Trump’s Infrastructure Plan: The Good, the Bad and the Uncertain

Paving Roads - Trump Infrastructure Plan

On February 12th, President Trump finally announced his infrastructure plan. He proposes to spend $200 billion in federal funds over the next decade, using it to leverage another $1.3 trillion from state and local governments and the private sector, for a total of $1.5 trillion.

Specifically, the plan calls for $100 billion in matching funds for state, local and private sector projects; $50 billion in block grants to states for rural infrastructure projects; $20 billion for “bold and innovative projects that have the potential to dramatically improve America’s infrastructure;” $20 billion in loans and bonds; and $10 billion for a new Federal Capital Revolving Fund to “reduce inefficient leasing of Federal real property.”

Here is my take on President Trump’s infrastructure plan:

The Good

It took him a year, but at least he’s come forward with a plan. If it succeeds in generating $1.5 trillion in infrastructure investments over the next 10 years, this would bolster our economy and generate plenty of man-hours for our members — a great achievement. America needs $4.6 trillion to bring our infrastructure up to acceptable standards over the next 10 years and we welcome any step that moves us forward.

In addition, the president calls for streamlining the approval process for infrastructure projects, a move we also applaud.

The Bad

Imagine if instead of giving corporations and the ultra-rich $1.5 trillion in tax cuts that they don’t need, President Trump had invested the same amount in infrastructure. With leveraging, that alone could have generated $4.6 trillion. Something is better than nothing, but it’s a shame the needs of hardworking building trades members didn’t come before the greed of billionaires.

Second, the plan’s entire premise — that $200 billion will generate $1.5 trillion — may be unrealistic. As The New York Times reported, “Many infrastructure experts consider the ratio Mr. Trump’s aides are proposing for a public-private plan — essentially creating $6.50 in private investment for every federal dollar spent — to be largely out of reach.”

Ironically, one reason for this is the Trump tax bill. By sharply reducing the deductibility of state and local taxes, the new law will make it much harder for state and local governments to raise the revenue they need for infrastructure. Plus, by reducing taxes on the wealthy, the law shrinks the tax advantage of municipal bonds, increasing state and local borrowing costs.

Moreover, the federal government typically covers 80 percent of the cost of highway construction and repair, but the Trump program reverses this ratio. And mass transit is usually funded on a 50-50 basis. So the plan actually reduces the incentive for states and localities to invest in infrastructure.

Third, while public-private partnerships can be valuable strategies for generating infrastructure improvements, their value is limited to projects that can earn profits, such as toll roads, bridges and tunnels. But other projects, such as installing lead-free water pipes in Flint, upgrading sewer systems, and building levees to prevent increasingly severe flooding, aren’t going to earn anyone a profit. Yet they’re every bit as important.

Fourth, and perhaps most problematic, the Trump plan has no mechanism for ensuring that the $200 billion in federal funds will spur new construction, rather than subsidize projects that would have been built anyway.

The Uncertain

It’s not yet clear how the Trump infrastructure plan will be funded.

At the very least, the $200 billion must be in addition to existing infrastructure funding; otherwise it’s being oversold. And it must not be paid for by cutting existing infrastructure programs. Yet the administration’s budget proposes cuts to federal transit funding, and another program giving federal infrastructure grants to state and local governments on a competitive basis. It you’re adding with one hand but taking away with the other, that’s a scam. Similarly, the bill must not be paid for with cuts to programs the middle class depend on, including Social Security, Medicare and Medicaid.

One funding source might be to sell off federal assets, such as Reagan National and Dulles International airports, and various power transmission lines. Whenever publicly-owned entities are sold to private buyers, there is a risk of sacrificing long-term control and revenue generation in exchange for a one-time cash gain. That would be short-sighted.

On the other hand, an increase in the federal gas tax, which has been stuck at 18.4 cents a gallon since 1993, should be on the table. Gas tax revenues go to the Highway Trust Fund, which has not been able to keep up with rising construction costs because of the freeze. Even the U.S. Chamber of Commerce has called for a 25-cent-per-gallon gas tax increase, something Congress and the White House should consider.

Finally, it is absolutely essential that any and all projects receiving federal funding — directly or indirectly — fully abide by the Davis-Bacon Act, so they support middle-class jobs rather than spearhead a race to the bottom. Your union will be vigilant in ensuring no erosion in the power of the prevailing wage.

The Big Picture

The OPCMIA will tirelessly work with the Trump Administration and Congress to pass a strong new infrastructure plan. We will seek to improve the White House’s plan in every way possible and change provisions that cause us concern. Above all, we will be a positive force in pushing for new, urgently-needed federal funding as soon as possible, so long as the outcome is more good-paying work for our members and a stronger infrastructure for our nation.

Daniel E. Stepano
General President