Dive Brief:
- Investors are banking on the fact that infrastructure spending, viewed by many economists as a vehicle for U.S. economic growth, will soon see a marked increase, according to The Wall Street Journal.
- Encouraged by Congressional tax breaks and a lifting of the cap on discretionary spending, some believe that conditions are setting the stage for significant stimulus that could increase wages, employment and record-low interest rates.
- Skeptics warn that if Democratic candidate Hillary Clinton, who is favored in the presidential race, wins at the ballot box in November, any efforts to push through an infrastructure spending bill could be stymied by what is expected to be a Republican-controlled House and Senate, particularly because she has proposed paying for the program with changes to the corporate tax structure.
Dive Insight:
Increased infrastructure spending has garnered support from both major party presidential candidates this year. In May, Clinton promised to roll out her five-year, $275 billion infrastructure plan to Congress within the first 100 days of her first term. And in August, Republican andidate Donald Trump said that if elected, he would "at least double" the amount of investment in infrastructure proposed by Clinton. Trump's plan relies on bonds to fund major projects, while Clinton's involves establishing a national infrastructure bank.
There has been an increased call across the country by elected officials and industry leaders to boost infrastructure spending for the country's aging roads, bridges and highways, as well as to invest in new construction. According to the American Society of Civil Engineers, the U.S. is coming up on a $1.44 trillion infrastructure-funding gap, which, if left unaddressed, could increase to $5.18 trillion by 2040.
Rather than wait on federal grants, local governments are turning to municipal bond financing while interest rates are still so low. Barclays Plc predicted that municipal bond issues might hit $400 billion by the end of the year, as agencies like New York City's Metropolitan Transit Authority use them to finance their maintenance and capital improvement initiatives.
Still, industry leaders are calling on the next president to commit to government investment in the country's infrastructure. In an op-ed piece for The Washington Post in September, former Treasury Secretary Lawrence Summers said that current low interest rates would maximize returns on infrastructure and that just a 1% increase would be enough to address the country's highest road and highway priorities. In another plea, Bloomberg's Matthew Winkler used Denver International Airport as an example of how infrastructure investment could pay off.