Infrastructure Spending: A Rare Point of Agreement for Trump and Clinton

October 18, 2016 by Tiffany Hsu, @tiffkhsu

Immigration, foreign policy, energy — Hillary Clinton and Donald Trump don’t agree on much in this election.

Infrastructure spending is a rare exception. The combative presidential candidates align on the need to spend more on the transit arteries that drive much of the country’s commerce.

That network, for the moment, is in terrible shape.

Safety is at risk: Decaying or outdated road design causes a third of all crashes, Kevin Burch, president of Jet Express Inc., a Dayton, Ohio, carrier and the chairman of the American Trucking Associations, said at a September roundtable.

“Having good, uncongested highways is important to my company and to trucking companies across the country,” Burch said.

The nation’s “economic backbone” is suffering, said Greg DiLoreto, chairman of the American Society of Civil Engineers’ infrastructure committee. In May, his group said the nation must spend $1 trillion more than $941 billion already planned to build and repair roads, bridges and rail systems over the next decade.

“Poor infrastructure means more congestion on our roadways, broken water lines and power outages, and an inability to get our goods to market,” DiLoreto said. “The cost of investment offers a good return, as it protects the GDP, jobs, families’ disposable income and our overall competitiveness.”

In recent years, state and federal spending has helped stabilize infrastructure, but the engineering society still gave the national network an average D+ grade.

Traffic experts say better roads reduce fuel and maintenance expenses for everyday drivers and commercial vehicles, such as goods-hauling big rigs. A more efficient freight system also helps companies hold down prices on consumer goods.

“There is bipartisan support, including from the presidential candidates, to address our country’s infrastructure problems,” said Beth Ann Bovino, chief economist of ratings and analytics company Standard & Poors. “But there is little consensus on how to fill the huge gap between what the government can finance and how much money is needed to pay for these projects.”

Clinton’s proposal, released last November, would devote $275 billion over five years to infrastructure. Some $250 billion would go directly toward dredging seaports to accommodate larger vessels, increasing the capacity of highways to reduce congestion, revamping aging rail tunnels and promoting intermodal and last-mile connectors that link different forms of transit.

Within her first term, she intends to upgrade at least 25 of the most severe freight bottlenecks. And she has promised to send a comprehensive infrastructure proposal to Congress within her first 100 days in office.

Clinton would also invest $25 billion in seed funds to launch a National Infrastructure Bank — a concept tossed around since the 1980s. The financing institution would support up to $225 billion in loans, loan guarantees and other credit assistance to municipal governments and private investors supporting infrastructure projects.

Her plan would revive the expired Build America Bonds program created during the recession, stimulating investment by attracting private capital — especially international investors, pension funds and endowments.

The candidate said she would stretch taxpayer funds by streamlining permitting, pushing for private investment and encouraging innovation via merit-based competitive grants.

Investing in our infrastructure is about so much more than creating good-paying jobs: it’s about maintaining our status as the world’s economic superpower,” she said on her website.

Clinton stresses that the U.S. is “a connected nation — that infrastructure investment is a national issue that requires national solutions.”

Trump, a developer who has claimed “there is no single builder in this country who has his name on as great a range of projects,” is promising to spend at least double Clinton’s proposed amount on infrastructure.

That’s more than half a trillion dollars.

Infrastructure improvement has been a major piece of Trump’s platform since he announced his candidacy in June 2015.

“It will be done on time, on budget, way below cost, way below what anyone ever thought,” he said last year. “I look at the roads being built all over the country, and I say I can build those things for one-third.”

But details on how are scant.

In interviews, Trump has boasted that “nobody knows construction better” than he does and that infrastructure builders currently use “a system that inspires cost overruns.” Fixing infrastructure “will be one of the biggest projects this country has ever undertaken,” an “expensive investment” on the national level, he wrote in his 2015 book “Great Again: How to Fix Our Crippled America.”

“But in the long run, it will more than pay for itself,” he wrote. “It will stimulate our economy while it is being built and make it a lot easier to do business when it’s done — and it can be done on time and under budget.”

If that sounds like something Clinton might say, that’s because she and Trump are ideologically similar on infrastructure. And the federal government has made some progress on the topic.

Last year, Congress authorized $305 million through the Fixing America’s Surface Transportation Act, or FAST, for researchers to study and propose infrastructure upgrades, restoration and innovation.

Clinton’s running mate, U.S. Sen. Tim Kaine, D-Va., backed the legislation. On his website, he notes that it is “penny-wise and pound-foolish to starve transportation funding, pat ourselves on the back for being frugal and then complain about traffic.”

Meanwhile, Trump’s vice president pick, Indiana Gov. Mike Pence, has infused hundreds of millions of dollars into transportation, most recently through his Major Moves 2020 program to rehabilitate heavily trafficked highways.

Infrastructure research efforts enabled by the FAST Act are “long overdue,” said Robert W. Poole, Jr., director of transportation policy at the libertarian think tank Reason Foundation. “But at least it is now underway.”

Technology — including automated and connected vehicles — could help ease the strain on the system, Poole said. In transit corridors with increasing heavy truck movement, truck platooning is an especially promising strategy, he said.

But for infrastructure innovation to take hold, planning and funding need to ramp up, Poole said. Future projects require new sources of capital, such as mileage-based taxes or other “long-term user-fee financing,” he said.

“It is very clear that with current fuel taxes not generating enough revenue to even properly maintain current highway capacity, there is no identified funding source for the $1 [trillion] to $2 trillion set of mega-projects that will constitute a 21st century interstate system,” he said. “Such a program cannot and will not be fundable out of annual cash flow.”

Clinton’s team wants to pay for infrastructure updates in part by raising taxes on corporations. Trump’s strategy involves taking advantage of low interest rates via new debt.

Both are operating under the assumption that their spending plans survive Congress, which has blocked many previous attempts.

Many in the transportation industry have yet to come down on a side. The American Road & Transportation Builders Association declined to give a statement on the issue, saying in an email that “there hasn’t been a lot of particulars given out.” Instead, the group pointed to its 16-page breakdown of the candidates’ statements regarding infrastructure.

Some transportation experts have proposed their own plans.

In early October, S&P suggested a private-sector solution to the infrastructure malaise. S&P said it could raise billions of dollars for public works projects.

The government, it suggested, could incentivize companies working abroad to commit a portion of their overseas profits to domestic infrastructure improvement by offering a zero tax rate on repatriated earnings.

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