Clinton Sees Chance to Build Bridges on Infrastructure
Hillary Clinton is gambling on achieving the kind of political breakthrough early in the next Congress that has eluded policymakers in recent years as she places an infrastructure blitz at the top of her policy agenda.
The former secretary of state, who was pushing her economic plans in a speech in Michigan on Thursday, vows that if elected she would seek bipartisan support for a big package of federal spending in the first 100 days of her presidency.
Putting infrastructure so high on her list of post-election priorities is hazardous given it will require compromise on knotty business tax reforms. The early months of a first-term presidency tend to be the key moment when deals get done with Congress, so the candidate cannot afford to waste political capital on long-shot policies.
Yet Clinton campaign officials say they sense a real opening amid increased discussion on both sides of the political divide about the benefits of greater investment in roads, bridges and other public infrastructure.
“After three decades of under-investment it is an issue whose time has come,” said William Galston, a senior fellow at the Brookings Institution who has followed the Congressional debate closely. “If the financing issue can be resolved — which I think it can be with some flexibility on both sides — there is a serious possibility of a deal.”
Adding to the impression of bipartisan interest, Donald Trump, Mrs Clinton’s rival, has vowed to push through an even larger infrastructure package. In a reversal of customary political alignments, the property baron has suggested funding the spending via new government bonds. Mrs Clinton, on the other hand, says she will fully fund her plans via business tax reforms, including closing loopholes, recognising Congressional Republican opposition to deals that formally advocate extra borrowing.
The existence of a serious infrastructure deficit in the US is not in serious dispute — the question is how to pay for the rebuilding.
The American Society of Civil Engineers this year projected a $1.44tn investment funding gap between 2016 and 2025, warning of a mounting drag on business activity, exports and incomes. The passage last year of a federal law providing long-term funding for surface transportation was only achieved through fiscal gimmicks including a raid on the Federal Reserve’s capital funds.
Mrs Clinton wants to spend $275bn over five years, with $25bn of the money going to seed a new infrastructure bank to help lure pension funds and other sources of private capital off the sidelines. Her plan envisages that the new bank would support up to $225bn in loans and loan guarantees, bringing the total value of the infrastructure plan to $500bn.
In her speech in Warren, Michigan, Mrs Clinton was expected to claim she would back the biggest investment in “good-paying jobs” since the second world war. She was set to attack Mr Trump’s plans as being focused on helping his millionaire and billionaire friends and allies.
The Clinton campaign is seeking a crackdown on “inversion” deals that US companies use to cut their American tax bills. But key details have yet to be filled in, and analysts insist a deal will be far from easy.
A critical question is whether agreement can be reached with Congress on reforming the US international tax system to tap corporate cash piles overseas and provide a one-time burst of infrastructure spending.
Mr Obama has proposed a one-off, 14 per cent tax on cash mountains sitting abroad, suggesting that the fruits could be spent on infrastructure. House speaker Paul Ryan and Democratic senator Chuck Schumer have held discussions on an overhaul.
But achieving compromise on the tax rate needed to bring money onshore would be difficult, and Mrs Clinton’s campaign has not pinned its colors to the repatriation mast.
Michael Likosky, infrastructure head at consulting firm 32 Advisors, said it was risky to place too much hope in a repatriation deal. “I don’t think we are at a point yet where we can coalesce around repatriation,” he said.
Yet Mr Galston said pulling money in from overseas may be necessary to bridge the funding gap. “The reason this is going to be difficult without repatriation in play is Republicans are likely to resist both revenue-raising corporate tax reform and an addition to the budget deficit. Repatriation is a way of squaring the circle.”