Tag Archive for 'bridges'

Wells Fargo Reports: Infrastructure Spending and the Fiscal Multiplier

Wells_Fargo_Securities_logoInfrastructure spending is widely known to boost economic activity. However, the fiscal multiplier tends to be much larger during recessions, suggesting the late-cycle lift could be less than originally anticipated.

Infrastructure Fiscal Multiplier Low During Expansions

President-elect Donald Trump has proposed an infrastructure program of $1 trillion over the next 10 years (the Trump transition website notes $550 billion.) The American Society of Civil Indicator Title Engineers (ASCE) reports that the nation’s infrastructure is in “poor” condition and would require an estimated $3.6 trillion by 2020 to maintain a state of “good” repair, with only about half the needed funds committed (top chart).

Although details of the infrastructure program have yet to be published, two of Trump’s advisers provided a proposal in October (Ross, Wilbur and Navarro, Peter, “Trump Versus Clinton on Infrastructure,” Oct. 27, 2016). The plan includes $167 billion in equity investment, which is almost 17 percent of the total package. The equity portion would be supported by a tax credit equal to 82 percent of the equity. The remainder of the plan would be financed by debt. Based on the structure, critics of the plan suggest that investors will have little “skin in the game.” There is also recent talk about an infrastructure bank, which was included in the

While we await the details, discussion has also been centered on the impact to overall economic growth. Academic research finds that infrastructure spending, especially highway funding, has a positive effect on real GDP growth, which can be seen in the first two years and then a larger second- round effect after six to eight years (Leduc and Wilson, 2012). In fact, based on Congressional Budget Office (CBO) estimates, the multiplier for infrastructure spending for the American Recovery Indicator Titleand Reinvestment Act was larger than most other forms of government spending (middle chart). Literature also highlights the correlation between infrastructure spending and productivity growth in the U.S. and suggests that periods of weak public investment explains a good portion of the slow productivity growth (Aschauer, 1988) (bottom chart). These anticipated results are very promising, especially given slow productivity growth and low growth in potential output. However, the direct effect of infrastructure spending will be subject to long lags and will depend on the size of the fiscal multiplier.

A fiscal multiplier is the ratio of how much economic activity will increase for a unit of government spending. Studies show a wide array of multipliers based on a host of factors, with values ranging from 0.5 to 3.5 (Whalen and Reichling, 2015). The multiplier can also vary over the cycle. Research estimates a peak multiplier of 2.5 during recessions and 0.6 in expansions, with the gap due to stimulus crowding out private spending during multiplier for infrastructure spending is slightly less than two over a 10 year period (Leduc and Wilson, 2012), suggesting a $1.00 increase in spending raises output by roughly $2.00. That said, the infrastructure multiplier may be smaller during an expansion.

Source: ASCE, CBO, U.S. Department of Commerce and Wells Fargo Securities

1 Auerbach, Alan and Gorodnichenko, Yuriy. 2012a. “Measuring the Output Responses to Fiscal Policy.” American Economic JournalIndicator Title

ARTBA President & CEO Pete Ruane Statement on Elaine Chao’s Selection as U.S. Secretary of Transportation

fa4ca536-14f6-4df1-83e2-ca3527905984American Road &Transportation Builders Association President & CEO Pete Ruane issued the following statement in reaction to Elaine Chao’s selection as U.S. DOT Secretary:

Pete Ruane

Pete Ruane

“President-elect Trump has made a very good choice in selecting an experienced and proven leader to serve in this key cabinet post.

“As a former deputy secretary of transportation and secretary of labor in the respective Bush Administrations, there will be little learning curve for Elaine Chao. She is already well-versed on federal transportation policy, regulatory and safety matters.

“We look forward to her playing a critical leadership role in fulfilling President-elect Trump’s campaign pledge to make major new strategic investments in America’s transportation infrastructure network.”

Since 1902, ARTBA has been the “consensus voice” of the U.S. transportation design and construction industry before Congress, the White House, federal agencies, news media and the general public.

Voters Want Transportation Investment Record Number of State and Local Ballot Measures Approve

63f04383-b557-424b-936b-696d2d371c0bPreliminary November 8 election results show voters in 22 states approved ballot measures that will provide $201 billion in funding extensions and new revenue for state and local transportation projects.

According to an analysis by the American Road & Transportation Builders Association’s “Transportation Investment Advocacy Center™” (ARTBA-TIAC), 69 percent of the 280 transportation funding ballot measures up for vote across the nation were approved, with results still pending for seven local areas.

