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Infrastructure Spending: It's Gonna Be Yuge... Maybe

Fri, 11/18/2016

By Elissa Dodge , Executive Vice President, Qorvis MSLGROUP

Additional federal spending on infrastructure shouldn’t be an issue in the next Congress. After all, there is widespread, bipartisan agreement that there is a tremendous need for infrastructure improvements and President-elect Donald Trump has said improving our nation’s crumbling roads, bridges and “third world” airports is a top priority for him. But those hoping for a significant boost in federal spending for infrastructure shouldn’t celebrate just yet.

The most recent “report card” from the American Society of Civil Engineers gave America an overall D+ on infrastructure and said a $3.6 trillion investment would be needed by 2020 (i.e. by the next presidential election). That’s most certainly not going to happen. But we do have a president-elect who has a penchant for construction and has made a commitment to increasing job opportunities in America. In fact, infrastructure was the only major policy issue discussed in any depth during Trump’s victory speech on the night of the election:

We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. 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.


During the campaign, President-elect Trump first said he would “at least double” Clinton’s $275 billion infrastructure plan, but offered little more in the way of details. Then, in his “Contract with the American Voter,” he announced his intentions to “leverage public-private partnerships, and private investments through tax incentives to spur $1 trillion in infrastructure investment over ten year.” At one point, Trump promised to “cancel billions in global warming payments to the United Nations, and use that money to support America’s vital environmental infrastructure.” Most recently, his transition website says his administration will “seek to invest $550 billion to ensure we can export our goods and move our people faster and safer.”

Even if the details on the final amount are murky, the investment commitment is there.

The fact that America desperately needs infrastructure improvements, and that we have a President-elect who campaigned on the issue and that we have traditionally had bipartisan support for investment clearly aren’t reasons for concern. The concern is over the same issue that stymied action in previous years: how to pay for the additional infrastructure spending that nearly everyone would like to do.

Long-term infrastructure planning has been held up in recent years as Congress passed short-term extensions for transportation authorizations. Congress has not raised the gas tax in more than two decades, as promoting user fees are a good way to get yourself voted out of office. And the Republican-controlled Congress under President Obama said they would not pass any plan that increased the deficit, requiring offsets instead.

After years of stop gap bills, the 2015 highway bill – the Fixing America’s Surface Transportation Act that eventually added $305 billion, was delayed for months as Congress struggled to come up with offsets which were ultimately a hodgepodge including changes to custom fees and passport rules for applicants who have delinquent taxes, contracting out some tax collection services to private companies and using dividends paid to the Treasury by the Federal Reserve Bank .

Let’s assume for a moment that the Republican-controlled Congress under a Republican president loosens the reigns and allows for some deficit spending without offsets – which is entirely possible. Possible doesn’t mean easy, including (especially!) with Republican members of Congress, and it doesn’t mean Trump will get to the significant spending amounts he wants. Take what newly re-elected House Speaker Paul Ryan said just before the election when asked whether he would help Trump pass “a $550 billion, or more, infrastructure program.” Ryan laughed loudly and slapped his hand on the arm rest of his chair. “Just so you know, we just passed the biggest highway bill since the 1990s.”

While Trump’s infrastructure plans are still somewhat vague, two of his economic advisors created a blueprint to explain how the President-elect could finance the infrastructure spending with private investor money backed by tax credits that theoretically would add nothing to the deficit.

Under the plan, private firms would put up about 20% of the cost and borrow the rest. The government would provide tax credits to cover 82% of their investment. To offset the cost of credits, U.S. corporations who have parked profits overseas in order to avoid taxes would be encouraged to invest those profits in infrastructure in exchange for a lower tax rate.


But is this plan really viable? The outlook is hazy.

Even with tax credits, private investors will only take on major infrastructure projects if they have a guaranteed revenue stream (i.e. a “user fee” like a toll) to make them profitable. So, if you live in a major urban area, you may see a new bridge or highway. But if you live in a less populated area that actually needs real infrastructure investment, it’s less likely a private investor will want to get involved without access to permanent user fees.

And by the way, if by “infrastructure” you are thinking beyond roads and waterways to our aging electrical grid, insufficient broadband access and cyber security, those are also projects that don’t lend themselves to tolls or other fees.

If public-private partnerships and the idea of corporate repatriation sound familiar – that’s because they should. These ideas have been suggested by both Democrats and Republicans at various times before. And yet here we are.

Democrats, Republicans, Independents and everyone in between know that building new infrastructure is a critical part of America’s growth strategy. Every $200 billion in additional infrastructure expenditures creates $88 billion more in wages for average

Americans and increases real GDP growth by more than a percentage point. And each GDP point creates 1.2 million additional jobs.

The need for infrastructure improvements in the U.S. is crystal clear, and the case can certainly be made to encourage repatriation, create an infrastructure bank/fund that support public projects with private investing, and/or increase the deficit to get us there. But for President-elect Trump, much like landing on a runway at LaGuardia , it is unlikely to be a smooth ride.

Elissa leads corporate reputation and public affairs clients, as well as StreetBuzz, MSLGROUP’s national grassroots network. She received Women in Government Relations highest honor- Distinguished Member Award 2012; has worked at the U.S. Supreme Court, and has the secret-keeping skills to prove it.

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