President-elect Barack Obama announced on December 6 that he would launch a massive program to invest in national infrastructure projects, greater than anything since the interstate highway system was started in the 1950s. He is promising a government spending spree. In a speech on the weekend of December 7 he proposed what everyone is calling the biggest investment in the nation's infrastructure since President Dwight D. Eisenhower created the interstate highway system. He also said that a faster, more pervasive Internet infrastructure is an essential part of his plan. This is good news for construction companies and telecoms companies both, who will most likely be seeing a large rise in the most dependable, lucrative kind of contracts - government public works projects.
Obama said: "As we renew our schools and highways, we'll also renew our information superhighway. It is unacceptable that the United States ranks 15th in the world in broadband adoption. Here, in the country that invented the internet, every child should have the chance to get online, and they'll get that chance when I'm President - because that's how we'll strengthen America's competitiveness in the world."
Even though Obama did not say the amount of money his administration would propose to spend on infrastructure improvement, rumors say it will be between $500 billion and $700 billion.
His announcement immediately led to gains in shares of construction and engineering companies that may benefit from the higher public spending and demand for products such as Manitowoc, Caterpillar, and Jacobs Engineering Group, which are US-based construction companies.
Hopes in South Korea went up as well, as stock prices for GS Engineering & Construction Corp. surged 14.8 percent, Hyundai Heavy Industries Co. gained 14.7 percent and Samsung Heavy Industries Co. rose 14.3 percent.
This is a sure sign that the Korean and US economies are linked together. When an announcement by the president-elect of the US causes stock prices to rise in Korean companies, there can be no denial of the integral ties the two have with each other.
FTA deal less likely to go through
Korean construction and telecoms infrastructure companies can count on being a part of this large infrastructure spending plan. Korean companies who were counting on the Korea-US FTA passing in order to become more profitable, however, should put their hopes to rest.
Since the beginning of the Democratic presidential campaign, Obama has repeatedly said that he wants to see the South Korea-US FTA revised. Experts have said that it is very likely the Obama administration, after its inauguration, will ask South Korea to renegotiate the auto provisions in the deal. Obama and the Democratic Party, which are supported by labor unions - and automotive labor unions in particular - need to return the political favor amid the worst downturn in the US auto industry in 25 years. In the third presidential debate, Obama expressed his dissatisfaction about the automobile trade with South Korea, saying South Korea is "sending hundreds of thousands of South Korean cars into the United States... We can only get 4,000 to 5,000 into South Korea. That is not free trade."
Obama's nascent administration has since moved into solid, active support of the US auto industry. The day after his famous infrastructure announcement he said that American automakers are the backbone of American manufacturing and that the top three automakers cannot be allowed to fail. In this light it is impossible to see how the Obama administration would approve a Korea-US FTA which protects the Korean auto industry so strongly against US imports. If the new President has to choose between the US and Korean auto industries, there will be no contest. It is unclear how or to what extent the United States would seek to renegotiate, but if the new US administration again wants to delay eliminating tariffs until the market share in South Korea for cars made in the United States increases to what it would consider to be a meaningful level, it will probably kill the deal.
Grim backdrop
Obama's comments came the day after the government announced that 533,000 jobs had been lost in November - the worst monthly job loss report in 34 years. The address marks the latest effort by the incoming president to shape events and build momentum for his agenda weeks before he takes office.
"We will create millions of jobs by making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s," he said. "We'll invest your precious tax dollars in new and smarter ways and we'll set a simple rule-use it or lose it. If a state doesn't act quickly to invest in roads and bridges in their communities, they'll lose the money."
Obama said his plan would also include a push to make federal buildings more energy efficient by installing new heating systems and energy-saving light bulbs, a plan that he said would save billions of taxpayer dollars and "put people back to work."
Additional provisions would upgrade public school buildings, enhance broadband technology and create a system to ensure that Americans have access to electronic medical records.
His comments reflected the growing belief among his top advisers and Democratic leaders on Capitol Hill that the fast-declining economy and the continued loss of jobs require a massive spending program - even if it means swelling the national debt.
Since the recession began a year ago, about 2 million jobs have been lost. Obama has said that his plan would aim to create 2.5 million new jobs by 2011.
