Electronics Assembly Knowledge, Vision & Wisdom
America's Trillion-Dollar Infrastructure Build-Out
America's Trillion-Dollar Infrastructure Build-Out
Today's low cost capital creates an opportunity address aging infrastructure. What barriers stand in the way? What are the highest priorities? We'll show you.
Technology Briefing

,{url:'http://www.circuitinsight.com/videos/technology_briefing_americas_trillion_dollar_infrastructure.mp4'}], clip:{autoBuffering:true, autoPlay:true, scaling:'scale' } }).ipad();
Technology Briefing is brought to you by association with Audio-Tech, publishers of critically acclaimed programs including: Trends Magazine.

Subscribe to their monthly reports and learn about big ideas, new products, new management techniques, breakthrough concepts, and trailblazing technologies.
Transcript

As we discussed in the previous trend this month, capital is both abundant and cheap. As a result, it's a perfect opportunity to address America's aging infrastructure, which will lower the cost of living, keep U.S. businesses competitive, and potentially put millions of unemployed people to work.

There's no question that the nation's infrastructure is in desperate need of upgrading, and that the costs of continuing to ignore the problem will be steep. According to a report from the American Society of Civil Engineers (ASCE) "Business costs and, therefore, prices will increase if surface transportation systems worsen, ports, airports, and inland waterways become outdated or congested, and if water, wastewater and electricity infrastructure systems deteriorate or fail to keep up with changing demand.

Greater costs to transport the wide array of imported goods that supply domestic manufacturers and rising costs for exports will affect our ability to compete in global markets for goods produced in the U.S. Irregular delivery of water and wastewater services and electricity will make production processes more expensive and divert household disposable income to these basic necessities."

Specifically, goods will become more expensive to manufacture and to distribute if roads, airports, and the electric grid continue to deteriorate. Consumer prices will rise, business productivity will decline, and GDP will plummet, leading to job losses and decreases in personal income. The ASCE report calculates that infrastructure deficiencies will cost every U.S. household $3,400 per year until 2025. If the problems aren't fixed before then, the cost will increase to $5,100 from 2026 to 2040. From 2017 to 2040, the total costs will amount to $106,000 per household.

At the same time that household costs will rise, personal incomes will drop because businesses will be less productive and less efficient, resulting in business revenue losses of $7 trillion by 2025, and more than $29 trillion by 2040. Lower sales will force companies to reduce employment, leading to job losses of 2.5 million by 2025 and 5.8 million by 2040. The ASCE report estimates that the U.S. economy will lose $3.9 trillion in GDP by 2025, and $18 trillion by 2040.

All of these consequences can be avoided if policy- makers take action to fix the nation's crumbling infrastructure. Unfortunately, according to the Center on Budget and Policy Priorities, since the start of this decade, government spending on infrastructure has fallen from 3 percent of U.S. GDP to less than 2 percent. The obstacles until now have been a shortage of funding and an abundance of regulations to delay or prevent the necessary projects from being launched.

But now, the U.S. is in the opposite situation: Because of abundant capital and a new presidential administration that has vowed to eliminate regulatory barriers, the time is right to finally fix this problem and avert another financial crisis.

During his campaign, President Trump pledged to invest $1 trillion in America's infrastructure. And on election night, he announced, "We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We're going to rebuild our infrastructure, which will become, by the way, second to none, and we will put millions of our people to work as we rebuild it."

According to the McClatchy DC Bureau, Trump met with union leaders from North America's Building Trades Unions in January and asked for a list of infrastructure projects that require minimal funding. The unions provided Trump's team with a list of twenty-six projects that are "shovel-ready," needing only regulatory approval to get started.

Some of the projects are also on a list prepared for the Trump transition team by consulting firm CG/LA Infrastructure. That list includes fifty high-priority infrastructure projects. Combined, the lists call for repairing or replacing bridges, railroad lines, river locks, and energy pipelines. Many, but not all, of the projects on both lists are privately funded.

Among the projects are the following:

  • The Gateway Project, at $20 billion, would increase passenger rail capacity between New Jersey and New York and re- place tunnels that were damaged by Hurricane Sandy. It would create 15,000 direct jobs and 19,000 indirect jobs at an average of $73,000 a year.
  • Improving Locks and Dams 52 and 53 on the Ohio River would eliminate the choke point for all barge traffic on the Ohio and Mississippi Rivers. The locks currently cause shipments to be delayed for as much as three days, causing increases in commodity prices and reducing the competitiveness of producers on global markets. It would cost $3 billion and create 1,500 direct jobs.
  • The NextGen Air Traffic Control System would replace the nation's radar-based systems with new systems based on satellites, which would "increase air traffic capacity by 50 percent, shorten flight times, save billions in fuel and make the system safer and more efficient." At a cost of $10 billion, it would create 2,300 direct jobs.
  • The Cadiz Valley Water Conservation Recovery and Storage Project would extract Mojave Desert groundwater to provide water for 100,000 homes in Southern California. It would create 5,900 direct jobs at a cost $250 million.
  • The Huntington Beach Desalination Plant in California would turn salt water from the Pacific Ocean into a reliable source of fresh drinking water for residents of drought-stricken Orange County. It would cost $350 million and create 400 direct jobs.
  • The Chokeberry and Sierra Madre Wind Energy Project would build as many as 1,000 turbines to provide wind power in Wyoming. At a cost of $5 billion, it would create 1,000 direct jobs.
  • The Atlantic Coast Pipeline would transport natural gas to public utilities in Virginia and North Carolina, at a cost of $4.5-$5 billion, with a gain of 10,000 direct jobs.

