- July 25, 2017
- Posted by: Trading
- Category: News
President Donald Trump seems to have given up on the most promising promise he made in last year’s presidential election: Rebuilding America’s infrastructure.
Since his election,Trump has given some lip service to the idea of investing more in roads, bridges, ports, tunnels, airports, water and sewer systems, the electrical grid, and other infrastructure that help make the American economy run more efficiently.
Every once in a while, Trump remembers to tweet about infrastructure, but the issue has clearly fallen down the to-do list, as the New York Times reported.
The Hill reported that Republican lawmakers believe the infrastructure push will have to wait until Congress finishes with dismantling health care and cutting taxes.
Even though the economy is about six times larger than it was in 1955, we are actually investing no more in our critical infrastructure today than our grandparents were.
Trump campaigned on investing $1 trillion more in infrastructure, but that figure represents total spending over 10 years, and it includes $800 billion of private-sector money leveraging federal tax incentives. Trump has penciled in $200 billion for federal spending in his 10-year budget, but the Congressional Budget Office concluded that infrastructure investments probably wouldn’t increase at all under Trump’s plan, because the $200 billion isn’t on top of what’s already planned, but instead of.
Trump hasn’t developed anything close to a plan to actually increase the level of investment.
It’s a big mistake, because the right kind of investments could put people to work now and make the economy more productive in the future. One study estimated that advanced economies like the U.S. could see up to a 1.4 percentage-point bump to gross domestic product with the right kind of infrastructure investments. Inefficient investments, on the other hand, don’t add to our productivity at all.
Focusing on infrastructure would have economic benefits, but it could have a political payoff as well: Trump could conceivably break out of the toxic and unproductive partisanship that’s consuming all of the energy in Washington.
Infrastructure, done right, is the perfect bipartisan issue that could begin to heal our politics as well as our economy. It wouldn’t be simple to get the two parties to agree on infrastructure (especially about the key questions of financing and control), but it would vastly easier than agreeing about health care, tax cuts or building a wall on the border with Mexico.
Since 2009, Republicans have turned “shovel-ready” into a kind of epithet. But now that Barack Obama is no longer in the White House, Republicans might warm up to the idea of spending some federal money sprucing up the country.
“It would give him a win on an important agenda item for him,” Republican Sen. Susan Collins of Maine told the New York Times. “It would have been better received by Democrats, Congress and, frankly, citizens across the country.”
However, the Trump administration has simply been too busy dismantling, deregulating, deporting and dissembling to think about building bridges, both real and metaphorical.
You know an idea is dead in Washington when a commission is created to study something that’s already been studied to death.
And so the death knell for infrastructure sounded last Wednesday when the White House announced it would create a presidential commission within the Commerce Department to study infrastructure. It will have 18 months to issue a report that will sit unopened on the shelves of relevant government offices along with hundreds of other studies that never led to anything.
It’s a shame, because America really does have many unmet needs. Our economy really is hampered by delays, bottlenecks, insufficient capacity, pollution, unequal access, and outmoded technologies. The latest report from the American Society for Civil Engineers gave U.S. infrastructure a D+ grade, and estimated that the shortfall in infrastructure investment would total more than $2 trillion by 2025.
In many ways, we’re going the wrong direction, especially following the Great Recession.
Net investment in the nation’s productive assets has slowed dramatically since the 2007-2009 downturn. The nation’s capital stock has grown at a 1% annual pace since 2009, less than half the historical growth rate. No wonder our productivity rate is in the dumpster.
According to the Bureau of Economic Analysis, the flow of real net investments in nonresidential structures in 2015 (adjusted for price changes and subtracting obsolescence and wear and tear) was down 53% from 2008 levels — and roughly equal to 1955 levels. (The category of “nonresidential structures,” which includes roads, bridges, railroads, airports, dams, broadband networks, power grids and water systems as well as buildings such as schools, hospitals and factories, is the closest the government data get to putting a hard number on infrastructure investments.)
So, even though the economy is about six times larger than it was in 1955, we are investing no more in our critical infrastructure today than our grandparents did.
The private sector is investing less in structures now than it did in the booms of the 1960s, 1980s and 1990s, when measured in real terms. Even the big push in 2012-2014 to invest in energy infrastructure barely registers as a blip on the graph.
The public sector (federal, state and local governments) has done even worse, although the 2009 stimulus bill was supposed to put more money into public infrastructure. After a small pop in 2009 and 2010, net federal investments in structures were negative from 2012 to 2015 (which means federal infrastructure was falling apart faster than it was being repaired or replaced).
State and local governments — which build 90% of the public infrastructure — didn’t take up the slack, with net investments in structures falling every year between 2003 and 2014. In 2015, total net public investment in structures was down 49% in real terms from 2008 levels. Governments are spending less today on structures than they did in 1955, just before the highway building boom began under President Dwight D. Eisenhower.
In constant dollars, Eisenhower directed more federal money toward the Interstate Highway System in its first decade than Trump has earmarked for all of his infrastructure plans — about $300 billion vs. $200 billion.
Trump was correct during the campaign to highlight the woeful state of American infrastructure, just as President Barack Obama was correct to ask every year for more infrastructure dollars than the Republican-led Congress was willing to even consider.
If Trump really wants the economy to grow at 3%, he’ll have to figure out some way to boost investments to make the economy more productive. He may ultimately succeed, but so far, we’d have to give Trump a grade of D+ on infrastructure.