Worley Blog

INFRASTRUCTURE BACK ON THE WASHINGTON TABLE

Posted on: June 26th, 2020 by Clifford F. Lynch

 

It is difficult for supply chain managers to focus on anything but meeting their firms’ human resource and distribution challenges under the current stressful circumstances. While Covid-19 restrictions have been lessened somewhat, it appears that this relaxing of preventive measures may have been a little premature, possibly extending the logistics difficulties. In any event, life goes on, and certain other areas need attention. In the U.S. today, infrastructure improvement remains at the top of two lists – one outlining the critical needs of the country – and the other listing those important projects about which Congress has done nothing.

It appears however, that the sands may be shifting somewhat. Sources indicate that the White House is preparing a $1 Trillion infrastructure improvement package, following up on the provisions included in the current budget. While much of the funds would go toward roads, bridges, and other infrastructure work, some would be devoted to rural broadband and 5G infrastructure.

While we have seen these proposals rise and fall for four years, there are three reasons why we might finally see some Congressional action in 2020. First of all, the current legislation, the FAST (Fixing America’s Surface Transportation) Act, signed into law in 2015, expires on September 30 of this year. This law funded surface transportation programs for fiscal years 2015-2020, and among other things, authorized $220 Billion for roads, bridges, and recreational trails. Between now and September 30, this funding must be reauthorized or hopefully, replaced by a new, broader program.

Secondly, the worsening economy and increased unemployment (over 3.2 million on June 1) resulting from Covid-19 necessitate some kind of action. Since the days of FDR, Congress has seen infrastructure work as a way to increase employment. Often, the creation of jobs has been more important than the projects themselves. It now appears possible that infrastructure programs could be included in the next round of virus-relief legislation, theoretically at least, putting more people back to work.

Finally, the presidential election is only five months away, and infrastructure improvement has been promised since the last presidential campaign. The president has repeatedly asked for legislation, but usually controversy has kept anything from happening. In one instance last year, President Trump walked out of an infrastructure meeting with Democrats, vowing not to meet with them again until they stopped investigating him. If everyone can learn to play nice and come to some agreement, it could be very beneficial to the president’s re-election efforts. If not, this will be still another case of “Politics Before Progress”.

The major issue this year will be the same as in previous attempts – how to pay for the improvements. The American Society of Civil Engineers has estimated that over $2 Trillion will be necessary by 2025. So much has been spent on Covid-19 relief measures, this will be a hard sell in Congress. Most industry experts still believe that the logical fund raising method would be to increase the gas tax which has remained constant since 1993; but to most members of Congress this suggestion has been about as popular as a root canal. In fairness, at this particular time, increasing taxes would not be a wise move. With interest rates so low (near zero) more government spending may be easier to digest. According to Bloomberg, Mary Daley, President of the Federal Reserve Bank of San Francisco, said “Now is an especially good time to take on this kind of debt.” While the last thing the country needs is more debt, something must be done, or our roads and bridges will continue to deteriorate.