President Trump’s $1.5 trillion plan to rebuild U.S. infrastructure is grand in ambition, bold on reform and going nowhere at present. But federal data don’t support the notion that the U.S. is suffering an infrastructure crisis.
In a nutshell
- The U.S. has a hefty backlog of needed repairs to roads, bridges, airports, railways and ports
- President Trump’s revolutionary plan calls for 80 percent of the infrastructure revamp to become local, not federal responsibility
- The chances of congressional action on the administration’s infrastructure plan in this election year are slim
President Donald Trump’s $1.5 trillion plan to rebuild infrastructure in the United States is grand in ambition, bold on reform and going nowhere at present. The cold shoulder it has received from Congress reflects disagreement among Republicans about how to pay for the initiative, and Democrats’ insistence that the federal share of funding increase by 400 percent.
Predictable as these politics are, the president’s 55-page legislative outline released in February is distinctive for three reasons: 1) it proposes that states and the private sector assume more responsibility for funding infrastructure projects; 2) it authorizes states to commercialize infrastructure; and 3) it details dozens of regulatory reforms to streamline the nation’s convoluted regime for issuing permits and licenses.
Rebuilding crumbling infrastructure has long ranked high on President Trump’s list of priorities. In a Message to Congress on February 12, he said current conditions “damage our country’s competitiveness and our citizens’ quality of life.” The White House is also promoting the initiative as part of its wider economic agenda; the White House Council of Economic Advisers (CEA) estimates an infrastructure splurge would increase gross domestic product by tens of billions of dollars annually.
Federal data does not support the notion that the U.S. is suffering an infrastructure crisis, although there is a hefty backlog of needed repairs to roads, bridges, airports, railways and ports.
The bigger problem, analysts say, is a flawed funding system that favors “shiny objects” such as high-speed rail and highway beautification over mundane but essential maintenance. The result is that California gets a $100 billion bullet train, while thousands of miles of teeth-rattling roads and highways go unrepaired.
Congress is notoriously recalcitrant to embrace reforms, let alone of the scope President Trump has proposed.
A second structural problem is excess regulation at the federal, state and local levels that impose years of delay and inflates costs for infrastructure projects. But Congress is unlikely to address the president’s proposed remedies in an election year, when bipartisanship and political backbone are in particularly short supply.
The slim chances of congressional action this year were underlined by the resignation in April of D.J. Gribbin, the president’s special assistant for infrastructure and the chief architect of the plan. Soon after, on April 27, the House approved a pro forma five-year reauthorization of the Federal Aviation Administration without considering the president’s proposed reforms. Lawmakers are also fast-tracking reauthorization of the Water Resources Development Act – which funds harbors, locks, dams, flood protection and other water resources infrastructure – without reference to the administration’s infrastructure plan.
Congress is notoriously recalcitrant to embrace reforms even in the best of circumstances, let alone of the scope President Trump has proposed. The plan encompasses conventional infrastructure such as roads, bridges, airports, waste and water systems, as well as energy transmission and distribution; broadband networks; remediation of hazardous waste sites; public land maintenance, and improvement of public hospitals, among others.
The president’s financing strategy is also audacious, calling for 80 percent of the cost of new infrastructure projects to be shifted to state and local governments, in concert with the private sector. A variety of reforms are intended to facilitate private investment, such as allowing states and local governments to commercialize nonessential services of public facilities (e.g., highway rest stops); authorizing the sale of public assets such as airports and power plants; and opening federal funding to privately owned public-purpose waste and water treatment projects.
The new approach regards states as best suited to determine infrastructure needs and grants more discretion to governors.
That approach would reverse three decades of growth in the federal share of infrastructure financing. For transportation, in particular, this funding now extends well beyond highways and mass transit to include state and local roadways, parks and even sidewalks. The Trump plan thus represents a significant policy shift. The new approach regards states as best suited to determine infrastructure needs and grants broad discretion to governors.
