all in addition to the estimated $25 billion to build Trump’s highly touted wall on the U.S. border with Mexico.
Another sign comes from Trump’s cabinet appointments, who appear to back the notion that infrastructure investment will be a priority. Elaine Chao, the new secretary of transportation, for example, has repeatedly stressed the importance of updating and maintaining the country’s highways, bridges, and tunnels (Chao is the wife of Senate leader Mitch McConnell, an instrumental figure in securing funding for an infrastructure package). Trump picked billionaire industrialist Wilber Ross, one of the main forces behind of Trump’s campaign language on infrastructure issues for the Department of Commerce. New Treasury Secretary Steve Mnuchin, a billionaire banker, is another frequent voice stressing the need to increase infrastructure spending.
Trump’s plan -- much of it distilled from an October 2016 white paper Ross co-authored with economist Peter Navarro -- calls for using $137 billion in tax credits to attract private investment, along with increased tax revenue from the jobs created, to reach the $1 trillion target. Trump officials have promised that spending targets can be reached without a tax increase, a view bolstered by the Ross-Navarro white paper, which estimates each $200 billion spent on infrastructure creates $88 billion in wages for workers and increases gross domestic product growth by one percentage point.
But few steps have been taken so far. Early in the Trump administration, the only concrete step taken has been an executive order to loosen environmental controls needed for approval of new infrastructure projects. In his first Congressional address Feb. 28, Trump said he would soon ask lawmakers to “approve legislation that produces a $1 trillion investment,” though he did not go beyond previous levels of detail.
Despite that, experts say it is increasingly likely that the plans may be pushed back to 2018 for political reasons.
The Hill, which focuses on governmental issues in Washington, quotes Trump insiders saying the White House is “likely” to focus this year on developing a plan to repeal and replace the health care scheme put in place by Trump’s predecessor, Barrack Obama, overhauling the tax code, reforming immigration and asylum rules, and beginning work on the U.S.-Mexico wall that was Trump’s signature campaign pledge. By delaying the relatively uncontroversial infrastructure plan next year, The Hill says Republicans believe they might garner support from some Democrats eager to see money spent in their districts, and perhaps helping Republican candidates in mid-term elections that traditionally punish the political party in power.
Nonetheless, investors remain optimistic. The IGF Global Infrastructure investment fund, a proxy for the health of the sector, reached its lowest point in the last year just before the election. Since then, it has steadily climbed, adding nearly 18 percent to its value between Nov. 9, 2016 and the end of February.
Is Europe following suite?
Back in 2014, then-new European Commission President Jean-Claude Juncker launched an ambitious plan aimed at enticing pension funds, insurance companies, and investment banks to leverage €21 billion in public investment into a €315 billion plan to help European infrastructure that would run through the end of this year.
Instead, European priorities focused on counter-terrorism measures, the mushrooming migrant crisis, and the fallout from last year’s Brexit vote. But that could be changing. In a white paper published March 1, Juncker focused on the post-Brexit European Union saying it could be “birth” of a new European Union.
What would be different about the new EU? One major part, Juncker says, is more and smarter investments in infrastructure. “Europe [will] upgrade its current reform agenda … including investments in digital, transport, and energy infrastructure,” Juncker said.