For the sake of our industry, we need to fully support any infrastructure bill that emerges from the Trump Administration and Congress.
President Trump has finally achieved a legislative win, and a big one: the first major tax reform since 1986, and one that has the potential for making a significant impact on economic growth, as reductions in corporate tax rates and increases in expensing of capital goods all bode well for our industry.
But coming off of 2017, where we estimate the year will end up with a 2.8% increase in total concrete volume over 2016, the universal view is that the recovery in the construction industry, and in ready mixed concrete volume in particular, is still anemic. We are more than 100 million cubic yards below the industry high of 2005-06, so we still have a long way to go to a full recovery in volume.
It is with great anticipation that we hear Trump announce he is now turning his attention to a landmark infrastructure bill, and it could not come sooner. But some Capitol Hill-centric publications have recently written about the challenges Trump’s plan faces. At a high level, the structure of the plan seems like a reach, as the Federal government will contribute $200 billion to the $1 trillion plan, and our states, counties, and municipalities are expected to fund the remaining $800 billion. No one is quite sure where the revenue sources for that much local funding it expected to come from. One proposal being considered by the White House is hiking the federal gasoline tax, which hasn’t been raised in more than 20 years. But the politically risky move is almost certain to run into a buzz saw of opposition from Republicans and conservative groups.
But there are other hurdles, as the bill faces opposition from both parties; Republicans are concerned about new government spending, and Democrats are wary of handing Trump another win. The Democrats have slammed the public-private partnership model as a corporate giveaway that will only lead to more tollways. They worry the administration’s proposed local incentive program will pave the way for “devolution”, or eventually handing off all federal infrastructure duties to local governments. And on the Republican side, an infrastructure bill is going to be a tough sell with fiscal conservatives, who are wary of massive federal spending on transportation.
Combine the above with the other daunting legislative matters facing Congress: they will have to quickly grapple with all the sticky issues left unfinished when they passed a stopgap spending bill before the holidays to keep the government open. House and Senate leaders will have to reach a deal on a bipartisan budget agreement, which will lay the groundwork for a massive, trillion-dollar omnibus package to fund agencies for the rest of the 2018 fiscal year. But several other issues are complicating the budget talks, including whether to include measures stabilizing ObamaCare and providing help for immigrants who were brought to the United States illegally as children.
And some Republicans are even pushing for entitlement reform and repealing and replacing ObamaCare, all of which could suck up the oxygen on Capitol Hill. Add to all of the above the delicate challenge of maintaining the Republican majority in Congress in the mid-term elections just ten months from now, and the likelihood of a major infrastructure bill looks like it is at risk.
For the sake of our industry, we need to fully support any infrastructure bill that emerges from the Trump Administration and Congress. Let’s hope we see the details soon
About the Author
Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers & acquisitions. He has a career spanning almost five decades, and volunteers his time to educating the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at pvillere@allenvillere.com. Follow him on Twitter – @allenvillere.