To come to life, the president’s proposal must receive congressional approval, and thus far Congress has offered a mixed response to the plan. Congressional Democrats applaud the incremental investment in infrastructure but warn that they will not back any bill that spurs investment through tax credits alone. After the election, House Minority Leader Nancy Pelosi said, “We can work together to quickly pass a robust infrastructure jobs bill,” and later emphasized that “the compromise is not to make infrastructure a gift of tax breaks.” Senator Bernie Sanders took a harder line, describing the Trump plan as “a scam that gives massive tax breaks to large companies and billionaires on Wall Street.”
Congressional Republicans support investing in infrastructure, too, but they have emphasized that any spending bill must not increase the federal debt. Speaker of the House Paul Ryan stated that boosting funding for new and existing infrastructure projects would be a top priority for the House of Representatives in 2017, emphasizing the important role that private investors will play. But Representative Bill Shuster, chairman of the House Transportation and Infrastructure Committee, has indicated that the details of the package will not take shape until May at the earliest, saying, “We’ll put together a big infrastructure package” in the “second 100 days” of the new administration. Senator John Thune, chairman of the Senate Commerce, Science, and Transportation Committee, expressed doubt about the $1 trillion price tag, saying, “I think it’s going to come down to figuring out just actually what’s achievable.” The fact that increased federal expenditures on infrastructure enjoys the support of 75% of the American public (according to a March 2016 Gallup poll), while only 11% oppose it, may encourage Washington to act.
Complicating passage of funding legislation through Congress is the need to devise a plan that spreads the investment fairly uniformly across the nation. Uniformity is a prerequisite to gaining broad approval from legislators representing all 50 states, not merely those hosting a relatively high concentration of projects that would benefit from the tax incentives. For example, certain states—such as Florida, New York, Pennsylvania, and Texas—have heavy concentrations of toll roads, so those states are better positioned to quickly execute projects using incremental federal funding. Moreover, certain states are in more serious need of infrastructure repairs than others, increasing the likelihood that the government will undertake improvement projects in those areas in the near term.
Infrastructure investments carry significant regulatory risks for investors, especially for those participating in a PPP. Long-term cash flows are critical if investors are to realize a gain, and a change in the regulatory landscape during the lifetime of the asset can adversely affect those cash flows. For example, an investor in a toll road project will want assurance that the relevant regulatory body will not permit construction of a competing toll-free road nearby in the medium to long term. Today, 33 states have some form of regulatory framework in place to protect investors; California, Florida, and Virginia, among others, stand out as “best practice” states. Mitigating risks for investors will be essential to building the pipeline of projects required for execution of the president’s plan—and it is unclear whether enough projects will emerge to fill a $1 trillion pipeline.
President Trump does not need to obtain congressional approval before rolling back Obama-era regulations that restrict some investments in energy. Consequently, spending in this area is likely begin much sooner than elsewhere. The president has signaled a willingness to engage in other tactics—such as dealmaking with private companies—to advance policy priorities, and he may use these tactics extensively to encourage infrastructure development. For example, federal agencies have the power to award government contracts to private companies, and the new administration may use this discretion to provide incentives to companies to undertake infrastructure projects as part of a larger government package.