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Paving the way

3 August 2016 By Jeffrey Goldfarb

When Donald Trump and Hillary Clinton can come together on an idea amid the vitriolic carnival of the 2016 election, it’s worth noting. The Republican presidential nominee just voiced support for rebuilding U.S. roads and bridges, proposing to spend at least twice as much as the $275 billion outlined in his Democratic rival’s plan. There’s no clearer initiative deserving of a deal.

Multiple efforts to plow more money into the country’s infrastructure following the financial crisis have been steamrolled by conservative members of Congress. They fear adding to the national debt, which stands at some $19 trillion. Even the meager $60 billion infrastructure plan put forward in 2011 by President Barack Obama, which included a tax surcharge on millionaires and the creation of a bank to spur private investment, flopped.

Dogmatically fixating on America’s balance sheet on this subject badly misses the point. Even assuming a conservative 5 percent return, most U.S. infrastructure investment probably would pay for itself easily. It costs Uncle Sam just 2.3 percent to borrow for 30 years. Factor in inflation and the real interest rate is close to zero. There would be potentially millions of new, well-paying jobs. The extent of the stimulating effect on the economy is debatable, but there almost certainly would be one.

Those kinds of numbers should be easy enough for the party of business, the GOP, to understand. Delaying repairs on existing ports and highways also will store up costs down the road. As former Treasury Secretary Larry Summers said at a Politico event during the Democratic convention last week: “Deferred maintenance and deferred renewal is just as much a debt as the issuance of Treasury debt, except that one compounds at 10 or 20 percent a year not at 1 or 3 percent a year.”

In characteristic fashion, Trump’s plan is fuzzy. Some sort of bonds and “people” would provide the funds. Clinton’s five-year blueprint is considerably more detailed, if only a fraction of what’s needed. The American Society of Civil Engineers estimates a cumulative $1.4 trillion investment funding gap between 2016 and 2025. All the details can be worked out. For now, it’s important that politicians – and voters – keep jack-hammering away at the idea of upgrading America’s infrastructure.


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