On Monday, President Obama proposed a nearly $US4 trillion budget for the fiscal-year 2016. As part of this budget, Obama proposed a 25% increase to infrastructure and transportation spending.
To fund this increase, Obama’s budget proposed a one-time tax holiday that would allow US companies holding cash overseas to repatriate this money at reduced tax rate of 14%. Senators Barbara Boxer (D-CA) and Rand Paul (R-KY) have proposed a separate plan to tax repatriated earnings at 6.5%.
So, quite a gulf between repatriation proposals, and without a plan to bring foreign earnings back to the US, infrastructure investment is probably not happening this year.
In a note to clients in January, Goldman Sachs’ Alec Phillips foresaw this hangup in a report that outlined the problem facing America’s bridges, a majority of which are approaching the end of their functional life. Phillips wrote:
“While core infrastructure in the US could clearly use improvements, our expectation is that they will occur only slowly … Eventually, federal reform is inevitable but it is far from clear that it will come about as part of this year’s debate on infrastructure financing.”
And this prediction seems to have come true.
In a note on Tuesday, Phillips said that without the repatriation holiday, infrastructure will not get the funding the White House seeks this year.
And while the government could borrow this money to increase infrastructure funding, it seems unlikely that Congress would go along with this plan.
All the while, America’s bridges aren’t getting any younger. The average age of America’s roads have been trending higher consistently for a century.
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