In a move representative of greater co-operation since Nov-2018 mid-term elections, US President Donald Trump and top Democrats including House of Representatives speaker Nancy Pelosi are pushing for a “big and bold” USD2 trillion infrastructure plan that would drive America’s federal budget deficit to unprecedented levels. It would almost certainly have implications for airport financing as representative groups continue to clamour for greater investment into airport infrastructure.
- Political parties in the United States of America (USA) miraculously agree on transport infrastructure investment;
- The Trump 2018 Infrastructure Plan did not get through Congress;
- Parts of it are now history as big public spending becomes the order of the day in the run up to the 2020 Presidential election.
Setting aside the partisan warfare that has gripped Washington since those November elections both sides have issued positive remarks about the national need for new investment in roads, highways, bridges, tunnels, air travel and broadband.
Mr Trump’s spokeswoman said: “The United States has not come even close to properly investing in infrastructure for many years, foolishly prioritising the interests of other countries over our own. We have to invest in this country’s future and bring our infrastructure to a level better than it has ever been before.”
Senate minority leader Chuck Shumer added: “We agreed on a number, which was very, very, good, USD2 trillion for infrastructure, which even the President was eager to push it up to.”
An hour-long meeting in the White House between Mr Trump, Ms Pelosi, Mr Shumer and almost a dozen others will be followed by another meeting in the coming weeks to determine how Mr Trump intends to pay for the plan. The meeting will discuss “specific proposals and financing methods”.
Washington sees few such examples of positive bipartisanship these days, but there is a deepening understanding that the window of opportunity for a new deal on infrastructure will close in the coming months as the two key political parties shift their focus to the 2020 presidential election.
America’s infrastructure shortfall is obvious to any visitor who uses its roads, airports or railways. Apart from ACI – North America’s now habitual annual demand for USD100 billion in additional airport infrastructure spending, the American Society of Civil Engineers estimates the country needs to spend close to USD5 trillion by 2025 to cover the basic needs across transportation modes.
But while the need is clear, the method isn’t. America’s political economy has shifted in recent years from the politics of austerity to a cross-spectrum disregard for debt and deficits fired by sustained economic growth of over 3%, but there is still likely to be resistance. Republicans in Congress have expressed scepticism, saying that agreement on a big figure means little if the funding is unresolved. Democrats have called for last year’s corporate tax cuts to be reversed as one way of funding the plan but that did not go down well with Republicans.
The political perspective is sensitive for both sides. Democrats need to show voters in 2020 that their control of the House of Representatives, which was won in last year’s mid-terms, has produced concrete results for voters. Similarly Mr Trump, now evolving into a two-term career builder, needs forthcoming “for the public good” projects he can point to in 2020.
But hang on a minute, haven’t we been here before? Wasn’t a major infrastructure plan announced by the President at the beginning of 2018? It certainly was, as reported by CAPA – Centre for Aviation: President Trump’s new infrastructure plan: potential for aviation and private airport financing. It sought to leverage USD200 billion in direct federal financing into a USD1.5 trillion spend. President Trump is reported to “hate” significant parts of this previous and now abandoned plan.
That plan, which failed in Congress last year, included the use of so-called “asset recycling” schemes promoted by Ambassador and former Treasurer Joe Hockey, who had seen it first-hand on his travels. Asset recycling is the opportunity to use the asset value of (for example) the airport to invest in much-needed infrastructure, either there or elsewhere in a city, or to fill up holes in employee pension schemes.
Whether or not it is an ethically acceptable practice it is certainly not a new one, either in the US or abroad. The first IPO on Aeroports de Paris in 2006 was arranged partly because of French government pension deficits and almost two decades ago more than one major US city was considering leasing its airports to pay for a new sewage system.
Democrats in Congress are largely opposed to such funding mechanisms – which their proponents say can unlock capital from unloved public assets and free resources for new projects. There is history, though with the Republicans. Indiana, home to Vice President Mike Pence, used the concept to sell a highway to Australia’s IFM Investors (which is a major airport investor, too).
Democrats, apparently this time with the support of the President — want “real” money. But a spending spree would test America’s fiscal resilience and the ability of Congress to reassure its creditors they can manage the books.
The government reached its USD22 trillion debt ceiling in March – meaning it cannot issue new bonds to borrow money, and it could run out of it by September, raising the spectre of yet another government shutdown unless Congress agrees to lift the ceiling.
And if funding can be found, what would be the focus point? Big old airports serving the main cities, some of which were dismissed by the President as “Third World” in his election campaign (and at which CAPA data suggests some big bucks are actually being spent already)? Or new ones? There still hasn’t been a major new airport in 24 years.