PHOTO: PATRICK T FALLON/BLOOMBERG
Our nation’s infrastructure is collapsing, and collapsing fast. And both presidential candidates have made pledges to fix it. Clinton wants $275 billion in direct government spending plus $225 billion in private investment over five years. Trump would finance up to $1 trillion, with most of it relying on private funding, over a decade. Two different approaches to fix a very big problem.
How big of a problem is it?
The US World Ranking for Infrastructure
The World Economic Forums’ Global Competitiveness Report ranks our overall infrastructure at 11th in the world, behind Spain. Our transport infrastructure fares a little better at 9th place behind Germany, however for our electric grid we are in 27th position.
According to the Organization for Economic Cooperation and Development the US ranks 16th for broadband access and 12th for broadband speed. Something as logistics professionals we should be very concerned about as technology and online access carves out a much bigger role in our industry.
The bottom line is it’s not good enough, particularly since we’ve been the world’s largest economy every year since 1871.
Our Failure To Act
The American Society for Civil Engineers in their latest economic study “Failure to Act: Closing the Infrastructure Investment Gap for America’s Economic Future” quantifies how the persistent failure to invest in our aging infrastructure impacts the economy, including GDP, jobs, personal disposable income, and business sales.
According to the study if we don’t invest in our nation’s infrastructure the cost to the US GDP by 2025 will be $3.9 trillion. Business will lose $7 trillion and 2.5 million jobs will be lost by 2025. The cost to every US family will be $3400 per year.
So we are talking about a pretty big problem which finally the government will pay attention to – no matter who the new president will be.
So how do we fix our infrastructure?
The Clinton Plan
Clinton is bullish about her infrastructure plan:
“In my first 100 days, I will send a plan to Congress to make the biggest, most forward-looking investments in infrastructure in 50 years,” she said at a rally in California. “I will put forward a plan that is as big—in fact bigger in some ways—than what President Eisenhower did when he created the interstate highway system.”
Her plan is detailed and of particular interest to logistics professionals is her national freight investment program:
“(Clinton’s plan) connect small businesses, farmers, and manufacturers to their customers and suppliers with a national freight investment program. U.S. transportation networks move nearly $48 billion in goods a day. Yet our insufficient freight infrastructure is preventing American businesses and farmers from reliably and efficiently moving their products to market, hurting U.S. consumers and damaging America’s ability to compete in the global economy. In fact, every year, U.S. businesses have to spend an extra $27 billion just in transportation costs because of congestion in our freight networks alone. Cargo trains can reach Chicago from Los Angeles in 48 hours, only to spend 30 hours crawling across Chicago itself. Clinton will make smart, coordinated investments that upgrade our aging rail tunnels and bridges, expand congested highway corridors, eliminate dangerous at-grade railway crossings, and build deeper port channels to accommodate the newest and largest cargo ships. Clinton will also focus on vital “intermodal” transfer points between trucks, rail, and ships—including the “last-mile connectors” between different modes, like the local roads that connect highways to ports. She is committed to initiating upgrades of at least the 25 most costly freight bottlenecks by the end of her first term.“
Clinton plans on spending $275 billion over five years that will be funded by government. $25 billion of that will go to seed a new infrastructure bank which could support up to $225 billion in loans and loan guarantees. The total value of Clinton’s infrastructure plan is $500 billion over five years.
The Trump Plan
As I write this Trump has just published his infrastructure plan which is drafted by Peter Navarro and Wilbur Ross. He plans to spend $1 trillion over a 10 year period. It would rely heavily on private funding with the government encouraging investment through a tax credit. It’s a little lights on the detail of specific infrastructure projects to be undertaken. However it would only apply to projects with a dedicated source of revenue such as toll roads, airports or utilities financed at least in part by fees paid by users.
There Really Is Light at the End of the Tunnel
“After three decades of under-investment it is an issue whose time has come,” said William Galston, a senior fellow at the Brookings Institution who has followed the Congressional debate closely. “If the financing issue can be resolved — which I think it can be with some flexibility on both sides — there is a serious possibility of a deal.”
And Wall Street Can See It Too
So there is hope no matter who wins the Presidency an infrastructure plan will be financed. And it’s a very real hope supported by trends in Wall Street.
“A win by either candidate would therefore appear to be good news for construction companies, equipment manufacturers, and materials firms. This development has not been lost on Wall Street,” Christopher Wood, author of the “Greed and Fear” newsletter said. Here’s his breakdown (emphasis added):
“Indeed in recognition of this theme, which judging by meetings over the past week and more is clearly gaining traction with US based investors, GREED & fear shows how a ‘smokestack’ portfolio of five US stocks geared to this area has performed. The stocks appear to have started performing after years of trailing the S&P 500. Thus, the portfolio has risen by 22% so far in 2016 and is up 43% from its January low. By contrast, the S&P 500 has risen by only 2.3% year-to-date and is up 14% from its February low.”
So folks are putting their money where their mouth is and betting on a new wave of infrastructure construction to start when our new president is installed and the dust settles. I don’t know about you but from where I’m standing the stars are starting to align for the logistics industry – and that’s a very good thing indeed!
If you’re interested in learning how shipping by rail might better meet your freight transportation needs, or need warehousing to bring your goods closer to your customers, call New Mexico Transloading at 505 – 908 – 1911. We’d be delighted to have a conversation with you.
Important note: This is a logistics industry blog, not a political blog. NMT is not commenting on any candidate’s views on the issues nor is NMT publicly supporting any candidate.