Nobody Knows How President Trump Will Fund His U.S. Infrastructure Plan

If you were shocked last week at the election of Donald Trump as U.S. President, you’re not alone.

For those in the travel industry who will likely have to deal with decreased visitation and the tarnishing of the U.S. image abroad due to nativist policy, one potential relief may be the candidate’s frequent pledge to improve U.S. infrastructure and airports.

Trump’s campaign platform stated he will “transform America’s crumbling infrastructure into a golden opportunity for accelerated economic growth and more rapid productivity gains with a deficit-neutral plan targeting substantial new infrastructure investments” and “pursue an ‘America’s Infrastructure First’ policy that supports investments in transportation, clean water, a modern and reliable electricity grid, telecommunications, security infrastructure, and other pressing domestic infrastructure needs.”

He often spoke at rallies about the need to fix U.S. infrastructure and create jobs in the process. His transition site now lists transportation as one of the major planks of his policy endeavors, but doesn’t go into any specifics on what he will do once in office besides investing $550 billion.

“Americans deserve a reliable and efficient transportation network and the Trump Administration seeks to invest $550 billion to ensure we can export our goods and move our people faster and safer… Our roads, bridges, airports, transit systems and ports will be the envy of the world and enhance the lives of all Americans,” states his transition site. “We will build the roads, highways, bridges, tunnels, airports, and railways of tomorrow.”

Despite the talk from Trump’s campaign, the outlook is weak for U.S. travel growth under the Trump administration due to his blustering rhetoric causing uncertainty and macroeconomic headwinds facing the U.S. economy.

“Trump’s election has caused natural concern in terms of potential effects on the global economy and travel to the US,” reads a Tourism Economics client briefing on Trump’s impact on travel. “Indeed, his policy proposals and rhetoric hold the potential to damage both. How Trump will actually govern remains the greatest uncertainty. Any changes to visa or security policies that would impede travel from major U.S. visitor source markets remain a wild card. And a continuation of campaign rhetoric that could alienate allies and trading partners also holds the potential to damage U.S. travel intentions.”

Spending Without Spending

Trump’s transition platform, particularly its call for an investment package designed around infrastructure improvement, is in direct opposition with the austerity-minded policy of House speaker Rep. Paul Ryan (R-Wisc.) and the Republican-controlled U.S. Congress.

A document prepared by two Trump advisors to contrast his infrastructure plan against Democratic nominee Hillary Clinton’s plan provides concrete details on how such a plan will be financed. The report claims that tax credits and investment vehicles with low interest rates will be used to fund infrastructure improvements, along with different types of public-private partnerships.

This method of financing large-scale infrastructure projects with private debt and tax rebates has never been attempted before at this scale, according to the report. It seems like Trump could attempt to bypass concerns from the parsimonious leadership in Congress by pushing through projects with some kind of private financing, allaying fears of increasing the U.S. deficit through increased spending.

“Trump’s core concept of tax relief to facilitate project investment is not especially new. It has been used historically to target real estate investment. However, the concept of offsetting a major portion of project cost with income tax credits that are repaid as issued by means of the tax revenues generated just by the construction is new,” concludes the report. “Because the combination is revenue neutral, whatever taxes flow from the actual operation of the new infrastructure will be additive to tax revenues. We believe that this tax credit-assisted program could help finance up to a trillion dollars’ worth of projects over a ten-year period. This innovative financing option would serve as a critical supplement to existing financing programs, public-private partnerships, Build America Bonds, and other prudent funding opportunities.”

The issue with this method of spurring infrastructure investment is that private companies will likely only invest in the projects they expect to see a return from, particularly toll roads and other revenue-generating projects. The nitty-gritty work of rebuilding bridges or repairing crumbling water supply systems aren’t such lucrative opportunities for private construction firms.

The view from U.S. Travel

Regardless of how the Trump administration ends up financing its infrastructure plan, there is some optimism that Trump’s background in travel and hospitality will lead to a positive outcome for the U.S. travel industry.

Jonathan Grella, U.S. Travel’s executive vice president of government affairs, told Skift that he believes airport modernization will likely become the centerpiece of Trump’s infrastructure plan.

“The smarter we’ve gotten about it, the more we feel strongly that airport modernization could be the centerpiece of it all,” said Grella. “We have zero airports in the top 25 in the world. This argument would seem to be pretty persuasive to the incoming president, who is committed to American greatness and exceptionalism. Certainly if that’s the case, it would do great things for our cities on the international stage if they all had the air service they needed to get more companies to headquarter here and work here.”

Grella and the team at U.S. Travel had productive conversations with both Trump and Clinton before the election. While no one is sure how exactly Trump’s administration will work to accomplish its infrastructure project, Grella thinks that Trump will come to the table to meet with travel industry stakeholders when the time arrives.

“There’s a lesson here with an outsider coming in and a big picture guy with a hospitality background, so we feel good about the impression we’re going to be able to make,” said Grella. “The partnership we should be able to have with his administration should resemble what we’ve had with administrations of both parties particularly because of that hospitality background and how international business works. Ultimately, if the name of the game is American competitiveness, greatness, and improving the balance of trade by growing exports, then there’s no better place to do that than travel and tourism.”

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