California will see the biggest impact. Voters in the state approved 15 of 26 transportation ballot measures worth $133 billion, including a 1 cent sales tax in Los Angeles that will provide $120 billion over 40 years for local road, bridge and transit projects. The California measures had to muster at least a two-thirds “super majority” vote to pass—10 of the measures that failed received over 50 percent of the vote, but did not reach that threshold. California voters also rejected a statewide measure that would have required any public infrastructure bond over $2 billion to go on the ballot for voter approval.

Voters in Illinois and New Jersey passed transportation tax “lockbox” measures to prohibit state lawmakers from diverting transportation user fee revenue to non-transportation uses. Maine approved a statewide transportation bond issue for $100 million and Rhode Island voters approved $70 million in bonds for port investment.

In Washington state, voters approved a 25-year, $54 billion revenue package that would support expanding Sound Transit light rail and bus routes. The package included a bond issue and adjustments in property, sales and motor vehicle taxes.

In Missouri, a statewide initiative to increase the state’s cigarette tax to raise an estimated $100 million annually for transportation investments failed. Voters in Georgia approved local sales tax increases that would raise nearly $4 billion for road and transit projects in the metropolitan Atlanta area.

Earlier this year, voters approved 76 of 81 transportation funding measures—or 93 percent—of initiatives on primary ballots.

Overall, voters approved 74 percent of transportation ballot initiatives in 2016. This is in line with the 10-year average rate of 74 percent. In the last two presidential elections, voters approved 77 percent (2012) and 76 percent (2008) of transportation funding measures.

The complete report and an interactive map showing the state-by-state results can be found at www.transportationinvestment.org.

ARTBA President & CEO Pete Ruane Statement on the Election of Donald Trump

fa4ca536-14f6-4df1-83e2-ca3527905984American Road & Transportation Builders Association (ARTBA) President & CEO Pete Ruane issued the following statement about the election of Donald Trump:

Pete Ruane

Pete Ruane

“President-elect Trump will have a ‘can do’ industry as his partner in rebuilding and expanding the nation’s transportation infrastructure to make it again second to none. Give us the proper resources and the new jobs and innovative solutions will take off.

“Republicans in Congress should heed the call of their party’s leader and make urgently-needed improvements of national infrastructure networks a top priority in early 2017.

“Despite a highly partisan political environment, Republicans and Democrats have routinely worked in a bipartisan manner to support infrastructure legislation. All sides should view a long-term infrastructure package as an opportunity for the two parties to come together and make meaningful progress for the American people.”

Since 1902, ARTBA has been the “consensus voice” of the U.S. transportation design and construction industry before Congress, the White House, federal agencies, news media and the general public.

Association of Equipment Manufacturers (AEM) President Dennis Slater made the following statement on Wednesday regarding the outcome of the 2016 elections:

AEM LogoAmerica’s voters have spoken, and on behalf of the Association of Equipment Manufacturers and our more than 900 members, I congratulate President-elect Trump on winning the presidency after a long and hard-fought campaign this year.

The 2016 campaign made clear that Americans are tired of gridlock government and fatigued after an unrelentingly negative election. Our elected officials now need to soothe our political discourse by coming together to advance sound public policy that will drive job creation and economic growth.

 Dennis Slater

Dennis Slater

The good news is that this election campaign highlighted the many issues on which Americans are united, along with manufacturers. Both Hillary Clinton and Donald Trump made the case this election season as to why we must make a substantial effort to not only repair our existing infrastructure, but also to develop a long-term vision for U.S. infrastructure that accommodates economic growth and rapidly emerging technologies. We stand ready to work with President-elect Trump to help advance this critically important policy priority.

A number of our elected officials have also spoken about infrastructure investment in the context of comprehensive tax reform. AEM members support commonsense and pro-growth tax reform that helps make U.S. manufacturing more competitive vis-à-vis our global trading partners, while also preserving important manufacturing investments and protecting U.S. jobs.

Our new president and leaders in Congress must also work together to address the strong anti-trade and foreign investment positions taken by candidates on both the right and the left this election season. We cannot undermine U.S. manufacturers’ global competitiveness for the sake of politically expedient soundbites.

Our elected leaders must also address falling farm incomes, move swiftly to advance a new Farm Bill and protect important safeguards for agricultural producers, such as the crop insurance program and the Renewable Fuel Standard.

To advance these important priorities, our new president and the 115th Congress must avoid the same partisan brinksmanship that has exacerbated political discord in Washington. A divided government cannot continue to be an excuse for inaction or executive overreach.

That is why the men and women of the equipment manufacturing industry stand ready to work with President-elect Trump, Speaker Ryan and Leader McConnell to advance our shared priorities and promote manufacturing growth in America.

AEM is the North American-based international trade group representing more than 900 companies and more than 200 product lines in the agriculture, construction, forestry, mining and utility sectors worldwide