"No surprises": that is how Goldman summarizes today's detailed infrastructure proposal released by the White House. According to the bank, it includes the same amount of funding, distributed in the same way, as the short proposal leaked to the media several weeks ago." It is summarized below:
More importantly, Goldman believes that "the low odds of enactment this year have not changed, in our view", which coupled with the White House's full budget proposal which also has virtually zero chances of being adopted in its proposed shape, means that Monday has so far been much ado about nothing.
Here is Goldman's full take:
The overall amount of federal funding under the proposal remains at about $200bn. This was originally described as helping to finance up to $1 trillion in infrastructure investment, but the President has described it more recently as backing up to $1.5 trillion. Regardless of the amount of non-federal funding the proposal might attract, the federal portion remains $200bn spread over several years.
The major aspects of the proposal are similar to the proposal that has been circulating informally and has already been described in the media. It consists of four broad segments:
- Infrastructure Incentives Program ($100bn): States would be required to establish a sustainable non-federal funding stream equal to 80% of project costs, which would be matched with 20% federal funding. This would be aimed at traditional areas of federal investment, i.e., transportation, water/sewer.
- Rural Infrastructure Program ($50bn): This funding would come via grants to states with no matching funds required, and would be aimed more broadly than traditional federal investment by including broadband and electrical power in addition to transportation and water/sewer.
- Transformative Projects Program ($20bn): The federal government would put up funding for 30%, 50%, or 80% of the project cost (depending on project stage). This would be aimed at projects that are commercially viable but have much higher than usual risk/reward.
- Infrastructure Financing Programs ($20bn): The proposal would expand several existing federal programs through additional funding and broader eligibility, including the TIFIA and WIFIA programs and private activity bonds (PABs).
The proposal also calls for a number of regulatory changes, including permitting reforms and broader allowances for states to use tolling on interstate highways. In addition, the proposal would allow for greater divestiture of federal infrastructure assets.
Our view has been that infrastructure legislation will be difficult to enact this year, in light of the need for 60 votes in the Senate, a lack of bipartisan consensus regarding the appropriate structure for federal infrastructure funds, and political considerations ahead of the upcoming midterm election. With few apparent changes from the document floated several weeks ago, the new proposal seems unlikely to change the dim prospects for an infrastructure financing plan being enacted this year, in our view.