Federal Express founder and CEO Fred Smith was on Capitol Hill last week, testifying in front of the House Transportation and Infrastructure Committee about improving the nation's highways, bridges and air traffic control system (full text here).

Axios spoke with Smith via phone about how to pay for modernized infrastructure, plus his thoughts on trade and automation. Quick takeaways:

  • Infrastructure ain't free. Congress needs to step up and spend.
  • The gas tax should be raised.
  • NAFTA is better for many American workers than they may realize.
  • America's tax code, not technology, is holding back productivity.

On paying for improved infrastructure:

"I think infrastructure is simply a matter of funding. It's not like the U.S. hasn't built a lot of infrastructure in the past. We're benefiting now from a vision the Eisenhower Administration had for the interstate highway system. The port and airport systems we have today were built up many, many years ago. The reason we've gotten into this situation with aging infrastructure not being modernized is that we ceased being willing to pay for it. You have to deal with that issue, and in a transparent manner.

FedEx and the surface transportation industry has said over and over again, for example, that we should take gasoline and diesel taxes up to a higher level, because on an inflation-adjusted basis it's been significantly underfunded since 1994. But that has been a very difficult thing for Congress to do. And part of the reason for it has been a lack of leadership from the White House."

On President Trump's proposal to use private investment to finance infrastructure:

"I think that private, incentive-based financing of public infrastructure is certainly a good idea and has its place. But I do not think, based on my long experience in the industry, that it can finance all of our infrastructure needs. I haven't really had that many conversations with people in the White House about infrastructure. But, very top-line if you will, I don't think they've really turned to it yet."

On speaking out against Trump policy on trade:

"All I have done is to talk about the facts of trade. I haven't addressed anything on a political basis whatsoever. The facts are that trade employs 40 million people in this country. One-third of American farmland is planted for export. The average family of four benefits from low-cost goods imported to the U.S. at approximately a rate of $13,000 per year, or maybe a little more now. Millions of people are involved in NAFTA trade, and export-oriented jobs pay, on average, fifteen to twenty percent more than jobs in other sectors of the economy. Our policy is to lean into these trade issues and change the aspects of foreign trade that have been so unpopular in certain quarters. That means addressing protectionism, mercantilism, prohibitions against foreign entities competing in certain sectors which we first saw in Japan and then in China. And all of that is before you get to issues of cybersecurity and intellectual property theft. We want to renegotiate trade agreements that are more open, not less, and I think that's consistent with the Administration's position."

On investing in automation that could replace humans:

"I wouldn't put it that way. I'd say we're interested in investing money that will make our employees much more productive."

But productivity is no longer rising like back when tractors replaced farmers:

"A big part of the reason is that the tax code of the U.S., and for that matter the country's financial system, is highly prejudiced against capital investment. The only way a blue collar worker with a high school education becomes more productive is if capital is put behind their jobs, like putting a lift loader at a port for someone involved in the container business.

Remember Marlon Brando in On The Waterfront? He's a stevedore, which was a very tough job in the 1950s and didn't pay very well. Today, the crane operator at a major U.S. port offloads in a day the tonnage that Brando's character would have in a lifetime, and is probably making between $150,000 and $200,000 per year. It's the capital investment in technology that produced that high income for today's version of the stevedore. But the tax code punishes those investments. Private equity and activists are all looking to capture short-term cash flow instead of investing in productive equipment."

Is Amazon your ally on infrastructure issues?

I think our outlook would be very similar. I know Amazon is very supportive of a new nationwide standard for trailers from 28 feet to 33 feet, as part of a coalition that is advocating for their adoption. I don't know their specific position on expanded highway infrastructure and modernization but I'd have to believe it's in line with ours.

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