Trump’s Smoke-and-Mirrors Infrastructure Plan

Trump’s Smoke-and-Mirrors Infrastructure Plan

REUTERS/Michael Spooneybarger

In a more disciplined White House, a five-day stretch dubbed “infrastructure week” by the administration would have begun with the president speaking in front of a failing bridge or an over-burdened airport to highlight the need for major investment. 

But even before Trump stepped on his own message Monday morning by attacking the mayor of London in the wake of a terror attack and blaming Democrats for the failure of a Republican Congress to confirm his nominees it was obvious that infrastructure week was going to be a tough slog. 

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After months of promising a trillion-dollar infrastructure program that would produce gleaming new railroads, airports and highways across the country, his fiscal 2018 budget plan unveiled last week provided just $200 billion of seed money for infrastructure projects over the coming decade.

Under Trump’s first comprehensive budget blueprint, the Department of Transportation would face a 13 percent reduction in total discretionary spending. As for the already woefully underfunded highway trust fund for road construction financed through a gasoline tax, it would gradually shrink by $95 billion by 2027 under the president’s proposal.

Trump would also cut nearly $1 billion from Army Corps, the agency of engineers that oversees construction of dams, locks and other projects on the nation’s waterways.

Further, the scant details about the plan that leaked out before Monday signaled that, much like the administration’s supposed tax-reform proposal and its immigration ban, the infrastructure plan that Trump planned to present to the nation was little more than a vague sets of promises and ideas stitched together with work done elsewhere -- in this case, a similar plan to privatize the air traffic control system that was already being pushed by House Transportation Committee Chair Bill Shuster (R-PA).

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The president has two events scheduled this week, in Kentucky and Ohio, as part of the infrastructure push. But one Kentucky congressman doesn’t see much point in the visit. Rep. John Yarmuth, the ranking Democrat on the House Budget Committee, said that Trump will show up in Kentucky and Ohio “empty handed” on Wednesday because he has woefully underfunded his infrastructure proposals.

“This is a complete charade and the people of Kentucky and Ohio should send the President back to Washington to start over,’ Yarmuth said.

As for the $1 trillion in new infrastructure projects Trump promised, the administration intends to offload most of the cost and responsibility to states, local governments, and private corporations, with the White House largely standing on the sidelines cheering them on.

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White House chief economic adviser Gary Cohn signaled to reporters last week that the federal government intends to make only a “fractional” down payment on rebuilding the nation’s aging and crumbling infrastructure, with others assuming the lion’s share of responsibility and financing of the projects, as The New York Times reported.

“We like the template of not using taxpayer dollars to give taxpayers wins,” Cohn, director of the National Economic Council and one of the architects of the administration’s strategy, told the newspaper.

Elaine Chao, the transportation secretary and wife of Senate Majority Leader Mitch McConnell (R-KY), added that providing 100 percent federal funding “is just not realistic.” The challenge now is to find ways to leverage modest federal contributions into major and pricey projects.

Commerce Secretary Wilbur Ross and economist Peter Navarro offered a similar proposal last summer, advocating major tax incentives for private investors and companies to invest in public works, including toll roads and bridges, that wouldn’t require major spending by the federal government.

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Politico reported last week that the Trump administration had assured conservatives that they would not include infrastructure in the major tax reforms they will be seeking later this summer. The administration’s plan to rely on the private sector to provide the funding for construction projects, while presented as a “win” for taxpayers, elides a fundamental fact about what drives private sector investments in the first place: Profit.

That says two important things about infrastructure programs financed by public companies. First, they will only make the investment if they expect to earn a return on it, and the only way to get a return on something like a bridge, tunnel, or airport is to charge people to use it. That means that taxpayers will ultimately pay for whatever gets built under the Trump plan. It will just be in the form of user fees -- tolls, ticket surcharges, etc. -- rather than in taxes.

The second point is a corollary to the first. Because private companies will only invest where they expect to earn a profit, projects without the potential to generate significant income won’t get completed. That means private sector developers will stand in line to build a new bridge between New Jersey and Manhattan, but bridges in rural areas that are essential to local commerce but much more lightly traveled will go begging.

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The flimsiness of the administration’s proposal was surprising -- and disappointing -- to those who believed Trump would follow through on his promise of a serious plan to address what people on both sides of the political divide agree is a serious problem.

Steve Bell, a senior official with the Bipartisan Policy Center and a former Senate Republican budget aide, said today he was stunned and surprised that Trump has failed to come even close to keeping his campaign pledge to mount an ambitious public-private infrastructure program.

“That was going to be the beauty of it because it would [put] public and private together and largely financed by substantial growth in the economy that would spur federal tax revenues to help pay for it,” Bell said.

“None of that appeared in the budget, and that, I think, is a very interesting omission,” he added. “A lot of stocks on Wall Street –- John Deere and Caterpillar and others –- really jumped up after the election because they thought there would be this new, innovative kind of infrastructure plan, $1 trillion over ten years. And it just didn’t make the cut in Trump’s budget.”