What Trump’s Infrastructure Initiative Means for the Middle Market

The White House on Monday unveiled its infrastructure plan, which is intended to leverage $200 billion of federal funding to encourage $1.5 trillion investment in infrastructure spending over 10 years.

According to the National Center for the Middle Market’s 2015 Middle Market Indicator (summarized by the U.S. Chamber of Commerce here), nine out of 10 middle-market executives want to see U.S. infrastructure improved. Almost half of those executives are willing to take a hit to their taxes for that to happen. Eighty-three percent of leaders surveyed say their companies are significantly impacted by infrastructure, and one out of 10 executives of middle-market businesses say that America’s infrastructure needs immediate action.

The American Society for Civil Engineers’ Infrastructure Report Card paints a dire picture of the state of U.S. infrastructure. It claims that “from 2016 to 2025, each household will lose $3,400 each year in disposable income due to infrastructure deficiencies,” and that if the current “investment gap is not addressed throughout the nation’s infrastructure sectors by 2025, the economy is expected to lose almost $4 trillion in GDP, resulting in a loss of 2.5 million jobs in 2025.”

Will They? Won’t They?

The framework released Monday is largely symbolic, representing a proposed set of ideas for Congress. Any legislative text would require 60 legislative votes, and ideas in the plan are already facing strong opposition from Democrats. The conservative wing of the Republican party is balking at the price tag (after the $300 billion increase in the deficit that the two-year budget plan would create). Meanwhile, progressive Democrats are attacking the lack of funding and the release of federal control baked into the plan.

On the other hand, tax reform advanced at an unprecedented pace against overwhelming odds while the majority of analysts bet against its passage—so nothing is impossible. However, with the need for a majority vote in the Senate, plus ongoing immigration talks and fast-approaching midterm elections, a sweeping infrastructure reform package appears unlikely.

What’s in It?

 Split into four parts, the infrastructure plan has provisions that address:

1. Funding and financing infrastructure improvements, including allocating money to an infrastructure incentives program designed to encourage public-private partnerships; a rural infrastructure program designed to revitalize rural areas and achieve parity with urban infrastructure; and a transformative projects program that aims to incentivize projects with the potential to radically change the way our infrastructure operates (think self-driving cars, 5G wireless technology and high-speed rail).
2. The types of infrastructure in need of investment, including roads, railways, airports, water infrastructure, veterans affairs-related infrastructure (like hospitals), and land revitalization (including at contaminated sites and others in need of cleanup).
3. The role of the federal government, state governments and other stakeholders in infrastructure improvements. This includes establishing a so-called “One Agency, One Decision” environmental review structure; removing and streamlining various facets of environmental regulations with respect to water, air and historic properties; delegating much of the approval process to states; experimenting with performance standards for environmental impacts instead of a review process; and instituting measures to avoid long litigation periods surrounding environmental impact.
4. Workforce development initiatives, which would expand Pell Grant eligibility to short-term education programs (rather than the standard semester-based model), revamp career and technical education programs in high schools, expand the federal work-study program to a two-year duration, and reform licensing requirements for those seeking work related to an infrastructure project.

Stay tuned for more coverage from Middle Market Growth about these infrastructure improvement initiatives and their impact on the middle-market economy.