U.S. President Trump recently launched a series of 'Infrastructure Week' events to pave the way for a trillion-dollar infrastructure plan. Some argue that the current U.S. government's tax reform and healthcare reform plans are both hindered, and the infrastructure plan will also face various challenges in its advancement.
On June 5, Trump released a plan to privatize the national air traffic control system to promote the update and upgrade of the air traffic control system, improve efficiency, and reduce costs. U.S. media reported that the air traffic control privatization project is part of Trump's plan to overhaul U.S. infrastructure. Trump expressed hope that the U.S. air traffic control system could be privatized because the current system is 'painfully stuck in the past,' designed when annual air passenger traffic was only about 180,000. He said that now passengers are approaching 1 billion, and it is time for the air traffic control system to enter the 21st century.
Infrastructure Plan Leverages Small to Win Big
Trump proposed allocating $200 billion in federal funds over 10 years to leverage at least $800 billion in state and municipal funds and private capital, thereby forming his proposed $1 trillion infrastructure plan.
However, Trump did not specify the source or use of the $200 billion. But the Trump administration said that a complete legislative package might be ready in the third quarter of this year.
Democrats and some Republicans have said that to meet the overall needs of the country, federal spending needs to exceed $200 billion, and relying solely on state, municipal, and private sector forces will not work.
Cai Enze, chief analyst at Jingsu Media, told the International Business Daily that Trump's trillion-dollar investment plan is a choice in line with U.S. national conditions and will have a certain promoting effect on the future growth of the U.S. economy. In a few years, U.S. infrastructure construction will have a qualitative leap. For example, high-speed rail: China has 20,000 kilometers of high-speed rail, while the U.S. has none. In the U.S., rail barely ranks after cars and planes as the third transportation option. If, in the implementation of the trillion-dollar infrastructure plan, the U.S. can build one or two high-speed rail lines running north-south or east-west, it will greatly promote the growth of the U.S. economy, not just GDP growth.
In Cai Enze's view, it is worth noting that Trump is driving infrastructure construction in the U.S. He has been in the real estate industry for many years, so he has both a special affection for infrastructure and is familiar with it. However, relying on U.S. construction standards, it is impossible to complete such a massive infrastructure plan, and China is strong in this area. Future cooperation between the U.S. and China can improve construction capacity and solve the problem of insufficient construction workers. The China-U.S. high-speed rail cooperation project has had twists and turns, but there is certainly room for cooperation between China and the U.S. on the trillion-dollar infrastructure. Therefore, the economic complementarity between China and the U.S. will be demonstrated once again during Trump's presidency and in the development of bilateral trade.
Project Execution Questioned
Time magazine believes that, with the 'Russia ties' controversy and the firing of FBI Director James Comey not yet fully subsided, Trump's talk of his trillion-dollar infrastructure plan at this time is a diversion of public attention.
Recently, after approving the plan to privatize the U.S. air traffic control system, Trump also showed attention to U.S. road and waterway projects. For those closely related to the system, Trump's infrastructure plan is certainly very popular, but it has also drawn much questioning and criticism.
Huang Wentao, an analyst at CITIC Securities Research and Development Department, believes that on the whole, Trump's budget proposal inherits his main campaign propositions, including the $1 trillion infrastructure investment plan and large-scale tax cuts, but to fulfill his promise of deficit neutrality, he has also made many unrealistic assumptions. 'First, it proposes that future 10-year economic growth will bring $2.1 trillion in additional revenue, based on the premise that its tax cut plan will make the U.S. nominal GDP compound growth rate reach 5% in the next 10 years, and real GDP will remain at 3% after 2021. Regardless of whether the 3% potential growth rate can be achieved, simply assuming that the U.S. economy will not experience a recession for 18 consecutive years is nearly twice the previous longest recovery cycle from 1991 to 2000.' Huang Wentao said. 'Second, this budget assumes an increase in the tax base brought by 3% economic growth, but does not consider the decline in fiscal revenue caused by large-scale tax cuts.' Huang Wentao pointed out. 'In addition, to achieve fiscal balance by 2027, the budget assumes cuts in a large amount of welfare spending. This will have a serious impact on the lives of low-income groups; the reduction in non-defense discretionary spending has also increased from 1% per year advocated during the campaign to 2% per year, which may also face increasing resistance in the future.'
In addition, Cai Enze added: 'Trump's trillion-dollar infrastructure plan is beautiful, but it is not without obstacles. In the U.S., the president's power is checked by Congress. Previously, Trump's tax cut plan and healthcare reform plan both encountered trouble in Congress and were stuck there. The main reason is that these issues are highly complex, and there are still major differences among Republican lawmakers, and Democrats are also obstructing, all of which will bring many obstacles to the Trump administration's promotion of the infrastructure plan.'