CEG Blogger Megan Wild takes a look what could happen to the industry with either candidate.
No matter who the next President of the United States turns out to be, they definitely have their work cut out for them — so do the nation's construction and contracting companies.
UPDATE: A look at the third party candidates has been added to this article.
The dust has settled, and America finally has its two “major” presidential candidates. They're both historically unpopular, but that doesn't change the fact that even unlikable candidates can do a world of good.
When it comes to construction and American politics, opportunities abound.
No matter who the next President of the United States turns out to be, they definitely have their work cut out for them — so do the nation's construction and contracting companies.
Let's take a look at how either candidate's Presidency would affect the Industry.
How a Clinton Presidency Would Affect Construction
There's no end to the ways that a change in national leadership can make an impact on major industries, and construction is no different. From new regulations to investments in infrastructure, Hillary Clinton's administration has the potential to touch many lives. Here are a few ways it might do so.
“Massive” Spending on Infrastructure
Hillary Clinton got jostled toward the leftmost end of the political spectrum during her primary campaign against Bernie Sanders, and it shows in her proposal for infrastructure spending. Clinton has indicated that, within the first 100 days of her presidency, she will introduce a five-year spending plan to shore up America's crumbling infrastructure.
The plan will cost $275 billion. That might sound like a lot of money, but it really isn't — at least in the grand scheme of things. It purports to be comprehensive in scope, with an eye toward improving America's bridges, roads, highways, rail systems and airports, but it falls fall short of the figure recommended by the American Society of Civil Engineers and other groups.
Still though, even though this comparatively small investment can have positive effects. Besides the obvious improvement of infrastructure, jobs will increase in the area of construction and construction companies will be able to make investments in their fleets. While they may not be able to buy new equipment right away, many will seek the flexibility and efficiency that renting equipment provides, which can boost the profitablity of construction equipment vendors.
According to the 2013 Infrastructure Report Card from the ASCE, America earns a measly D+ when it comes to the overall quality of our infrastructure — a status that has far-reaching and potentially devastating economic implications if America wants to continue competing on a global scale. In point of fact, the only aspect of infrastructure that earned a B-grade or higher is waste disposal, with a somewhat pathetic B-.
Overall, the ASCE recommends a total investment of $3.6 trillion by 2020 to stave off the worst effects of this years-in-the-making shortfall. While Clinton's proposal falls short of meeting that requirement, it does seem to have the future in mind. The $275 billion spending plan also includes a $25 billion “national infrastructure bank” — an idea that's been consistently struck down by our Conservative-led Congress. The bank would provide support for $225 billion in loans meant to encourage private investment and could represent a grand total of $500 billion in overall infrastructure spending.
It's a price tag that means lots of new jobs bringing bridges and roads back up to code — and finally committing to the necessary ongoing maintenance, the lack of which helped land us in this crisis in the first place.
Who's the “Infrastructure Frontrunner?”
The construction and labor industries have been keeping an eye on the presidential race for more than a year now, and thanks to a series of polls, we know which candidates have been most favorable on this important issue. While he was in the race, Bernie Sanders won by a handy margin, followed by Trump and Clinton in second and third place, respectively. During his time as a candidate, Sanders proposed a $1 trillion spending plan for infrastructure.
Strangely enough, though, the Republican Party is still proving popular among construction industry insiders, with 69% of campaign donations going to Republicans and just 30% to Democrats. Nevertheless, Clinton has received the nod from a number of high-powered labor unions in the industry, including the North American Building Trades Union.
Clinton's proposal is a solid and much-needed one, even if it falls short of the plan brought forward by her primary challenger and doesn't meet the recommendations of the ASCE. Still, a Clinton presidency would seem to be the better choice — at least in comparison with a man whose involvement with construction seems to begin and end with deciding on the dimensions of the bright, golden letters that spell his name.
Forecasts for the Future
Interestingly, economists have had mixed opinions about the potential impact of recent presidential candidates on construction and related industries, including the housing market.
Unlike the poll results mentioned above, economists were less optimistic about either a Trump or a Sanders presidency — the former because of his “unpredictability” and the latter because he associated himself with the concept of socialism. Ignoring for a moment that socialism is nothing more than the exchange of tax revenue for public services (public roads, public parks, police and fire stations, etc.), their impression of Clinton at least holds with what we've seen elsewhere: She'd be good to the construction industry.
This is according to a Zillow/Pulsenomics survey of active economists, which predicts, in the event that Clinton wins the general election, housing prices could see an uptick of about four percent year-over-year beginning at the end of 2016.
