In his first State of the Union address, President Trump, who has vowed to make America great again, upped the ante on infrastructure rebuilding, with promise of “gleaming new roads, bridges, highways, railways” with a whopping $1.5 trillion (it had been $1 trillion). Finally. It had been over a year of promises.
The Legislative Outline for Rebuilding Infrastructure in America arrived a few days later. There on page 1 was the promise of $1.5 trillion, an amount that if applied to new construction would be sufficient a whole second US Interstate system. But reading onward was to be sobered, even confused. The outline only commits to$200 billion. Where was the rest of it?
What’s the Plan?
Here’s the breakdown of the $200 billion in the White House infrastructure plan.
- $100 billion is to be used as “incentives” for investment by state/local governments and the private concerns.
- $20 billion for existing federal infrastructure loan programs, including the Transportation Infrastructure Finance and Innovation Act (TIFIA).
- $50 billion of the $200 billion would be block grants to governors for rural projects.
- $20 billion “transformative programs,” or “next-century type of infrastructure.” Possibly new high speed rail lines.
- $10 billion for a “capital financing fund.”
The $1.5 trillion is but a projection of total investment that will grow from the $200 billion. The White House hopes dangling seed money will lure a further $1.3 trillion (or 87% of the total)out of local governments and the private sector. It’s a big ask – and an untested on such a large scale. States are used to the reverse situation, getting 80% of the funding from the federal government and only having to chip in 20% (for interstate routes.)
Local governments almost immediately took notice of the limited funding. One local official described the outline as more a financing plan than a funding plan. Kevin DeGood, director of the Center for American Progress, reflected the disappointment of state and local governments, calling the plan a “fiscal two-by-four to the face.”
The White House infrastructure plan overrides an infrastructure plan introduced by the Democrats last year that provided $1 trillion in direct spending – all by the federal government – that would have been wildly popular by state and local governments. However, that plan was termed “not a priority” by Senate Majority leader, Mitch McConnell and went nowhere.
Head Spinning Permits
As if to make up for little in the way of direct funding, the White House plan includes the promise of quicker permitting. Big highway projects, for example, can take decades to complete with construction delays due to getting approvals and permits
“We’re going to get you the environmental and the transportation permits,” said Trump. “We’ll get them for you so fast your head will spin.”
Alarm bells began ringing almost immediately at environmental groups. Already sore about an administration that does not believe in climate change and with an alleged agenda to weaken the EPA, environmentalists have already noted that the plan lessens the effectiveness of a total of 9 environmental laws, including the National Environmental Policy Act (NEPA), Clean Air Act, and Clean Water Act.
The Plan Giveth and the Budget Taketh Away
The $1.5 trillion amount is up from a the $1 trillion for infrastructure promised in May (in the FY 2018 budget proposal), which also offered $200 billion in direct spending. The White House may be hoping the extra $500 billion projected in the total spend of the recent proposal will come from the faster permitting.
The infrastructure plan is part of the $4.4 trillion FY2019 national budget. Defense spending was the big winner with an increase from $868 billion to $950 billion but many infrastructure projects suffered. The Highway Trust Fund, the main source of transportation funding in the United States, stands to lose $95 billion over the next 10 years according to University of Pennsylvania’s Wharton School of Business. Also targeted for cuts are Amtrak (cut$7.6 billion) and the US Army Corps of Engineers ($14B). The White House intends to eliminate $19.5 billion for the “Fast Starts,” affecting a slew of infrastructure projects all over the US. Add it all up and the budget cuts $275 billion from infrastructure projects over the next 10 years, according to CITILAB.
Combine the federal budget cuts with direct federal spending in the infrastructure plan and you are left with a negative net spend of $45 billion to $75 billion on infrastructure over the next 10 years.
Where’s the Money?
The $200 billion offered in the infrastructure plan is hardly a gold nugget easily picked up. The national budget does not specifically call out the $200 billion direct spend as a line item, as it does the defense spending and the wall between US and Mexico. Agencies specifically named as recipients in the budget will be guarding what they have been allocated and prying $200 billion from them will not be easy.
One approach hinted at is raising of the tax on gasoline. The federal gas tax has remained unchanged since 1993.
Reasons this Won’t Work: 50
Critics of the White House infrastructure plan see it not as making America great but as America shirking from its responsibility. Rather than unifying the states with interstate routes and projects with continuity and uniformity, the White House is practically telling them they are on their own. This could result in unfinished projects, or ragtag interstate routes and projects from varying standards, resources and lack of cooperation from one state to the next.
Or projects that never get started. Few states and cities have money lying around for refurbishing highways, railroads, airports and water projects that would amount to $1.3 trillion. Local governments raise money by selling bonds and raising taxes – the latter virtually political suicide for any elected official. Also, recent changes in the federal tax code that have reduced deductions for local taxes will make it harder to raise them.
Private Investment in Infrastructure
Private investment works well if there is an obvious return on investment. Public sector spending, on the other hand, is supposed to disregard profit and focus on the public good. A project that delivers profit could be a high speed rail line between Los Angeles and Las Vegas and an attractive investment for the gaming industry. However, repairing the water delivery system to the poor people in Flint, Michigan? Good luck with that.
To call the infrastructure proposal Trump’s plan may be stealing too much credit from Vice President Mike Pence, the architect of a private-public partnership initiative while he was governor of Indiana. Spain’s Grupo Isolux Corsán Finance underbid the I-69 corridor from Bloomington to Martinsville, got the job, became embroiled in embezzlement charges in Spain, got two years behind schedule and was fired. The local paper called it an “embarrassing mess.”The company that took over the Indiana Toll Road went bankrupt after 8 years into a 75 year agreement.
Indiana is not alone in privatizing infrastructure. Examples of failed privatization projects are easier to find than successful ones. San Diego’s South Bay Expressway went out of business when they couldn’t raise tolls high enough to cover construction costs that had soared from $658 million to $843 million. Texas brought in Cintra (also from Spain) to make a 41 mile long extension of Route 130. Raising the speed limit to a mad 85mph (highest in the country) was to have attracted enough speedsters to generate $245 million a year for the state. It didn’t. In 2016, the venture went bankrupt, owing more than half a billion to the state and turning over all of $3 million in toll revenue.
Despite being reported as a cautionary tales in the media, privatized infrastructure nevertheless emerges as a shining example of private-public cooperation personified by Mike Pence as he rode into the White House.
What Happens Next
The $1.5 Trillion infrastructure plan is a proposal to Congress. Democrats have already expressed criticism. Even a Republican-controlled congress has pushed back on some of Trump’s previous budget cuts, so the plan’s passage into law and enactment is far from certain.At least one lawmaker has referred to the plan as “dead on arrival.”
We expect to hear our embattled president touting the “$1.5 trillion plan” to save America at every opportunity, his White House officials in tow. We also expect most lawmakers to be skeptical lawmakers, except for the remaining ardent Republican supporters. The media will, as usual, be unsympathetic and critical. The engineering, building and construction industry, is cautiously optimistic, thankful for a step from the White House, however small, as a measure of progress, hopeful that eventually the means to rebuild America will finally arrive.