Final Thoughts: Will Trump’s Big Win Prove Too Taxing for Infrastructure?

As we put this newsletter to bed, details of the tax bill remained unclear. Some accounts indicated that private activity bonds would retain their tax-exempt status under the new tax laws, which is arcane but important. “The president has been saying he wants private sector money to play a large part in the infrastructure improvements. I don’t see any way to attract private investment for infrastructure if there isn’t favorable tax treatment,” the economist noted.

Not to suggest there will be no infrastructure spending next year. The need to expand and modernize facilities will drive a good deal of airport construction. Airports are largely self-funded through airline landing fees and various rents and taxes. Work to expand ports to handle the larger ships that can now pass through the Panama Canal will continue, though much of that spending has already taken place. State and local governments will work on the nation’s badly deteriorating roads and bridges with whatever federal support they can get.

“In terms of putting more federal money toward infrastructure, I don’t see it happening in 2018, even if the administration puts forward a plan early in the year. It will take Congress time to pass it, and time for state and local authorities to award the contracts, pushing the timetable into 2019,” the economist said.

By some estimates, the big federal infrastructure program promised by Trump the candidate could boost steel demand in the U.S. by as much as 5 percent. What Trump the president can deliver following the bruising battle over taxes may be considerably less.

Editor’s note: SMU Publisher John Packard is cruising the Caribbean on a well-deserved vacation (which has not kept him from dashing off various emails about steel between fruity drinks with little umbrellas). Look for John’s Final Thoughts in Thursday’s newsletter.