Trump’s Infrastructure Proposal: More Questions Than Answers
A few months ago, a one-trillion dollar infrastructure program was the talk of the town. That has since grown to a massive $1.5 trillion under the recently-released Trump administration plan.
Actually, “plan” is an overly generous word to describe what the president released. It’s more like an outline that demonstrates no presidential or federal leadership or vision on the subject.
For one thing, despite the top-line growth, the federal share of spending on infrastructure under the proposal will reach $200 billion over ten years. That’s an average of just $20 billion per year. Pretty puny.
The federal spending share for most projects will be 20 percent, much lower than the 50 percent to 90 percent the federal government has contributed over the last 60 years. That means states and localities will have to shoulder a greater share of the burden. Unlike the debt-loving president, those entities have to balance their budgets and most don’t have a lot of cash sitting around in the first place. According to Adie Tomer, an urban policy export at Brookings, this kind of funding scheme will reward those states and localities that are able to raise additional cash in the form of user fees and taxes, and it probably won’t work for most.
That raises doubts over the extent to which state and local government will proceed with infrastructure improvement projects. Those that do go ahead, roads, for example, will likely to be subject to tolls. And, by the way, the Trump outline makes it easier for states to slap tolls on interstate highways.
The notion of leveraging federal spending to the degree being proposed amounts to “fake funding,” said Chris Spear, president and chief executive of the American Trucking Associations, according to reporting in the Wall Street Journal. The ATA is the biggest trucking group in the US and a strong supporter of Trump.
The proposal also doesn’t say how it’s going to be paid for. There is a growing consensus that the federal gas tax needs to be raised. Even the US Chamber of Commerce has come out in favor of that. President Donald Trump is reportedly in favor of such a hike, although he has not said so publicly, and no mention of a tax increase is mentioned in the infrastructure proposal. By the way, the new term for a gas tax is “fuel user fee,” as if that is going to fool anybody. It’s also worth noting that the gas tax is regressive, in that it hits lower-income Americans harder than others.
The proposal sees public-private partnerships and privatization schemes as fueling much of the infrastructure improvements of the future. One aspect of the plan is to privatize more airports. Another is to remove the cap on private activity bonds, an important financing tool used by private partners in public-private partnership, and expand their eligibility to non-highway and transit projects. The plan would also increase funding to federal credit assistance programs.
In an odd twist, the proposal would mandate that 25 percent of total infrastructure funding go to rural projects, even though less than 20 percent of Americans live in rural areas and that proportion is declining.
Trump’s infrastructure proposal evidences a lack of leadership and vision on the issue. It presumably could be used to finance a hodgepodge of different kinds of infrastructure projects but includes no statement of the kind of systems—or the kind of economy—we are supposed to be trying to build for the future.