According to the unions' president, Sean McGarvey, if Trump expedites the permitting process to allow projects such as these to proceed, the unions would create jobs for the economy by hiring people for positions such as pipefitters, bricklayers, and underwater welders, at hourly wages of $20-$100.

That link between infrastructure spending and higher employment was confirmed by a study reported in a briefing paper from the Economic Policy Institute, which explored the impact of infrastructure investment on the economy and employment.

The study evaluated three potential scenarios for infrastructure investment and estimated their impact on overall economic activity, productivity, and the number and types of jobs depending on how the investments are financial. The results indicate that the biggest near-term boost to gross domestic product and jobs comes from financing the new investment through new federal government debt rather than a progressive increase in taxation, a regressive increase in taxation or cuts to government transfer programs.

The study concluded that investing $250 billion a year in infrastructure projects would increase GDP by $400 billion and add 3 million net new jobs to the U.S. economy by the end of the first year.

The jobs that would be created would be filled disproportionately by male, Latino, and older workers without a four-year university degree. Best of all, the workers hired to perform those new jobs would earn disproportionately higher wages compared to the averages for the overall economy.

Based on this important trend, we offer the following forecasts:

First, the infrastructure build-out will be a development that will benefit virtually everyone in the U.S.

With Republicans in control of the White House, the Senate, and the House of Representatives, and because of the pro-business makeup of the Supreme Court and the dramatic shift in regulatory priorities at the Interior Department, EPA, and the Army Corp of Engineers, once-formidable bureaucratic barriers are likely to be bulldozed. The various projects will cut shipping costs, commuting times, and safety problems, while eliminating water shortages and air traffic bottlenecks. People in every state will enjoy savings in time and costs. The projects will put half-a-million or more underemployed blue-collar workers back to work for the next ten years. And they will provide a reasonable ROI for some the world's surplus capital. Even environmentalists will have reasons to celebrate, because many of the projects connect wind turbines and similar products to the electric grid.

Second, even with cheap capital at its disposal, the U.S. government is not going to expand the federal budget deficit by $1 trillion to pay for all of the infrastructure projects.

That's what makes many of the infrastructure projects on the two lists so appealing; in many cases, private financing is already in place, and all that is needed is approval from regulators to break ground.

Third, the projects that currently lack funding are likely to be financed with a more sensible solution than the "borrow and spend" approach.

For worthwhile projects, such as the Gateway Project and the NextGen Air Traffic Control System, a combination of government debt and private financing is likely to prevail. As CNBC reported last November, Trump "apparently intends to rely heavily on private financing to avoid the massive budget impact of an ambitious rebuilding program. The outlines of the idea were sketched in a briefing paper last month by two Trump advisors, Wilbur Ross, a private investor, and Peter Navarro, a business professor at the University of California at Irvine. In addition to existing programs designed to attract private investors to finance public projects, the Trump plan would provide generous up-front tax credits to those investors. The credits would then be paid for with additional revenue generated by wages from workers who build the projects and the profits of the contractors who oversee construction." As Ross and Navarro explained, "We believe that this tax credit-assisted program could help finance up to a trillion dollars' worth of projects over a ten-year period."

Fourth, although the construction industry and its labor unions clearly stand to benefit from infrastructure projects, innovative new approaches based on new technologies could overturn some of the industry's assumptions.

For example, according to Reuters, an official in the Trump administration said, "Initially what we're trying to do is make sure we're thinking expansively and creatively." The official specified that instead of simply replacing outdated infrastructure with identical bridges and highways, planners are thinking of ways to incorporate emerging technologies such as driverless vehicles and drones into their project designs. For example, instead of widening an interstate highway to allow more human drivers to use it at the same time, it might make more sense to embed sensors into roadways that will enable autonomous cars and trucks to use the same number of lanes more efficiently.

Submit A Comment

Comments are reviewed prior to posting. Please avoid discussion of pricing or recommendations for specific products. You must include your full name to have your comments posted. We will not post your email address.

Your Name


Company


E-mail


Country


Comments


Authentication

Please type the number displayed into the box. If you receive an error, you may need to refresh the page and resubmit the information.



Related Programs
bullet Breakthrough Printing 3D Carbon Fiber Composites
bullet On-Demand Personal Aviation Takes Off
bullet Hybrid Solar Cells Set World Record for Performance & Efficiency
bullet Five Myths About Digital Transformation
bullet Realizing the Potential of 4D Printing
bullet The New World of AI-Enabled Work
bullet New Generation of Transistors Based on Graphene
bullet Advancements In Electric Car Batteries
bullet Countries Most (and Least) Likely to be Affected by Automation
bullet The Future of AI Is Neuromorphic
More Related Programs
About | Advertising | Contact | Directory | Directory Search | Directory Submit | Privacy | Programs | Program Search | Sponsorship | Subscribe | Terms

Circuit Insight
6 Liberty Square #2040, Boston MA 02109 USA

Jeff Ferry, Publisher | Ken Cavallaro, Editor/Business Manager

Copyright © Circuitnet LLC. All rights reserved.
A Circuitnet Media Publication