How Trump's Infrastructure Spending could boost the U.S. Economy
In 1933, President Franklin Roosevelt moved quickly to put into place a series of experimental public works projects which became known as the New Deal. One in four Americans was out of work at the time. In May of that year, he signed the Tennessee Valley Authority Act (TVA) into law. The new agency worked on projects to improve navigation, flood control, electricity generation, fertilizer manufacturing, and economic development.
Additional large-scale projects were launched in 1935, which became known as the Second New Deal. Additional agencies were created, like the Public Works Administration, and later, the Works Progress Administration. The Public Works Administration funded almost 34,000 projects.
In 1956, president Dwight D. Eisenhower signed the Federal-Aid Highway Act into law. The bill authorized enough funding — $26 billion — to construct and repair approximately 41,000 miles of highways, roads, and bridges.
While the new Trump administration will aim to reduce government's role in the lives of the average American, the emphasis on infrastructure spending and projects will introduce a degree of interventionist government that was popular with Roosevelt's supporters. And much like FDR's first 100 days, president Trump is taking executive actions and proposing projects that will stimulate the economy and put Americans back to work. Unlike FDR, he is not expanding the Federal government.
Infrastructure Proposals and Solutions
Make work projects have been used throughout much of America's history to stimulate the economy and create jobs.
The president's infrastructure proposals include the goal of transforming "America’s crumbling infrastructure into a golden opportunity for accelerated economic growth and more rapid productivity gains with a deficit-neutral plan targeting substantial new infrastructure investments."
The proposal includes "investments in transportation, clean water, a modern and reliable electricity grid, telecommunications, security infrastructure, and other pressing domestic infrastructure needs."
By providing maximum flexibility to the states and the creation of "thousands of new jobs in construction, steel manufacturing, and other sectors to build the transportation, water, telecommunications and energy infrastructure needed to enable new economic development in the U.S., all of which will generate new tax revenues," the new administration will emphasize using American steel made by American workers.
Specific steps are mentioned in the proposal to control costs and cut wasteful spending. "Link increases in spending to reforms that streamline permitting and approvals, improve the project delivery system, and cut wasteful spending on boondoggles," according to the Trump website. "Employ incentive-based contracting to ensure projects are on time and on budget."
The Keystone XL and Dakota Access pipeline projects are projected to create thousands of permanent and temporary new jobs. These jobs would result from the construction of the pipelines and the additional new hires at the refineries. New jobs mean more spending on commodities, as a one-off effect and increased spending means a stimulated economy. Retail spending would benefit also.
Considering that growth in domestic GDP has been lethargic over the past eight years, any initiatives, that would increase employment substantially, would have a domino effect on the sales of goods and services and the profits of corporations and small business. While there is some risk of inflation, U.S. GDP would increase beyond the stagnant 1.5 or 2 percent that has been typical recently.
While there was even opposition to FDR's infrastructure projects, which was an effort to dig America out of a depression, there is also opposition to president Trump's initiatives. With infrastructure spending comes safer highways and bridges and more tax revenues. If there is an uptick in jobs creation, then the overall impact is good.