Trump Tariffs Could Wipe Out Tax Cuts for Many

Plus, the case against a $2 trillion infrastructure spending spree

The Case Against a $2 Trillion Infrastructure Spending Spree

It’s Infrastructure Week again in Washington, but as President Trump and lawmakers continue to discuss a potential package of up to $2 trillion, a new report warns that a one-time infrastructure spending spree isn’t what’s needed to properly address the nation’s road conditions. “This is more than a money problem—it’s a priorities problem,” the authors say.

The report, “Repair Priorities 2019,” was published this week by the groups Transportation for America and Taxpayers for Common Sense. It found that, despite more spending, the percentage of U.S. roads in “poor condition” grew from 14% to 20% from 2009 to 2017.  Thirty-seven states saw the percentage of their roads in poor condition increase over that time.

The underlying problem, according to the report, is that states, given flexibility in how they spend transportation infrastructure funds, are shortchanging basic repair and instead choosing to expand their road networks. States spent an average of $21.3 billion a year on road expansion between 2009 and 2014, compared with $21.4 billion on road repair.

And the new roads being built create future maintenance liabilities, adding to the funding shortfall. Every new lane-mile of road costs about $24,000 a year to maintain in good repair, according to the report. “By expanding roads, we are borrowing against the future,” the report says, adding that we now have to spend an additional $5 billion a year to keep new roads built from 2009 to 2017 in good condition.

That’s not to say that money isn’t an issue. The report estimates that it would cost more than $231 billion a year over six years (the typical length of a federal transportation reauthorization) to keep existing roads in good condition and fix the roads in poor condition. That is more than double the $105.4 billion spent across all levels of government on highway capital expenditures in 2015, only a portion of which went toward repairs.

But talk of a $2 trillion infrastructure plan — which, to be clear, Democrats want to have cover much more than just roads? “We don’t need it, and it could even do more harm than good,” Beth Osborne, director of Transportation for America, writes in a new Washington Post op-ed. “At best, this infrastructure plan would throw more money into the same flawed system. At worst, Congress and the president would be signing a blank check with no sense of what the money is intended to accomplish, no clear system for accountability, no requirements for states to actually repair our ‘crumbling roads and bridges’ and no guarantees that any of us would have an easier time getting from A to B when all that money has been spent.”

The report lays out a number of recommendations for a 2020 transportation bill, including:

  1. Set clear, quantifiable and measurable outcomes that new funding is expected to accomplish.

     
  2. Require that states repair their existing roads before expanding.

     
  3. Require project sponsors to show that they can afford to maintain new road projects.

     
  4. Establish reporting requirements to allow progress to be tracked and published.

“What do all these ideas have in common?” Transportation for America asks on its site. “They’re about policy not money.”

Trump Tariffs Could Wipe Out Tax Cuts for Many Households

The tariff increases on Chinese imports ordered by President Trump could end up taking more money out of many low- and middle-income households than the Republican Tax Cuts and Jobs Act put in, says Howard Gleckman of the Tax Policy Center.

Trump’s trade war is still developing and could change course at any moment, making it hard to determine its cost to American consumers, but Oxford Economics says that if tariffs remain at current levels, they will cost the U.S. economy $62 billion a year, which translates to about $500 per household.

If the president imposes a 25% tariff on virtually all Chinese imports, as he has threatened to do, the U.S. economy would be about $100 billion smaller in 2020 than it would have been otherwise. That translates to about $800 per household — which “is roughly equal to the average TCJA tax cut for a middle-income household,” Gleckman says.

Low-income households would be hit much harder, since their annual savings from the tax cuts are about $40.

“Public opinion surveys showed most Americans thought they got no benefit from the TCJA’s tax cuts,” Gleckman writes. “Turns out, they may have been right—at least when those tax cuts are paired with the Administration’s trade policy.”

Democrats Counter Trump’s Defense Budget Request

The House Appropriations defense subcommittee on Wednesday approved a spending bill that would provide $690.2 billion to the Pentagon in 2020.

The funds would be split between the base budget ($622.1 billion) and the war-fighting fund known as the Overseas Contingency Operations account ($68.1 billion). It also includes about $10 billion for military construction and another $33 billion for defense-related activities in other departments.

Taken together, total defense spending would come to about $733 billion.

Although the bill would raise defense spending from 2019 levels, the increase of nearly $16 billion falls short of President Trump’s request for $750 billion in total defense spending.

Scott Maucione of Federal News Network said the bill amounts to a rebuke of President Trump’s budget request. In addition to providing less than the White House asked for, the budget would prohibit the use of defense funds for border wall construction. It also provides less money for the Space Force, allocating $15 million to further study the idea, compared to the $72 million Trump requested to set up its new headquarters.

The bill would fund the purchase of 90 F-35 stealth fighter jets, 12 more than requested, as well as the eight F-15 fighters that were listed in the White House budget.

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Stat of the Day: America's Baby Bust

With 3.79 million babies born in 2018, the U.S. recorded the lowest number of births in 32 years, the National Center for Health Statistics said Wednesday. The general fertility rate (the number of births per 1,000 women ages 15 to 44) fell to 59.0, the lowest on record, while the total fertility rate (the number of births per woman over her lifetime) dropped to 1.7, also a record low.

The ongoing baby bust could mean trouble for social welfare programs that rely on younger workers to take care of the elderly. “All past projections of the proportion of the U.S. population that will be elderly, and eligible for Medicare and Social Security, have assumed that the previous higher birth rates remained constant,” John Rowe, a health policy professor at Columbia University, told Fox Business Network. “As rates have fallen, and fewer young people ultimately enter the labor force and pay into the Social Security and Medicare Trust funds, the solvency of these funds is threatened.”

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