Such devolution is a fundamental tenet of the conservative canon but anathema to progressives.
The $200 billion federal share would be split among five new programs. The most ambitious is an “Incentives Program” under which states would compete for a slice of $100 billion in federal funding (over 10 years). Authority to award financing would be divided among the U.S. Department of Transportation, the Environmental Protection Agency and the Army Corps of Engineers. According to the proposal, up to 70 percent of the evaluation criteria would pertain to a project’s ability to secure new, nonfederal financing.
Facts & figures
The balance of the $200 billion is designated as follows:
- $50 billion for rural infrastructure projects, including transportation, the electrical grid, water and waste, and broadband networks. Governors would be granted discretion over financing in areas with populations of less than 50,000.
- $20 billion for a Transformative Projects Program involving “bold and innovative” infrastructure that possesses unique technical and risk characteristics that would deter private-sector investment.
- $20 billion to increase federal credit programs for infrastructure financing, including expanded use of private activity bonds.
- $10 billion to create a Federal Capital Financing Fund for purchasing federally owned civilian real property.
Lawmakers are showing little enthusiasm for these and other aspects of the plan, in large part because of budgetary concerns. Or rather, they don’t know how to come up with $200 billion while avoiding spending cuts elsewhere.
President Trump’s decision to impose tariffs on imports of steel and aluminum only raises project costs, as do “Buy American” mandates that restrict sourcing options.
Congress has for years failed to address profligate spending on infrastructure, particularly from the Federal Highway Trust Fund. Originally created to support building and maintenance of the interstate highway system, its spending has increasingly been lavished on relatively frivolous non-highway projects. Federal taxes on gasoline (18.3 cents per gallon) and diesel fuel (24.3 cents per gallon) generate about 90 percent of the fund. However, federal transportation spending consistently outpaces the fuel tax revenues, and the Congressional Budget Office projects a cumulative shortfall of $150 billion over the next decade if current trends continue.
Instead of instituting reforms, Congress has covered trust fund shortfalls with $62 billion in transfers from the U.S. Treasury over the past six years.
There is bipartisan support among some lawmakers and corporate allies such as the U.S. Chamber of Commerce for raising the federal gas tax, which hasn’t been increased since 1993. The White House, too, has signaled “openness” to all potential revenue sources. As President Trump told members of Congress at a White House meeting, “Come back with a proposal. We put in our bid. Come back with a proposal.”
The Democrats’ plan includes $62 billion for neighborhood revitalization, lead remediation, affordable housing and disaster recovery.
However, House Speaker Paul Ryan has taken a gas tax increase off the table, telling The Hill newspaper, “There are some people who are talking about that, but the last thing we want to do is pass historic tax relief in December and then undo that. So we are not going to raise gas taxes.”
Key Democrats, meanwhile, are holding out for a colossal funding commitment before giving any consideration to the president’s proposal. As Rep. Peter DeFazio said, “We would just be wasting our time over here to move forward or say we’re going to move forward with some legislation that isn’t going to be paid for or financed.”
In response to the president’s plan, Senate Democrats in March released their “Jobs & Infrastructure Plan for America’s Workers,” which calls for a whopping $1 trillion in federal spending (compared to the president’s proposal for $200 billion). In addition to conventional infrastructure, the Democrats’ plan includes $62 billion for neighborhood revitalization, lead remediation, affordable housing and disaster recovery.
The Democrats are also adamantly opposed to the regulatory reforms proposed by President Trump to streamline the processes of issuing environmental and other permits. But the potential benefits of infrastructure modernization, including job creation, productivity improvements and economic growth, will not accrue if regulatory barriers impede projects.
There remain about nine months in the current session of Congress, although the House is scheduled to be active for less than three. The demands of campaigning will effectively leave only a few weeks to address legislation. Faced with a variety of budgetary and political hurdles, President Trump’s infrastructure plan is unlikely to progress this year, further delaying the much-needed reforms to America’s flawed and mismanaged system of infrastructure funding.