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A $2 Trillion Mistake? Here’s What Washington Must Do to Get Infrastructure Right

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A $2 Trillion Mistake? Here’s What Washington Must Do to Get Infrastructure Right

New York Post May 16, 2019
Urban PolicyInfrastructure & Transportation

President Trump and Democratic leaders have discovered the one policy that unites Washington: spending money we don’t have. Yet their bipartisan pledge to spend an added $2 trillion on infrastructure over the next decade faces serious obstacles if these leaders are to responsibly improve our infrastructure.

First, Washington should spend only as much as it is willing to offset with other savings. Putting $2 trillion on the national credit card would boost deficits that are already on course to surpass $2 trillion a year within a decade, due mostly to entitlements.

These deficits are projected to push ­annual interest costs over $1 trillion. And if interest rates merely return to 1990s levels, interest on the debt will become the largest part of the budget. Yet Democrats are already calling for $40 trillion in other new spending over the decade, and Republicans just cut taxes by $2 trillion. Something has to give.

At the same time, $2 trillion is too much to finance in taxes. The $1,500-a-year-per-household cost would require either raising the federal gas tax to $1.53 per gallon from 18.4 cents or raising all income-tax rates by 2.2 percentage points. A different approach is needed — one with a much smaller price tag that is also offset with spending cuts.

Lawmakers should also drop the illusion that infrastructure will bring economic stimulus. House Speaker Nancy Pelosi recently said this initiative is “about jobs, jobs, jobs.” Yet with the unemployment rate ­already at 3.6% — the lowest since the 1960s — there is no significant slack in the economy to mobilize. All the government can do is transfer capital and jobs from one part of the economy to another.

As the Congressional Research Service has noted, when the economy is at full employment, “the net impact on the economy of highway construction . . . could be nullified or even negative.”

Still, a stronger infrastructure can eventually increase the economy’s long-term capacity for growth. Government spending on infrastructure remains near the 40-year average, yet political mismanagement has created a backlog of necessary maintenance and improvements.

One problem is bureaucratic red tape. Nearly a century ago, the Empire State Building was built in 410 days. More ­recently, Boston’s Big Dig took 25 years from planning to completion. Today, California’s bloated high-speed rail is expected to take nearly 40 years from planning to completion, while basic infrastructure maintenance is shortchanged.

Another issue: Federal infrastructure projects have long been hijacked by politicians, as well as diverted to lower priorities like high-speed rail (with high cost overruns), museums and bike paths. Politicians also typically prioritize pricey new projects over less expensive repairs to existing infrastructure. After all, repairs do not bring ribbon-cutting ceremonies. So potholes proliferate, while Washington invests in politician vanity projects and bridges to nowhere.

Washington’s recent track record with “moonshot” infrastructure initiatives inspires little confidence. The $68 billion infrastructure portion of the 2009 “stimulus” earned widespread condemnation for its Solyndra-style waste, mismanagement and political micromanagement — with President Obama later admitting that “shovel-ready was not as, uh, shovel-ready as we expected.”

In this latest round, Trump and Democratic leaders committed to a specific funding level — $2 trillion — and then promised to figure out the infrastructure needs and priorities later. That is exactly backward.

The solution is not $2 trillion more of federal mismanagement. Instead, Washington should get out of the way and empower states and local governments to set their own infrastructure priorities.

Specifically, Congress should significantly cut the federal gas tax, and reserve federal infrastructure spending only for federal lands and major interstate projects. Then, let states raise the gas tax back up and decide for themselves the best projects — without meddling from Washington.

States can also follow the Canadian and British trend of including more public-private partnerships. Canada and Europe have also taken steps towards privatizing air-traffic control and airports.

Non-transportation infrastructure (such as energy, utilities and telecommunications) are also often best left to governors, mayors and regional commissions. Washington’s role should be limited to true national projects, such as interstate waterways and interstate telecommunications.

But don’t hold your breath for commonsense reforms. After all, Washington’s real purpose here is to invest $2 trillion in political favors, pork, press releases and ribbon-cutting ceremonies — and then stick our kids with the bill.

This piece originally appeared at the New York Post

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Brian M. Riedl is a senior fellow at the Manhattan Institute. Follow him on Twitter here.

Photo by iStock

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