Why It Matters

Trump banks on infrastructure

President Donald Trump's infrastructure renewal package has a headline of US$1.5 trillion (S$2 trillion) over 10 years.

This somewhat obscures what will be a shift from federal to state and private sector funding, using just US$200 billion in direct federal spending to motivate state and local tax dollars, and private investment, for the rest of the total.

This move puts more discretion and responsibility in local hands. It also comes with a pledge to clear projects within two years, instead of under a federal approval process which can take much longer. Folded in is a proposal to sell off some federal assets.

But this formula makes it more imperative for users to pay for infrastructure, in the shape of local taxes, and airport and toll fees - probably at higher rates than if it was paid for by federal handouts.

The infrastructure will thus be viable for investors if more people use it. Hence, projects in poorer areas risk being left out as there is less potential for profit. Environmental regulations may be one of the casualties of shortening approval times.

The proposal will see a stiff battle in Congress over these aspects. The plan could create more than 11 million jobs over 10 years, a Georgetown University paper estimates. This would correct the "loss" of 6.4 million jobs not created due to the 2007-2009 recession. This matters to the President going into mid-term congressional polls in November and the 2020 presidential election, in which he will run again.

Job creation is Mr Trump's main promise. The economy has been robust, the earliest signal of whether that translates into votes will come in November, even accounting for ruling parties historically losing some seats in mid-term elections.

 

By 2020, the economic impact of the Trump presidency will be more evident. The President will lobby hard for the infrastructure proposal because the success of his 2020 run may depend on it.

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A version of this article appeared in the print edition of The Straits Times on February 14, 2018, with the headline 'Trump banks on infrastructure'. Print Edition | Subscribe