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Monday, July 15, 2024 | Back issues
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Economists Sour on Trump’s Budget for Infrastructure

The infrastructure plan unveiled Monday by President Trump faced a dubious reception by economists who said it fails to allocate enough federal dollars to support its aspirations.

WASHINGTON (CN) - The infrastructure plan unveiled Monday by President Trump faced a dubious reception by economists who said it fails to allocate enough federal dollars to support its aspirations.

Of the $200 billion in federal dollars that the Trump administration has carved out to improve roads, bridges and water systems over the next decade, half will go toward incentivizing investments from private firms and state and local governments.

The White House said its contribution will be leveraged to $1.5 trillion after states and municipalities chip in with revenue collected from taxes, tolls and user fees.

Labeling the plan "incredibly stingy,” Hunter Blair with the Economic Policy Institute said it relies on states to shoulder around 80 percent of the funding burden.

Discussing the 55-page plan in a phone interview, Blair noted that the federal government has historically paid for 80 percent of interstates and other federally run highways.

Though states and local governments have been contributing the bulk of infrastructure funding for some time now, Blair said this system has been insufficient to meet the country's infrastructure needs.

"It strikes me that if we all agree that the current situation isn't working, why would we double down and do more of the same," Blair asked in a phone interview. "The onus should really be on the federal government to pony up some of the funds to make a real investment in our infrastructure.”

"There's no free lunch here by leveraging the private sector," Blair added.

Blair explained that the reason “states and localities still spend more on public infrastructure is that they have to pay for far more infrastructure than just federal aid highways.”

“If we think infrastructure is currently underinvested in, then we shouldn’t just punt even more of the funding onto states and localities,” Blair added.

Trump’s infrastructure budget also apportions $50 billion on block grants for rural infrastructure, which can be used for water, waste and power projects, along with transportation and broadband internet.

The last $50 billion is set to be split between funding "transformative" projects, which a 55-page legislative outline says "could dramatically improve infrastructure" and "major, complex infrastructure projects.”

The Perils of Privatization

While Capitol Hill dissects the proposal, economist Blair said he is skeptical that the plan will stimulate the economy and create more jobs.

"Real infrastructure investment could create jobs but, because the plan just kicks finding funding to states, it's not clear how much real investment takes place," Blair said.

Trump's infrastructure plan also contains a provision that has drawn criticism for its potential to foster monopolistic behavior. It calls for the privatization of certain infrastructure, such as the Ronald Reagan Washington National and Dulles International Airports.

The plan says federal agencies should have the authority to divest federal assets if they can show "an increase in value from the sale."

At the Center for American Progress, infrastructure policy director Kevin DeGood said investors are attracted to public infrastructure assets because of the absence of competition.

"We have to recognize one reason why Wall Street investors are eager to take over those assets is that they look and behave like a monopoly," he said during a call with reporters Monday afternoon.

DeGood also said middle-class and working families would be hit hard by increased privatization of roadways, which means increased toll fees.

Blair with the Economic Policy Institute echoed that sentiment, noting that privatization would allow companies to hike up user fees or degrade the quality of service.

“Infrastructure historically is something we have provided through the public sector because it very often has characteristics of natural monopolies," he said.

Trump's infrastructure plan cites the George Washington and Baltimore Washington Parkways as examples of other infrastructure that could be privatized, along with the Washington Aqueduct and the transmission assets of the Southwestern Power Western Area Powers Administrations.

Though Trump has also vowed to expedite the permitting process for environmental reviews, critics are skeptical that his proposal will achieve this by imposing a two-year deadline.

"Just setting those deadlines does not make people move faster," said Christy Goldfuss, the senior vice president of climate policy at the Center for American Progress, in a call with reporters.

To do that, Goldfuss said the administration would need to invest in the necessary resources, technology and expertise.

Categories / Economy, Government

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