The 'roads' to the White House

Repairs on the Longfellow Bridge continue, including the removal of a couple of salt and pepper shaker-like towers.
David L. Ryan | The Boston Globe | Getty Images
Repairs on the Longfellow Bridge continue, including the removal of a couple of salt and pepper shaker-like towers.

Neither Donald Trump nor Hillary Clinton, (and their parties), has fully and realistically addressed hourly wage earners' concerns. That's a big deal, because hourly wage earners, who have not seen real wage growth for decades, will likely decide this election.

One very obvious answer to stagnant real wages and job loss is staring all of us directly in the face—create millions of jobs and higher incomes by maintaining, upgrading and expanding our infrastructure, which is outdated and crumbling.

The American Society of Civil Engineers (ASCE) gives American infrastructure a D+. Because U.S. infrastructure is in such a sorry state, each American family will lose about $3,400 in disposable income this year and in each of the next ten years. To address our nation's infrastructure crisis, the ASCE estimates that a $1.4 trillion investment gap will need bridging over the next decade.

But the Republican platform is silent on any kind of infrastructure "moonshot." Trump has not yet offered a comprehensive plan to make his verbal commitment to fixing the problem even more credible. And Hillary Clinton and the Democrats, on the other hand, are championing a $275 billion, five-year plan that is clearly inadequate. A trillion dollar plus plan would pay for itself. And by not concretely backing such a major, bold investment program, Clinton and Trump and both parties risk voters' physical safety and their incomes—they also risk incurring voters'wrath.

For purposes of illustration, let's say the federal government borrows $1.4 trillion for an infrastructure program by issuing 30-year bonds at our current extraordinarily low interest rates. Once these funds were fully invested, American family disposable income would increase by up to that $3,400 annual figure. If families were to spend this additional disposable income, incomes in the economy would increase because one person's spending is another person's income. Federal tax receipts would, as a result, increase by up to about $100 billion each year in total, (assuming a 25% tax rate), given about 126 million households.

The federal government could thus receive $3 trillion in tax receipts over thirty years. That would pay all the interest costs and repay the entire $1.4 trillion of debt incurred. But that is not all. Wage earners would also see immediate additional benefits because the $1.4 trillion injected into the economy would generate additional income and jobs. And there is still more.

Because rising incomes could make families and businesses more confident in their prospects, they certainly might increase their demand for credit. Observing the greater creditworthiness of borrowers, banks and other financial institutions would be willing to lend them more. This additional private credit, when spent, would add to incomes, net worth, federal tax receipts and spur further credit creation. As a result, the federal government would receive large, additional tax revenues that it could use to pay back other unrelated U.S. federal debt.

Such policies would not only create jobs, economic growth, greater confidence, and national pride, and help improve national security. They would also decrease our federal debt and federal debt/GDP ratios from current levels, all else being equal.

Some Republicans' wrong-headed thinking about such infrastructure investment—draped in the respectable-sounding phrases of "debt reduction," "deficit reduction,""fiscal-conservatism," and "lower taxes"— displays, at the very least, a fundamental misunderstanding of some of the foundations of a vibrant national economy. And a seeming indifference to wage earners' prospects. While Democrats' inadequate plan displays an apparent lack of boldness.

Republicans and Democrats each have an opportunity to launch a major, bold initiative in conjunction with Trump and Clinton and safeguard as well as broaden their electoral appeal. Who will muster the courage to do so?

The good news: a legislative starting point already exists. A detailed Senate bill was introduced this past January. The Rebuild America Act proposed a five-year, trillion dollar infrastructure plan. Clinton or Trump can quickly come out in favor of this starting point and, in the process, also gain the backing of more of Senator Bernie Sanders' supporters, because Sanders was actually the Senator who introduced that legislation.

This issue can tip the scales in the election. Since hourly wage earners really seem to like and identify with Mr. Trump, he could energize them even more by pushing hard for a detailed national program to rebuild our infrastructure. Which means that Clinton could score major points by taking this potential issue away from him.

Clarence Schwab is founder and managing partner of Schwab Capital Management, an investment and advisory firm focused on publicly traded and smaller privately held companies.