The Devil in the Infrastructure Details

President Donald Trump doubled down on his campaign promise to push $1 trillion of infrastructure spending through Congress in an effort to patch up America's roads, bridges, airports and waterways during his first speech before a joint session of Congress.

But the president appeared to back away from the idea of financing such a massive infrastructure overhaul through tax breaks and private investment alone – which some are interpreting as a sign he's coming to terms with the politically tortuous task of paying for such an effort.

"Crumbling infrastructure will be replaced with new roads, bridges, tunnels, airports and railways gleaming across our beautiful land," the president promised during his address.

"I agree with the president. We have crumbling infrastructure," says Steve Witkoff, a real estate developer and investor who has known Trump for decades. "New York City is a classic example. Every single year, people sort of hold their breaths if they have those low-profile tires, because the potholes on the streets are terrible."

Democrats recently floated their own $1 trillion infrastructure proposal, which they say could help create "more than 15 million jobs over the next 10 years."

But the devil of these infrastructure plans is in the details, and lawmakers for decades have been unable to agree on exactly how to go about funding such projects. Democrats have historically advocated for pooling funds through corporate tax reform, though Republicans have been more lukewarm on that idea.

Infrastructure banks, gas taxes and toll roads have all entered infrastructure funding conversations at one point or another, but lawmakers have yet to come to consensus. Bill Sandbrook, CEO of U.S. Concrete, says politicians were discussing infrastructure funding when he entered the industry 25 years ago and that some of those same challenges are still around today.

"There's more cars. There's more trucks. There's more people. There's more suburbs. There's more of a movement of goods and services over the past 25 years that have continued to beat up the underlying infrastructure," he says. "It is significantly underfunded. There's study after study after study that says [the country's infrastructure shortfall] is in the trillions of dollars."

U.S. Concrete's stock, for example, opened Wednesday up more than 35 percent from where it closed on Election Day. U.S. Steel was up more than 92 percent over the same period, while Fluor Corp., one of the country's largest publicly traded construction companies, enjoyed gains of more than 26 percent over the same period.

"There's an enormous percolating impact from infrastructure, particularly around transit, because it creates all other kinds of development from it. You get jobs on top of jobs," Witkoff says. "And in a world where you have sub-2 percent [gross domestic product] growth and with demographics that are not on our side and productivity increases that are not on our side right now, infrastructure is a key component of getting to this administration's minimum target for GDP growth."

But prior to Tuesday, Trump's publicly stated plan for boosting infrastructure spending had been criticized as being unrealistic and appeared to diverge from public remarks made by his transportation secretary, Elaine Chao. The president's plan to fund infrastructure projects hinged on private investment stimulated by the issuance of billions of dollars of tax credits. Some analysts didn't believe the plan would be attractive enough to stimulate the $1 trillion in private investment Trump was looking for. And there was additional concern that such a plan would generate conflicts with the companies that undertook the construction projects.

"Instead of having the government spend directly to fix our dangerously outdated roads, bridges, airports, water systems and more, Trump would give large tax credits to private investors, covering 82 percent of the capital they invest in infrastructure projects," the Main Street Alliance small business advocacy group said in a statement Tuesday, noting that the completed projects could be considered "private property, resulting in more highway tolls, increased privatization of water and sewer systems and other fees for public use."

Chao, for her part, has gone on record multiple times as saying she believes public-private partnerships have a role to play in infrastructure reform but that this may not be a one-size-fits-all solution.

"Everybody wants a better transportation system, but very few people want to pay for it. So that's a big conundrum. There are a number of pay-fors for improving our critical infrastructure. And the pay-fors are going to be hard," Chao said over the weekend during an appearance before the National Association of Governors. "But as we go forward, we do look forward to, for example, public-private partnerships. That is not the answer for everything, because there is a cost to that. And there is consumer lack of acceptance for toll roads, for example, in certain areas."

Trump, however, appeared to acknowledge Tuesday night that fixing the nation's infrastructure wouldn't be a quick and easy process. Notably, his speech appeared to open the door to the possibility of funding mechanisms outside of public-private partnerships and tax credits.

"To launch our national rebuilding, I will be asking the Congress to approve legislation that produces a $1 trillion investment in the infrastructure of the United States – financed through both public and private capital – creating millions of new jobs," Trump said.

That "public and private" financing is a notable departure from his campaign-season rhetoric and did not go unnoticed by Sandbrook.

"That was a point of contention during the campaign and through his inauguration. For a long time, he was insisting that it was going to be privately funded," Sandbrook said. "I think that that's critical, because I think it shows that the president after 40-some odd days in office is seeing the realities of what's needed to carry out his major plans. It's not an executive order that can magically produce $1 trillion."

Getting debt-wary Republicans on board will be no small task for the Trump administration and for Democrats hoping for some sort of infrastructure progress. But Witkoff pointed to an interview Sen. Ted Cruz, R-Texas, gave Tuesday night in response to Trump's speech as a sign that Republican lawmakers may be willing to play ball on infrastructure.

When asked how he feels about Trump's plans for big investments like infrastructure, Cruz said he will "certainly look at the details of the budget" but that "the most potent tool for dealing with the national debt and the deficit is not cost-cutting."

"It's economic growth," he said. "Economic growth is the only first-order variable."

Witkoff was encouraged by this response as a sign that Cruz and his colleagues may be willing to seriously consider investing in infrastructure, considering the economic boost analysts expect would follow suit.

Trump has vowed to get annual economic growth north of 3 percent – something that hasn't happened in the U.S. for more than a decade. But without infrastructure reform, Witkoff says, it may be difficult to make that dream a reality.

"That strong economy pays for more defense spending. That strong economy pays for entitlement packages," Witkoff says. "How do you get more economic growth out there? Well, taxes and jobs. And it begins with infrastructure. That's a big-payback program."

Exactly how Trump plans to go about doing this is still unclear. But his speech Tuesday appeared to acknowledge there are plenty of options on the table and that a multifaceted approach may be necessary to overcome roadblocks on Capitol Hill.

"To me, that's the most encouraging part of the whole speech, because we've been hearing about the $1 trillion for awhile," Sandbrook said. "While there weren't a lot of details last night, I think people are missing the point to some extent. He said a combination of public and private funds. ... The public funds have to come from somewhere."