Trump Talks a Big Infrastructure Game But His Budget Tells a Different Story

Josh Bivens and Hunter Blair June 5, 2017

The Trump administration’s rhetoric on infrastructure is loud and real. The administration’s plans are thin and fake. (Photo by Drew Angerer/Getty Images)

This arti­cle was first post­ed by the Eco­nom­ic Pol­i­cy Institute.

It has been declared infra­struc­ture week” by the Trump admin­is­tra­tion. On the face of it, that should be excel­lent news. The U.S. econ­o­my would ben­e­fit enor­mous­ly from an ambi­tious increase in pub­lic invest­ment, includ­ing infra­struc­ture invest­ment. Such invest­ment would cre­ate jobs and final­ly lock-in gen­uine full employ­ment in the near-term, and would pro­vide a need­ed boost to pro­duc­tiv­i­ty growth (or how much income and out­put each hour of work gen­er­ates in the econ­o­my) in the medi­um-term. Fur­ther, infra­struc­ture invest­ments would ensure that we do not leave future gen­er­a­tions a deficit of under­in­vest­ment and deferred main­te­nance of pub­lic assets.

This clear need is why we at EPI have been such enthu­si­as­tic back­ers of the Con­gres­sion­al Pro­gres­sive Cau­cus (CPC) plan to boost infra­struc­ture invest­ment. The CPC invest­ment plan is up to the scale of the prob­lem, and it con­fronts the need to make these invest­ments head-on, with­out account­ing gim­micks or mag­i­cal think­ing about where the mon­ey for these invest­ments will come from.

Despite being long-stand­ing and loud pro­po­nents of the need for more infra­struc­ture invest­ment, how­ev­er, we can­not say we expect much from the Trump administration’s infra­struc­ture week. Why not? Because the most com­mon theme in the Trump administration’s approach to infra­struc­ture is pure obfus­ca­tion about how it will be paid for. If you’re not will­ing to say forth­right­ly how you’re going to pay for infra­struc­ture invest­ments, you real­ly can­not be seri­ous about it. As the old adage goes, show me your bud­get and I’ll tell you what you value”.

The recent­ly released Trump fed­er­al bud­get plan guts infra­struc­ture, peri­od. Read the link — the dam­age the Trump bud­get would do to pub­lic invest­ment and infra­struc­ture is stag­ger­ing. This alone should make any open-mind­ed per­son extra­or­di­nar­i­ly skep­ti­cal of their claims to val­ue infra­struc­ture spending.

The Trump cam­paign plan on infra­struc­ture was notable only for its shal­low­ness and its deter­mi­na­tion to increase crony­ism in infra­struc­ture pro­vi­sion. The plan claimed that the prob­lem with Amer­i­can infra­struc­ture invest­ment was a lack of inno­v­a­tive financ­ing, and that the pri­vate sec­tor could some­how be con­vinced to build infra­struc­ture at no cost to tax­pay­ers. This was obvi­ous­ly false. Even long-stand­ing, bipar­ti­san efforts to lever­age pri­vate sec­tor financ­ing of infra­struc­ture have ranged from dis­ap­point­ing to dis­as­trous. And in no case did they pro­vide a free lunch to tax­pay­ers — unless tax­pay­ers have a huge pref­er­ence to pay­ing tolls to pri­vate com­pa­nies rather than the same amount of tolls or tax­es to governments.

The prob­lem hold­ing back increased invest­ment in Amer­i­can infra­struc­ture is sim­ple: politi­cians are sim­ply unwill­ing to increase pub­lic spend­ing in a trans­par­ent way. This must be over­come — Amer­i­ca needs a sig­nif­i­cant invest­ment in pub­lic assets, and it needs this invest­ment to be trans­par­ent, sub­ject to demo­c­ra­t­ic account­abil­i­ty, and long-lived.

The sketch of the new Trump infra­struc­ture effort includ­ed in their bud­get shows clear­ly that they do not get this. Instead, the plan is more obfus­ca­tion and mag­i­cal think­ing. They claim their plan will lead to $1 tril­lion in new invest­ments. Yet only $200 bil­lion in new fed­er­al spend­ing is spec­i­fied (and again, this must be bal­anced against the enor­mous cuts to pub­lic invest­ment already embed­ded in their over­all bud­get plan). Where does the rest of the fund­ing come from? In a word, nowhere. There is hand wav­ing about lever­ag­ing the pri­vate sec­tor and vague claims that fed­er­al divest­ment” from infra­struc­ture pro­vi­sion will some­how empow­er state and local gov­ern­ments to do more (but with­out any new fund­ing source for these gov­ern­ments!). But like Trump’s cam­paign plan, this is an unse­ri­ous doc­u­ment meant to sound like an infra­struc­ture invest­ment plan, but one that would rad­i­cal­ly under­in­vest in projects over­all, and which would pri­or­i­tize projects that can pro­vide prof­its to pri­vate enti­ties (like toll roads to air­ports) rather than projects that pro­vide the largest wel­fare boost to vul­ner­a­ble com­mu­ni­ties (say replac­ing lead-laced water pipes for com­mu­ni­ties like Flint, Michigan).

Nation­al Eco­nom­ic Coun­cil Direc­tor Gary Cohn summed up the Trump approach well: We like the tem­plate of not using tax­pay­er dol­lars to give tax­pay­ers wins.” Who wouldn’t? And there are legit­i­mate ways to give tax­pay­ers wins with­out using tax­pay­er mon­ey. Raise the fed­er­al min­i­mum wage, for exam­ple. Or restore work­ers’ rights to bar­gain col­lec­tive­ly. Or pur­sue gen­uine full employ­ment. But if you’re try­ing to spend mon­ey on pub­lic assets, the idea that this can be done while not using tax­pay­er dol­lars” is a pure dodge.

Infra­struc­ture invest­ment should be tak­en seri­ous­ly. The stakes are large: each $1 bil­lion in such invest­ment has the poten­tial to sup­port more than 18,000 jobs—and these jobs are dis­pro­por­tion­ate­ly well-pay­ing (so long as no strings are attached to the invest­ments that spurred them —like the ero­sion of work­ers pro­tec­tions). And as pri­vate sec­tor invest­ment has lagged in the after­math of the Great Reces­sion, the most obvi­ous path to boost­ing pro­duc­tiv­i­ty growth is through an increase in pub­lic invest­ments. An opti­mal plan would pair infra­struc­ture invest­ments in the nation’s phys­i­cal cap­i­tal stock with a big increase in pub­lic invest­ment in human cap­i­tal, with ear­ly child­care and edu­ca­tion being an obvi­ous place to earn big returns.

But because the stakes are so large, we should not let pol­i­cy­mak­ers get cred­it for fake plans. The Trump administration’s rhetoric on infra­struc­ture is loud and real. The administration’s plans are thin and fake.

Josh Bivens is the direc­tor of research at the Eco­nom­ic Pol­i­cy Insti­tute (EPI). Hunter Blair joined EPI in 2016 as a bud­get ana­lyst, in which capac­i­ty he research­es tax, bud­get, and infra­struc­ture policy.
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