Issue of the week: Trump’s infrastructure promises
In these divisive times, voters and politicians seem to agree on at least one thing: Our nation’s infrastructure is desperately in need of major upgrades, said Andy Uhler in Marketplace.org. “In fact, it was one of the first things President-elect Trump mentioned in his victory speech,” echoing earlier pledges on the campaign trail to invest as much as $1 trillion rebuilding U.S. highways, airports, and schools. The specifics, however, are murky. Who foots the bill and what projects get priority “are just a few of the details the Trump team has to work out.” Trump’s promise to refurbish crumbling U.S. infrastructure is a big reason behind the stock market’s postelection rally, said Paul Davidson in USA Today. His advisers have laid out a rough blueprint centered on public-private partnerships, which theoretically “would add nothing to the deficit.” That program, says Team Trump, would generate up to $1 trillion worth of investment over 10 years, creating 3.3 million jobs.
“The catch, though, is that Trump doesn’t really have a plan to do all this,” said Brad Plumer in Vox.com. At least not a conventional one. Right now, the idea is to offer some $137 billion in tax breaks to private investors who want to finance toll roads and bridges or other revenue-generating projects. The problem is, if every project needs to make a profit for its investors, a lot of pressing infrastructure needs won’t get funded. The monetized approach likely won’t work for repairing existing roads or replacing aging pipes in poor communities like Flint, Mich., “where people can’t afford a big hike in their water bills.” Those projects require billions of dollars in direct public funding, which is a nonstarter with the Republican-controlled Congress. There is one way to get the private sector to pay for projects like Flint’s water system: “Give them a cut of the profits in perpetuity,” said David Dayen in NewRepublic.com. The result would probably be a disaster, however. Chicago did something similar in 2008, when it leased the rights to 36,000 parking meters for 75 years to a Wall Street investor group, which now charges exorbitant fees to park in the city.
Don’t expect a blue-collar job boom, either, said Steve Chapman in the Chicago Tribune. The unemployment rate for construction workers is just 5.7 percent, and “out-of-work coal miners don’t necessarily have the skills contractors need to expand airports or replace bridges.” And while stimulus spending can be helpful in a recession, “in the eighth year of a recovery, it will just crowd out private spending, nullifying any macroeconomic benefit.” Still, companies are already lining up to make sure that their pet projects qualify as essential infrastructure, said Steven Mufson in the Los Angeles Times. IBM CEO Ginni Rometty has pressed Trump on the need to invest in cybersecurity, while Verizon is pitching internet-connected LED streetlights. Meanwhile, energy companies are licking their chops at the prospect of new oil pipelines. “There is no shortage of volunteers,” but what eventually gets the green light is anyone’s guess. “One person’s critical infrastructure is another person’s bridge to nowhere.”
Why coal can’t be saved
Donald Trump has pledged to “bring the coal industry back,” but he’ll be lucky just to slow its “precipitous decline,” said Justin Fox. There are signs that market watchers think the Trump presidency could indeed revive the struggling sector’s fortunes; shares of coal giant Peabody Energy, which filed for bankruptcy in April, surged after the election. And to be fair, Trump’s promises to miners aren’t “entirely empty.” The Obama administration “really has been waging a ‘war on coal,’” by putting into place tougher air pollution regulations and blocking new coal leases on federal lands. Trump could immediately “cease hostilities,” which would help remove some of the industry’s headwinds. But environmental regulations were never the main reason for coal’s decline; market forces were. Thanks to the fracking boom, natural gas has displaced coal “as the nation’s No. 1 source of electrical power.” Natural gas not only burns cleaner than coal, it’s also cheaper. That’s likely to remain the case no matter how much Trump tries to give coal country a helping hand, because no one “has reason to expect a crackdown on natural gas drilling” from his administration. “The past few years have been so terrible for miners that even a pause in coal’s decline may feel like a comeback.” But a permanent revival? It’s just not in the cards.
Factories of the future
The Wall Street Journal
“U.S. manufacturing is about to get smarter,” said Christopher Mims. The same data revolution that has transformed the advertising business, allowing for real-time decision making and highly targeted marketing, is poised to reshape the factory floor. Just as marketers harvest customer information to deliver more effective ads, manufacturers are hoping to use data from their machines to make factories “more productive, less costly to operate, and more reliable.” The insights generated could be used, say, to set the ideal temperature for an entire factory or quickly ramp up production in response to sales. It could also prevent unplanned downtime on an assembly line from a broken machine; car owners are already familiar with this kind of preventive maintenance, thanks to software that tells drivers when a part is about to fail. I’d assumed that manufacturers were already pretty far along in this process, given all the talk about the Internet of Things. “But that turns out not to be the case.” Industrial giants like GE say adding high-tech sensors to legacy equipment is expensive and challenging, especially when it comes to powering them. The business opportunity, however, is massive. A data-driven approach rapidly revolutionized the $500 billion global ad industry. Think about what it could do for the $12 trillion manufacturing sector.