Infrastructure spending is the key to increasing economic growth, because it will give Americans better-paying jobs, a prominent investment banker and economist said.
"The private sector has done all it reasonably can, yet the U.S. labor market remains a shadow of its former self. It is time to rebuild America," Daniel Alpert, a founding managing partner of Westwood Capital, said Monday in a presentation titled "The Case for Aggressive Fiscal Spending on Infrastructure in 2017."
Source: Westwood Capital
Alpert's argument makes a strong counterpoint to economists who believe that investing in infrastructure won't help the labor market now because the country is already at "full employment" — meaning most people who want a job, have a job.
Last week's jobs report showed solid growth in the U.S. labor market, and low unemployment. But overall economic growth has held near a slow 2 percent level.
Source: Westwood Capital
Alpert's argument is that the reason for such lackluster growth is that more and more jobs are being created in less productive, lower-paying services industries. Restaurants and retail stores are examples of such businesses.
Between just before the financial crisis in December 2007 to last December, 60 percent of net new jobs created were in retail and service-related industries that tend to pay low wages and offer fewer hours, Alpert said. The better-paying jobs are in infrastructure-related industries such as construction and utilities.
"I do believe there's an enormous [amount] we could accomplish by pulling up wages versus pushing, by providing higher-paying jobs," Alpert told CNBC.
Source: Westwood Capital
Infrastructure spending is a centerpiece of President Donald Trump's domestic economic agenda. For at least a decade, many U.S. politicians — Democrats at least as much as Republicans — have loudly called for more spending on the country's declining bridges, dams, levees, airports, tunnels, roads and other infrastructure.
Last week, the American Society of Civil Engineers gave U.S. infrastructure a near failing grade of D+ in its 2017 "infrastructure report card."
"We have clearly a huge need," Alpert said. We have underemployed labor — that's my central thesis. We have a huge amount of capital looking around for" projects.
"This is not obviously going to happen unless the White House decides to honor its campaign promise," he said.
Most economists agree that Trump's combined plans to increase government spending and cut taxes will further boost America's budget deficit and running debt.
