Plans by Trump, Clinton to fix potholes, bridges face obstacles

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Construction work is seen at the 826 and 836 State Road Interchange in Miami.

America is falling apart. And both Hillary Clinton and Donald Trump are promising to spend big to fix it.

But it remains to be seen whether a tight-fisted Congress would go along with the kind of massive new spending the candidates are calling for.

"We will build the next generation of roads, bridges, railways, tunnels, sea ports and airports that our country deserves," Trump said in a speech Monday outlining his plan to boost the American economy. "American cars will travel the roads, American planes will connect our cities and American ships will patrol the seas."

Clinton has said she wants to commit $275 billion in public funds over five years, including $25 billion for a national infrastructure bank to generate another $225 billion in direct loans, loan guarantees and other forms of credit.

Trump told CNBC's Squawk Box on Thursday: "Well you need a lot more than that to do it right."

There's little doubt that the U.S. faces a major undertaking to upgrade basic infrastructure, and the repair bill is getting bigger.

That's the conclusion of the latest "report card" on American roads, bridges, airports, power grid and other critical infrastructure from the American Society of Civil Engineers.

Over the next decade, the group estimates, it would cost more than $3.3 trillion to keep up with repairs and replacements, but based on current funding levels, the nation will come up more than $1.4 trillion short, the group says. When projected to 2040, the shortfall is expected to top $5 trillion, unless new funds are allocated.

During the depths of the Great Recession, Congress made a start on the task of rebuilding by approving the Obama administration's $840 billion stimulus plan, the American Recovery and Reinvestment Act of 2009, that included funding for hundreds of "shovel ready" projects.

But after that spending surge faded, Congress took a much harder line on approving new funding for infrastructure repair and investment in new projects.

Investment in American roadways stalled badly in 2014, when Congress failed in multiple attempts to extend long-term funding for the Highway Trust Fund, which teetered on the brink of insolvency for two years. Despite rising costs of maintenance and construction, Congress hasn't raised the gasoline tax used to replenish the fund for more than two decades.

Late last year, with the highway fund running on fumes, Congress came up with a one-time, $70 billion cash infusion for road repairs with a series of accounting gimmicks, including shifting funds from the Federal Reserve, but failed to create a sustainable source of long-term funding. The Congressional Budget Office recently projected that the money will run out in six years, and the fund faces a shortfall of some $100 billion by 2026.

Faced with rising pension costs and tax-weary voters, state governments have also been cutting infrastructure spending as a share of the economy. Since the late 1960s, state and local government spending on capital projects dropped from its high of 3 percent of U.S. GDP to less than 2 percent in 2014, according to the Center on Budget and Policy Priorities.

Aside from spawning an epidemic of potholes, the spending cuts have thrown cold water on the ongoing economic recovery, according to a report Thursday from the Economic Policy Institute, a left-leaning think tank.

Though the unemployment rate has fallen in half since peaking at 10 percent in 2010, the pace of job growth has been slower in this recovery that the rebound from the recessions of 1981 and 1990. Of the last four downturns, only the recovery that began in 2001 saw a slower pace of job creation.

One of the biggest reasons, according to institute economist Josh Bivens, was the tight-budget policies at all levels of government after the Great Recession sent tax revenues plummeting.

Faced with voters adamantly opposed to tax increases, federal, state and local governments capped spending across the board to match the shortfall. That drop in government spending created a major headwind for the economy growth, Bivens argues.

"Government spending not only failed to rise fast enough to spur a rapid recovery, it outright contracted," he said in the report. "This policy choice fully explains why the economy is only partially recovered from the Great Recession a full seven years after its official end."

Candidates Clinton and Trump are promising to change that policy. But if the Republican Party maintains control of the House in this fall's election, it remains to be seen whether the next president will be able to persuade enough of them to go along with a big increase in spending on infrastructure. So far, there's little indication that will happen.

Meanwhile, existing budgets for infrastructure are being stretched thinner. Much of the hundreds of billions of dollars in federal, state and local spending is consumed by just keeping existing infrastructure operating as smoothly as possible. Without bigger increases in spending, the rising costs of operations and maintenance will crowd out dollars for new highways, bridges, airports and railways.

It's also gotten a lot more expensive to build those new projects. For more than a decade, infrastructure-related costs of labor and materials rose much faster than the amount being invested, according to the CBO.

While public spending on infrastructure rose by 44 percent between 2003 and 2014, the purchasing power of that money fell by 9 percent. As a share of GDP, spending on transportation and water infrastructure fell by 5 percent during that period.