Trump’s halfhearted infrastructure plan

Columnist
Yahoo Finance

Everybody seems to favor new and improved roads and bridges. It’s finding the money to pay for them that’s the problem.

President Trump will unveil a long-awaited infrastructure plan on Monday with a lofty goal: to stimulate $1.5 trillion in new spending to modernize the nation’s transportation and public works systems. But the plan won’t identify any new revenue sources to finance those projects. Instead, it will call for killing other programs and shifting that money over to infrastructure.

“They’re not serious about infrastructure,” says a representative of the business community familiar with the White House plans. “They don’t want to put any new money into it. They’re going to use it as political bait, to portray the Democrats as getting in the way of rebuilding the country.”

Though Trump is calling for $1.5 trillion in new infrastructure spending, most of that wouldn’t be federal money. The Trump plan only calls for $200 billion in new federal funds, above what Washington already spends, which would be taken from other programs. Those funds would be used in a variety of ways to seed or incentivize projects. The rest of the money would come from states, cities and private sources.

Trump also wants to speed the permitting process, requiring approvals in 24 months or less. His plan would cut back on bureaucratic overlap by identifying a single agency to take the lead for every permit required, eliminating duplicative procedures. “The process we have in the United States just takes way too long and is not really focused on outcomes,” a senior White House official told reporters on February 10. “We want to shorten the process while at the same time preserving environmental protections.”

Costly projects. Highway construction near Portsmouth, Ohio. (Photo: Ty Wright/Bloomberg)
Costly projects. Highway construction near Portsmouth, Ohio. (Photo: Ty Wright/Bloomberg)

The Dems also have an infrastructure plan

Democrats have their own infrastructure plan, which is why there appears to be general agreement between the two parties on the virtues of rebuilding roads and bridges. But the Democrats favor $1 trillion in direct federal funding, rather than the indirect method Trump supports. Some Democrats say the Trump plan is a veiled effort to shift more of the burden for infrastructure onto states and cities.

Dems haven’t said where they’d get the money, either. One obvious source would be raising the federal gasoline tax, which has been 18.4 cents per gallon since 1993. Since the gas tax, which finances the Highway Trust Fund, isn’t indexed for inflation, its value as a funding mechanism weakens over time. In recent years, the trust fund has been chronically short of money, requiring new funding infusions.

Trump himself has suggested the possibility of raising the gas tax, but Republicans in Congress have essentially shut that down. And it’s not part of Trump’s infrastructure plan, which requires Congressional action to go into effect. So both parties are likely to spend 2018 dueling over who loves roads and bridges more, with the real prize being a political edge heading into the November midterm elections.

Congress could appropriate new funding financed by borrowed funds, as it did with the big tax cut passed at the end of 2017 and with a new spending bill signed in early February. But those two bills alone could end up adding $3 trillion to the national debt during the next decade. The annual government deficit will approach $1 trillion this year and probably exceed $1 trillion in 2019. Could Uncle Sam borrow more to spend on infrastructure? Sure. But this is about a lot more than roads and bridges.

Confidential tip line: rickjnewman@yahoo.com. Encrypted communication available.

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Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman

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