13 February 2018
President Trump’s infrastructure spending plan, unveiled yesterday, has been slammed by his political opponents but given a qualified welcome by industry and investors.
Trump said his plan "will spur the biggest and boldest infrastructure investment in American history. The framework will generate an unprecedented $1.5 trillion - to $1.7 trillion investment in American infrastructure." But only $200 billion of that total would come from Federal funds.
“This is a sham of a proposal that offers too little and asks for too much,” said California State Treasurer John Chiang*. “Given that California alone has at least $850 billion in new public works that must be built or repaired in the coming years … the President’s $200 billion national investment is no better than spit in the ocean.”
Kristina Swallow, president of the American Society of Civil Engineers (ASCE), told National Public Radio: "$200 billion is a good starting point for a conversation but it is insufficient." The society estimates that an investment of $2 trillion more than what's currently budgeted is required to get US infrastructure into decent shape.
Senior Democrats said the plan would require cash-strapped local governments to shoulder much more of the burden of infrastructure spending than they had in the past and could lead them to impose higher local taxes, fees and tolls.
But private sector investors such as pension funds, sovereign wealth funds and dedicated infrastructure funds could make a significant contribution, many believe.
“Investors perceive US infrastructure assets as relatively safe investments, in some cases with revenues that mimic real GDP growth or inflation trends,” said Christopher Mann, a partner at New York law firm Cromwell & Sullivan.
“With the right reforms to make it easier for such investors to find attractive assets, the private sector, while not providing a panacea, could provide a significant amount of the needed infrastructure investment”.
Jon Lindenberg, deputy head of investment banking at MUFG in New York, told the Financial Times there is currently about $340 billion of “available, uncommitted” funding from private infrastructure funds focused on the Americas.
But the ASCE also cautioned against short-term fixes, arguing that any new spending should ensure the infrastructure is able to withstand the impacts of climate change.
"We don't have enough funding to build it twice," Swallow said. "So we have to have a long-term view … we have to look at what we're dealing with today but [also] what we might be looking at tomorrow."
Similar concerns were expressed by clean energy advocates.
Lisa Jacobson, president of the Business Council for Sustainable Energy (BCSE), said: “The Council is pleased that the Trump administration is making modernisation and improvements to US infrastructure a priority.
“The public and private sectors must work together to spur investment in the nation's infrastructure assets. Federal proposals should consider policy and incentives that facilitate long-term planning and infrastructure investment and maintaining support for energy efficiency.”
But Gregory Wetstone, president and CEO of the American Council on Renewable Energy, struck a more critical tone.
“The president’s proposed infrastructure plan is intended to leverage public capital to attract private investment, but it fails to build on the momentum generated by the largest source of private sector infrastructure investment for the past seven years: renewable energy,” he said.
“Any serious effort to address America’s infrastructure needs to focus on the modernisation of our antiquated electrical grid,” he added.
*John Chiang is hosting California’s first Green Bonds Symposium, in partnership with Environmental Finance and the Milken Institute. For details, click here