Bridging the political divide

Following elections in the US, infrastructure may be one item on a short list of issues the Republicans and Democratic President can agree on.

Last week’s US midterm elections gave Republicans control of both chambers of Congress for the first time since 2006 and the widest margin of control since 1929 according to the Washington Post. The implications are many and significant – first and foremost raising the question of how a Democratic President will govern during the remainder of his second term with a legislative branch in the hands of the opposing party.

“There’s no way of knowing what the dynamic between the President and the Republicans who control the re-organised Congress will be, but if they’re looking for areas of agreement on things that matter to them and matter to the country, infrastructure has to be on that list,” David Narefsky, a partner at Mayer Brown, said during a teleconference the law firm hosted to discuss the impact the midterm elections will have on US infrastructure and the use of public-private partnerships (PPP; P3).

We would have to agree. Looking back at developments that unfolded while Congress was so deeply divided that government ground to a halt for 16 days last year, infrastructure showed an ability to cross party lines.

One example is the Water Reform & Development Act (WRDA), which an overwhelming majority in both the House and Senate passed in May. A comprehensive piece of legislation aimed at improving the country’s entire water sector infrastructure, it has been touted as the most policy- and reform-focused legislation of its kind in two decades.

On the other hand, there is the Highway Trust Fund, which was set to go bankrupt this past August and has now been made solvent only through May 2015. Congress failed to come up with a longer-term solution but with the same party having the majority in both chambers, the passage of major legislation is easier and therefore more likely.

In addition, “Republicans will be looking for something that they can do to show that they can govern and passing a major infrastructure bill, a surface transportation bill, is clearly the way to do it,” John Schmidt, another partner at Mayer Brown, stressed during the same call.

As for the use of P3s as a means to deliver infrastructure projects, the partisan shift resulting from these elections is not expected to have a negative impact. While the two political parties may have differing views on the types and level of federal funding “everybody has recognised it’s never going to be enough; it’s not even close to being enough, therefore we ought to be supporting public-private partnerships,” Schmidt said.

But only time will tell whether President Barack Obama and a Republican-controlled Congress will be able to find common ground. “I’m eager to work with the new Congress to make the next two years as productive as possible,” Obama said the day after the elections, citing trade and corporate tax reform as areas in which he anticipates working with Republicans. Hopefully, infrastructure will be added to what is expected to be a short list.