That's good news for home builders and the construction industry in general.
How a Trump Presidency Would Affect Construction
When it comes to construction and American politics, opportunities abound.
No matter who the next President of the United States turns out to be, they definitely have their work cut out for them — so do the nation's construction and contracting companies.
The American Society of Civil Engineers (ASCE) has been keeping track of the state of America's crumbling infrastructure, and the situation right now is probably best described as “dire.” Just as you'd grade a student on their reading and math scores, the ASCE grades America on the state of our infrastructure. Criteria include aviation, bridges, drinking water, schools, transit, waste disposal and about a dozen other important aspects of modern infrastructure.
In 2013, solid waste received the highest grade of the lot, with a depressing B-. Bridges got a C+. Everything else is worse, including a long parade of Ds.
In short, it's one of the direst issues of our time — as well as one of our greatest opportunities.
Trump on Infrastructure
Donald J. Trump might claim he's an outsider, a visionary and an iconoclast, but a peek into his policy proposals, such as they are, reveals quite the opposite: He's conservative to the core. The only thing that differentiates him from a man like Paul Ryan is that Ryan sometimes knows when when it's best to say “no comment.”
So far, trends in campaign donations seem to confirm that Trump is not nearly so removed from the political mainstream. About 69 percent of campaign donations made by construction industry insiders are going to the Republican Party, while Democrats have received just 30 percent. Given how strong Secretary Clinton's infrastructure proposal turned out to be, this is a minor mystery.
The Housing Market Doesn't Show Much Confidence
What's a little less surprising than the industry's faith in Trump is the housing market's lack of it. A survey published by Pulsenomics and Zillow indicates extremely negative forecasts for home values, housing finance and “overall economic impact” in the event that Trump wins the White House in November. And as we saw in 2008, the housing market has rippling effects.
With lower home valuations, homeowners may skimp on seemingly unnecessary or expensive investments. What happens to a home without a standby generator during the likes of SuperStorm Sandy or Hurricane Katrina? The effect here is two-fold. Sellers in the industry, such as Yancey, suffer loss of income, and homeowners are put at risk.
And it's not hard to imagine why. So far, Trump doesn't seem to have much of a plan at all when it comes to tackling our infrastructure problems and boosting the construction industry.
What little he's done so far isn't promising for voters: Make vague promises about infrastructure spending plans, but steadfastly refuse to consider hiking the gas tax to help pay for it. The Donald has actually proposed a “trillion-dollar rebuilding program,” which, if it sees the light of day, would make Secretary Clinton's $275 billion plan pale in comparison — that is, if there were any way for him to pay for it.
Trump has suggested raising revenue by lifting energy production restrictions (an obvious giveaway to the coal and oil industries), and by finding new ways for the private sector to become involved in financing infrastructure projects.
It's that last point that should get the most attention. We've seen this kind of experiment play out already on a smaller scale. You know the one — we get government out of the infrastructure business and hand the reins (and our trust and tax revenue) to third-party, privately owned companies instead. What could possibly go wrong?
Honestly? A heck of a lot. Omaha made the ill-informed decision to privatize some of their roads, and it turned out to be an unmitigated disaster. After running out of money, the local paving company tasked with road maintenance literally just ground up several major roads into gravel, instead of paving them properly. There was no warning, and the result was lower property values for locals and untold inconvenience for the companies doing business there.
This is why we need a candidate to take our infrastructure crisis seriously. Republicans are right — to an extent — that government can sometimes hold the private sector back. But as Omaha's all-too-real nightmare scenario has proven, government needs to remain at the top of the food chain since government answers directly to the people and their needs in a way that Corporate America never has.
The Trump Card
If we've learned anything about Trump, though, it's that he's wildly unpredictable. So who knows? Maybe even a historically unpopular candidate might end up doing some good.
In the meantime, it pays to be an informed voter. Politicians are either serious about solving our longstanding problems, or they are not. Given how long we've already neglected America's infrastructure, we can't afford another President who is content with the status quo.
The Outsiders: The Views of the Green and Libertarian Parties on Construction
The Democratic and Republican party establishments want American voters to believe there are just two active political parties in this country. This is not so. In fact, as of April 2016, 28 political parties were formally recognized as ballot-qualified.
With an election drawing nigh, in which our two incumbent parties have fielded unprecedentedly unpopular candidates, it's more important than ever to see what America's third parties have to offer – including their stances on the issues that matter most to Americans. Some of these top issues are infrastructure, jobs and construction.
