It’s the first day of the Trump presidency and the rubber has hit the road. Trump has promised to deliver an infrastructure rebuilding proposal to Congress within his first 100 days in office. Rep. Bill Shuster (R-Pa.), Chairman of the Transportation and Infrastructure Committee remarked:
“We’re going to start to work on it, but first of all, you’ve got to figure out the pay-fors, which will come, I believe, in the first 100 days,” Shuster said Wednesday. “Then in the next second 100 days is when we’ll put together a big infrastructure package.”
House Speaker Paul Ryan similarly stated:
“Those are the kind of innovative reforms we’re going to be working on between now and our spring budget, which is where we believe we will be able to address the infrastructure issue,” Ryan said.
The commitment is there to rebuild America’s infrastructure. President Trump is a real estate developer extraordinaire. This is what he knows and can confidently execute. There is also broad bipartisan support for building new infrastructure. There is a tangible wave of optimism and the momentum is building. However significant issues need addressing before the order for the shovels gets placed.
- In typical Trump fashion there are no details, just an idea. A plan needs to be developed.
- How is the plan to be financed?
- Will Trumps enthusiasm and impatience be tempered by a slow and cautious Congress? Can they meet in the middle?
- Will representatives of the transportation and logistics sectors take some initiative and get involved in the process of shaping the plan?
Building the Infrastructure Plan
Trump has nominated real estate developers Richard LeFrak and Steven Roth to head up a Council of 15 to 20 builders and engineers. This Council will review projects placed before them.
“Some of the projects they’ll throw out. Some of the projects they’ll expand. But all of the projects, they’ll make sure we get a tremendous bang for the buck,” Mr. Trump said in an interview with the Wall Street Journal.
It’s not immediately clear what the process or timeline is to submit projects. No doubt federal and state lawmakers will all have their pet projects as well the transportation and logistics industry. The key is to ensure that new infrastructure meets 21st and 22nd century needs.
Financing the Infrastructure Plan
This has been the focus of intense scrutiny since Trumps plan was first rolled out. In theory the financing is quite simple and elegant. $1 trillion is required over 10 years. $167 billion of tax credits will be offered to private investors to raise it. The private investors will own the assets and the $167 billion of tax credits will be recouped from the income taxes paid by the contractors constructing the infrastructure.
However this financing concept has its critics:
“This proposal would work only if you have projects that generate cash flows such as tolls, congestion charges or user fees that can be used to generate the return on equity,” said Douglas Holtz-Eakin, president of the American Action Forum, which describes itself as a center-right policy institute.
Even the American public don’t want to pay bridge and transportation tolls for private infrastructure investors according to a Washington Post ABC news poll conducted January 12-15. 66% of those surveyed oppose a plan that would grant $140 million in tax credits to investors who put their money into roads bridges and transit in return for the right to impose tolls.
And according to House Speaker Paul Ryan the infrastructure package should have $40 of private sector spending for every $1 of public spending.
So there’s a lot of work to do to get everybody on the same page with regard to financing this infrastructure plan, and that will be done within the first 100 days of Trumps presidency according to Bill Shuster.
Can They Get It Done?
I’m optimistic. Trump and the Republican Congress are eager to show a big win to the American public. With bipartisan support it should be an easier than normal passage. It may not be in as large a scope or short a timeline as Trump anticipates but it will enable him to show he can create jobs. The rubber has hit the road and the clock is ticking…
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IMPORTANT NOTE: This is a logistics industry blog, not a political blog. NMT is not commenting on any party’s views on the issues nor is NMT publicly supporting any party.