On one thing–and perhaps one thing only–Donald Trump and Hillary Clinton agree: It’s time to invest a lot more in roads, bridges and the like.
Clinton, the Democratic presidential nominee, unveiled a plan earlier this year to spend as much as $500 billion on new infrastructure projects. Trump, the Republican nominee, said he’d double that, and in late October unveiled his own $1 trillion plan.
Trump doesn’t just outdo Clinton on spending. His plan is notably different because most of the money would come from private investors. There are already investor groups that seek out infrastructure projects around the world that they deem to be safe bets likely to produce strong returns. But there are relatively few of those in the United States.
Trump would establish a new federal tax credit to encourage private infrastructure investment, effectively raising the return to people who pony up the money. In principle, the idea has mainstream support, but there are some caveats. First, the only such projects likely to attract private interest would be those with tolls, user fees or some other source of revenue that serves as cash flow back to investors. Most infrastructure project don’t fit this profile. There’s also the risk of political backlash if citizens feel private interests—inevitably backed by Wall Street—are profiting at the expense of locals just trying to get to work or school. On the whole, there probably aren’t anywhere near $1 trillion worth of infrastructure projects suitable for Trump’s funding plan.
Clinton’s plan includes the establishment of an infrastructure bank that would function similarly to Trump’s funding mechanism. But her target for such private funding is much lower. The rest of her plan entails conventional infrastructure spending, funded by new taxes on the wealthy.
Just because Trump and Clinton agree on the need for more infrastructure spending doesn’t mean it’s a good or timely idea. Economists point out that while such projects can help the economy during downturns, when there are a lot of idle workers, they’re less effective when employment is strong, and may even take workers from other industries where they’re needed. And there’s always the risk of boondoggles engineered to benefit politicians and their cronies, rather than the public at large. Not all roads lead to greater prosperity.
Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman.
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