Dr. Jill Stein and Gary Johnson, of the Green and Libertarian parties, respectively, are hoping this is their breakthrough year. Let's see where they stand on these issues.
The Green Party: Dr. Jill Stein
The most significant plank in the Green Party platform, circa 2016, is what the party calls its Green New Deal. This would be a sweeping, coast-to-coast initiative to put people back to work, tackle climate change, rebuild our crumbling infrastructure and guarantee health care to all U.S. citizens as a right.
During his presidential run, Bernie Sanders championed the work FDR did in putting Americans back to work and bringing our country's roads, bridges, water treatment plants and airports back up to code. The Green Party is continuing that fight.
As far as infrastructure goes, Stein and her running mate Ajamu Baraka have declared their intentions to institute an emergency jobs program. Like previous government jobs programs, it would focus heavily on construction and infrastructure.
It would be wrong to think of these sorts of employment opportunities as short-term engagements, however – America has a significant infrastructure crisis on its hands, and a new wave of employment in this sector would provide decent-paying jobs for millions well into the future. While construction employers, such as Johnson-Machinery have employment opportunities available, this kind of investment would aim to significantly bolster the construction industry and reduce unemployment. We're not just talking about building a few new roads – we're talking about long-term opportunities thanks to ongoing and routine maintenance, which has long fallen by the wayside during America's long years of Republican-led austerity efforts.
It is a fact that government spending is one of the few proven ways to lift a country out of a depression – which, even with our recent heartening economic gains, is still very much a label that applies to the U.S. economy. During the Great Recession, President Obama's spending efforts expanded the U.S. deficit by about 70 percent. For the sake of comparison, FDR's administration spent its way out of the Great Depression by ballooning the deficit by 1,000 percent. Remember: FDR is the president most frequently credited with turning America into a superpower.
With that in mind, Stein has distanced herself even from some liberals, holding firm in her conviction – one that's shared by economists – that government spending during hard times is not just inevitable, but absolutely necessary.
The Libertarian Party: Gary Johnson
The contrast between Jill Stein and Libertarian candidate Gary Johnson could not be more stark. Where she wants to expand the role of government, Johnson wants to cut government programs to the bone.
For starters, Johnson has signaled his support for the belief that our national debt is bankrupting us. This is not so. In fact, the national debt of the United States is considered a safe haven for investors – one they were all too eager to run back to during the global financial meltdown of 2008. More importantly, it's good for American citizens, whose tax dollars get put to work building programs and initiatives that improve life in this country across the board.
So, with the fantasy of an impending, debt-driven collapse thoroughly debunked, what would Johnson spend our money on?
Not much, it turns out. Johnson would eliminate farm subsidies, which would harm America's already-struggling farmers, avoid further stimulus spending like the plague and generally cut the federal budget by a staggering 43 percent. If you've been following Greece's freefall into third-world status, you know this is precisely the opposite of what is needed during economic crises.
During his tenure as New Mexico's governor, the state's budget grew from $4.397 to $7.721 billion. As we've established, Jill Stein is not afraid of growing government spending – but she's not the one running as a fiscal conservative.
Johnson is also hostile to unions. In the construction industry, union membership stands at about 13.2 percent, as of January 2016. That's a lot of folks to throw under the bus, considering the state of our infrastructure and the dire need we have of skilled and semiskilled laborers.
Perhaps most damning, Johnson is campaigning full-bore on the idea that corporate income taxes should be eliminated wholesale, despite the general consensus among economists and labor experts that this does not, as he claims, result in increased employment in the private sector.
As far as explicit infrastructure and construction policies go, Johnson is still a bit tight-lipped, despite the fact that he presided over a $10 million, 1,000-employee construction company that he sold in 1999. Also to his credit: As governor of New Mexico, he oversaw the construction of 500 miles of brand-new highway. One highway in particular, Route 44, was designed, financed, built and guaranteed by a private company.
Regrettably, however, the word infrastructure doesn't appear even once in the official 2016 Libertarian Party platform.
Six of One, or Half a Dozen?
The Green Party is more progressive than the Democrats, while the Libertarian Party is even more conservative than the GOP.
That makes the 2016 election something of a history exam for participating voters. Which political party has presided over the biggest economic expansions? Which party's philosophies still ring true, and which have been demolished by a generation's worth of impartial data? Opinions are great, but facts are even better.
NOTE: The views expressed here are those of the author and do not necessarily represent or reflect the views of CEG. Megan Wild writes about trends in the construction industry on websites like Engineering and CADDigest. When she's not catching up on world news in the newspaper, she likes to write about home improvement tips on her blog, Your Wild Home.
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