Building Boom Before Infrastructure Bill

The rebuilding of America is underway. Both political parties want an infrastructure spending bill, yet gridlock is likely to prevent the desired $1.5 Trillion Bill ($150 Billion/year) as it requires either massive new deficit spending or higher taxes. A 25 cent Gasoline tax hike to generate $37.5 Billion/year, toll roads and burden shifting to the States will be major aspects debated soon that could offer a modest accomplishment. While another $1.5 Trillion Bill on top of the projected $1.5 Trillion shortfall due to tax cuts is a tough sell in this climate, the US economy is already investing in infrastructure now thanks to higher profits and tax revenues. Corporations and States in the larger faster growing coastal areas are leading the way with replenished cash levels. The 2 year lull in overall State revenue collections from the energy 2015 – 2016 slowdown along with weak stock market capital gains has been reversing in 2017 and we expect new highs in the number of States with revenue gains in 2018. 

The private sector profit motive has spurred a wave of building that benefits infrastructure on the micro level and to some extent in surrounding areas. The online shopping wave led by Amazon blasted off over the past 4 years with a 500+% increase in spending on e-commerce warehouse distribution centers and personal storage spaces.

Federal dollars have yet to assist overdue Airport improvements, but key States have begun spending on passenger terminals at Airports. With air travel in the US growing at a rapid 7% annual pace, there is a significant deferred maintenance needs that will demand a sustained effort to modernize and expand.

New funding for micro-center hospitals to serve the aging population began taking off in late 2017 once the fears over Trumps failed Affordable Care Act (ACA) reduction efforts subsided. Growth for now is expected to continue at a healthy high single digit pace as retiring Boomers entire the 65+ bracket at a ~1.5 Million per year pace (about twice the rate of those entering the workforce).

Federal construction dollars spent are rising after years of decline, but far more will be needed to maintain our D+ infrastructure rating. 

While subsidies for student loans continue higher, elementary school building may be rising once again as children of Millennials begin a new wave of enrollments as occurred in the late 1980’s – 1990’s when today’s Millennials were entering school.

Although State and Federal employment is stagnant and Government spending remains a non-factor in the overall economy, we see that Public and Private sector construction is accelerating organically. However, the electrical grid is an area of particular concern with estimates of $150 to 200 Billion needed every year for 10 years to modernize our system, with a mere $5 Billion needed to harden our key power nodes from electromagnetic pulse attacks (EMP’s). To pass a new infrastructure bill seems almost chimerical at this juncture, requiring some very challenging deal making, but until then, the current expansion phase has triggered profits and spreading construction booms while waiting for Godot.

 

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