How the Presidential Election Will Affect the Construction Industry
If there’s one thing the Democrat and Republican presidential candidates agreed on this election season, it was the need to invest more in our country’s infrastructure. Last February, a study by the American Road and Transportation Builders Association reported that more than 58,000 bridges across the country needed repairs—and nearly 204 million crossings occur on these bridges each day.
In Massachusetts in particular, 2,231 bridges (43%) are classified as functionally obsolete, and an additional 461 (9%) are considered structurally deficient. That’s more than half.
All told, the American Society of Civil Engineers estimates that there is more than $3 trillion needed to repair the country’s infrastructure before 2020, including almost two trillion for roads and bridges and several hundred billion more for airports and waterways. Others point to the lead disasters in Flint, Michigan and other cities as evidence that our drinking water systems need to be overhauled, since many of the pipes being used are more than a hundred years old. And still others claim that rural broadband upgrades must be part of the plan.
What is the Trump plan?
During his campaign, President-Elect Donald Trump announced his intention to spend more than $500 billion on rebuilding infrastructure over five years—double the funding called for by Hillary Clinton. His vision includes rebuilding not only roads and bridges, but railways, tunnels and airports. He has frequently noted that our airports look like third world facilities.
What does all this mean to us?
If Trump’s plan passes, not only would we put hundreds of thousands of people to work directly on the projects, it could have a ripple effect for related construction industries.
In the 1950s, President Dwight D. Eisenhower’s interstate highway initiative, for instance, was a direct generator of jobs, creating thousands of construction projects across the country and spawning a large number of businesses and economic activity that continue today. Similarly, in 1983, President Ronald Reagan signed the Surface Transportation Assistance Act, which was a transportation funding policy projected to create about 170,000 jobs (and 150,000 more in related industries). Likewise, an infusion of millions of dollars into infrastructure would create jobs today, most likely, as well as increase financial security for labor workers across the country.
On the other hand, the Trump people argue it is also possible that investments would lack in places where there is not a good return. Under Trump’s plan, in order to pay the companies investing in infrastructure, it is likely that tolls and fees would be imposed on those who use it. And, as a result, investors are likely to invest only in areas in which construction is in serious need, and if they believe users of the infrastructure could afford to pay.
The main element to consider in both cases is how good of a return would be yielded, which is too soon to gauge. Regardless, additional investment in our country’s infrastructure would certainly have a positive and immediate impact on those in the construction industry, as work would begin to build bridges, roads, airports, and more.
How would his plan be funded?
Few people are against infrastructure investments. The concern comes over how you pay for it. According to some, there is possible cause for concern, as his plan would be financed by investors purchasing government bonds, effectively privatizing funding. In this case, the money Trump intends to spend on renewed infrastructure would potentially add to our country’s debt due to these private companies charging the treasury interest on investments.
There is also a proposal for the creation of an infrastructure bank by Steven Mnuchin, one of the leading contenders for the Treasury secretary position under Trump. An infrastructure bank would essentially use money from the federal government in order to attract both state and private money for project funding. (Note: President Obama has previously suggested the same, which was not passed by Congress.)
A smarter but more politically difficult approach might the imposition of a gas tax increase, with receipts earmarked for infrastructure improvements. In the past, gas taxes have proved so unpopular that the federal government has not raised its gas tax in more than 22 years.
This may sound familiar. Two years ago, Massachusetts voters rejected a law which would have raised the gas tax by tying it to the inflation rate (thus ensuring automatic increases alongside inflation without the need for legislative approval).
Ultimately, funding is a key stumbling block to solving the infrastructure issue. But President-elect Trump seems committed—if not hell bent—on doing it. So, if Trump’s $500 billion infrastructure plan moves forward, there are a lot of possible implications for construction and labor jobs, even here in Massachusetts.
Aging infrastructure is a major cause of health hazards—for example, the case in Flint. With more money and more renovations put into our country’s infrastructure, we could reduce the risk of experiencing increased health hazards from old materials. Improved infrastructure planning could bring faster, cheaper broadband to millions of Americans, especially in rural areas, as well—that is, if there is a plan laid out to pay for it. And we would all be safer with bridges that were safe and roads that were fixed.
We have seen time and again policy leaders criticize our infrastructure without taking tangible action. Under Trump’s infrastructure plan, if all goes well, there would be a new—perhaps more steady—source of funding than what is currently in place. And in having stable funding, these projects would be able to move more quickly than the current pace. However, given the transition’s early stage, we are still in a quasi-holding pattern in terms of next steps. Moreover, as the GOP continues to grapple with how funding will come together, the next few weeks —and a formalized plan from Trump- should gauge whether or not Congress will ultimately jump on the bandwagon.