Solving Infrastructure, Trump Style
The president unveiled his proposal this week, heavily involving states in the process and expense.
Earlier this week, President Donald Trump unveiled his much talked about infrastructure improvement plan, a 55-page proposal that calls heavily on state and local investments, promises to streamline regulations and permitting, and make investment in rural infrastructure projects and workforce training.
“My Administration’s plan addresses more than traditional infrastructure — like roads, bridges, and airports — but addresses other needs like drinking and wastewater systems, waterways, water resources, energy, rural infrastructure, public lands, veterans’ hospitals, and Brownfield and Superfund sites,” Trump said in his proposal.
The package would cost the federal government $200 billion, but Trump plans to use half of that to spur state and local governments to invest a much larger share, potentially as much as $1.5 trillion. The $100 billion would be used as “seed money” to get state and local projects started, but only if those jurisdictions promise to spend much more from funds they generate on their own through taxes, fees, bonds or public-private partnerships.
The plan takes the Federal Highway Trust Fund model and flips it on its ear. Currently, the federal government puts up 80% of the cost for highway funding projects, with states adding 20% from their own coffers. But will states still be as willing to take on new projects if they have to come up with the bulk of the funding themselves?
Trump is counting on an immutable political fact that all levels of governments love to spend on infrastructure. He believes states will initiate new projects because they will be politically popular and the federal government will provide the start-up cash.
He is also looking to spur increased state and local infrastructure investment by streamlining regulations and the byzantine permitting process that sometimes stall infrastructure projects for decades. This second goal of Trump’s plan will refocus permitting for new projects under one office, rather than through several different agencies, promising to cut the permitting process down to a maximum of two years. A logical, simplified permitting process will go a long way toward inspiring new investment, as many projects die on the drawing board for no other reason than the applicants have been bound with red tape. Currently, the excess paperwork alone can add untold millions to the cost of a building or repair project.
It remains to be seen how many states and municipalities will take up the offer of federal startup cash for infrastructure projects. Some states recently took a hit when the new tax law removed the federal deduction that taxpayers claimed for state and local payments. Of course, if those same states weren’t so reliant on high taxes, the blow might have been softer. Beyond that, many states have yet to fully recover the tax revenue lost during the economic downturn that started in 2008 and continued through much of the last president’s term of office.
Another $50 billion of Trump’s plan would focus on investing in rural areas. This money would be provided to governors in the form of block grants to spend the money at their discretion, including broadband Internet, road improvements, and water and power projects. $20 billion would be targeted for transformative projects such as high-speed rail, as opposed to rehabilitating existing infrastructure. The remaining $30 billion will go toward financing, loans and bonds to start and manage new projects.
Trump’s infrastructure plan contains elements that are worth supporting. Tom Donahue, president of the U.S. Chamber of Commerce, said, “For years, plenty of people have been willing to talk about modernizing our nation’s infrastructure, but few have been willing to take action.” This plan has a much better chance to improve infrastructure and the economy than Barack Obama’s trillion-dollar stimulus. His so-called “shovel-ready” projects did not produce the jobs projected and ended up as nothing more than payouts to Democrat cronies.
The main issue that some are having with Trump’s plan is that it is based on the assumption that America’s infrastructure is crumbling. Going back at least to Bill Clinton every president has lamented our “crumbling infrastructure,” painting a picture of a country that is pockmarked with bad roads, collapsing bridges and brown water. This view is easily sold to voters. After all, it doesn’t take a detective to find a road that has potholes. But is America really in such bad shape?
Michael Sargent, transportation and infrastructure policy analyst for The Heritage Foundation, says no. “Consider federal data on the nation’s bridges,” Sargent says. “Despite a reputation of steep decline, the number and share of bridges deemed ‘structurally deficient’ (not unsafe, but in need of elevated maintenance) has declined by more than half over the last 25 years and now represents just 9 percent of the nation’s total. The same goes for the nation’s major roads. A full 93 percent of the miles driven on the National Highway System is on pavement that is in fair or better condition.”
This is not to say that America’s infrastructure couldn’t use a tune up. Keeping roads, bridges, waterways, and other systems running smoothly is a never-ending process. And new technologies can be employed to make things run more efficiently, thus making us more competitive in the global marketplace. But some in favor of infrastructure improvements claim that the best thing to do is focus on deregulation, streamlining permit applications, and cleaning up the current funding system.
Spending even more money on infrastructure may not necessarily be the answer. But if it is to be done, several voices in Washington suggest avoiding adding to the nation’s debt by raising the federal gas tax.
The current tax has remained at 18.4 cents per gallon since 1993, and it is not indexed for inflation. Raising the tax by 25 cents, or even 50 cents as Trump once proposed, would fill the dwindling coffers of the Federal Highway Fund and provide a source of money for infrastructure projects. That is what the gas tax was meant to do in the first place. But more fuel-efficient cars and the increased reliance on public transit in growing urban areas have cut into tax revenue in recent years. And those federal highway dollars have not always gone where they should.
The problem is that the gas tax is not a straight user tax. Drivers are hit disproportionately, with lower-income drivers paying a higher portion of their income on gas, and drivers of hybrids and electric cars paying less tax or none at all, but still using the same roads. Additionally, Republicans would have to reconcile with the fact that they recently scored a victory with major tax cuts across the board. How will voters react when they propose a tax hike at the pump?
Solving the gas tax issue is just one of many issues that will need to be tackled now that the Trump infrastructure plan is out there for all to see. At least the speculation of what Trump is proposing is behind us. Let the debate begin.