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How Trump and Clinton would rebuild creaky infrastructure

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It's one thing Donald Trump and Hillary Clinton unambiguously agree on: Roads, bridges, airports and other U.S. infrastructure assets are in woeful condition.

Both have pledged, if elected, to invest hundreds of billions of dollars on upgrades -- putting millions of people to work on projects coast to coast that tend to be popular with voters.

Their dueling plans to tackle the problem have a few things in common: Both would merely scratch the surface of a very big problem, and neither contains a long-term solution to paying for infrastructure maintenance.

Clinton has put forward a five-year plan that calls for $250 billion in direct spending on roads and bridges and another $25 billion to seed an infrastructure bank that could yield an additional $225 billion in private funding. She plans to pay for the plan via corporate tax reform, including a chance for companies to repatriate overseas profits. Her plan would essentially double the investments the U.S. is on track to make on such projects.

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Trump promised in a recent interview to "at least double" Clinton's numbers on infrastructure investment, in part via privatization. However, he has offered scant details on financing for the plan beyond wanting to take advantage of current low interest rates. His website, which notes 28 percent of U.S. roads and 24 percent of bridges are in substandard condition, promises that the campaign will unveil a specific infrastructure plan in the "near future."

Neither politician is suggesting changes to the gasoline tax -- which is yielding less and less revenue for road maintenance as cars become more fuel-efficient. They're avoiding that in part because doing so could carry dire political costs, said Sen. Tom Carper of Delaware, a Democrat who serves on the Senate's Committee on Environment and Public Works, which oversees infrastructure investment.

"Any comprehensive proposal will need funding and financing, and include user fees," Carper said in an interview. He suggested a move toward transportation taxes based on vehicle-miles traveled. "If we simply rely on user fees from gas and diesel, those using very little [fuel] will not be paying their fair share."

Another problem with the candidates' proposals: Both fall far short of being adequate, if you believe the experts.

The American Society of Civil Engineers estimates the U.S. needs to spend $5.2 trillion to bring its infrastructure to an acceptable level by 2040. Poor infrastructure reduces productivity -- think of all the wasted time you spend commuting -- and hinders economic growth. The engineers, which give U.S. infrastructure a grade of D+, warn that failing to make necessary investments would hit the economy to the tune of 5.8 million lost jobs and $14.2 trillion in lost productivity.

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Given that both presidential candidates say they support infrastructure investment, adopting an argument President Obama has been making since 2009, "can only help" its likelihood of eventual success in Congress, Carper predicted.

In contrast, many Republicans historically have argued that warnings about failing infrastructure are overwrought, and responsibility for repairs should fall to the states.

Carper is optimistic that Clinton, who as a senator earned a reputation for working across the aisle, will be able to finagle support for her plan in contrast to the negative reception President Obama received for a similar proposal last year.

"It's a logical area for common ground," Carper said. "Almost any honest assessment of roads and bridges, the amount of time people spend in traffic, damage to vehicles -- there's plenty of argument for investing heavily in our transportation system."

The candidates' agreement on infrastructure spending also suggests a departure from the political tradition of higher spending on roads and bridges under Democrats and lower spending under Republicans, noted Avram Fisher, chief investment officer at Long Cast Advisers and a former infrastructure analyst at BMO Capital Markets.

Fisher said the Clinton plan comes from "a very traditional playbook" -- with both direct spending and an infrastructure bank designed to leverage additional spending on infrastructure via public-private partnerships.

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Trump's plan, predictably, is more of a wild card. Fisher guessed a Trump proposal would be more "heavily weighted" to benefit developers -- including funds for projects ranging from new coal-fired power plants to the Keystone XL Pipeline, paired with relaxed permitting and other regulatory allowances.

Among private-sector beneficiaries of the Clinton plan, Fisher points to pure-play construction companies including publicly traded Granite Construction (GVA), Tutor Perini (TPC) and Sterling Construction (STRL), of which he's a shareholder.

A Trump win could steer more business to the likes of Fluor (FLR), Jacobs Engineering Group (JEC) and KKR (KKR). Fisher also noted costs for new infrastructure would be higher with Trump if he follows through on promises to mandate the purchase of local materials including steel.

As the election approaches, investors and construction-company executives aren't the only ones jockeying for position hoping to take advantage of a windfall on infrastructure spending.

Governors, mayors and other local elected officials -- those most responsible for planning and executing such investments -- are adding to a "wish list" of road, bridge, rail and airport projects coast to coast, said Brad Gerstman, a veteran lobbyist and founder of Gotham Government Relations.

Elected officials want to ensure their projects are "shovel ready" (in the parlance of Obama's stimulus plan) from an engineering and planning perspective once a spigot of funding opens up.

"Everybody that would have a horse in this race is talking about it," said Gerstman, who has advised several clients that were beneficiaries of stimulus spending.

Gerstman acknowledged that both candidates would have work to do in selling Congress on such a plan, but he suspects horse-trading on funds for pet projects for legislators would help seal the deal. He expects more spending on traditional infrastructure, such as roads and bridges, under Clinton since those investments enjoy strong support from unions. Trump, he predicted, would put more of an emphasis on airports and energy infrastructure.

Spending the money now will save taxpayers in the long run and save lives lost to failing roads and other infrastructure including commuter rail, Kevin Curry, a senior vice president at Infor, a provider of enterprise software to the public sector, wrote in an email.

"America's infrastructure is crumbling at an alarming rate," he said, "and citizens' lives are at risk."

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