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Manhattan Institute

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Ideas for the New Administration: Private Infrastructure Provision

issue brief

Ideas for the New Administration: Private Infrastructure Provision

January 12, 2017
Urban PolicyInfrastructure & TransportationRegulation

Abstract

The Easy, The Hard, The Impossible

There are many things to like about President-elect Trump’s plan to encourage the private provision of infrastructure. Private firms have incentives to keep costs down. If the costs need to be covered by tolls and ticket fees, no one would build bridges to nowhere or empty monorails. If investors reap returns only over time, they have the right incentives to invest in maintenance.

But private provision is no panacea. In some cases, such as airports, privatization can be swift and relatively painless. Yet generous tax credits for privately built infrastruc- ture—as proposed by Wilbur Ross, Mr. Trump’s nominee for secretary of commerce—leave real potential for abuse: when the users don’t need to cover costs, it is far easier to waste billions on unwise projects. Better to make tax credits dependent on project performance, as measured by property-value increases.

Unfortunately, privatization is unlikely to be the right recipe for America’s most important infrastructure investments: maintaining its existing stock. A better approach would have the federal government monitor infrastructure quality and tie federal support to maintenance.

Key Findings

  1. The Easy: Airports and New Technologies
  2. The Hard: Getting Subsidies Right
  3. The Impossible: Private Maintenance of Existing Infrastructure

READ FULL REPORT

Return to MI's Transition 2017 page

______________________

Edward L. Glaeser is the Glimp professor of economics at Harvard University, a senior fellow at the Manhattan Institute, and contributing editor at City Journal.

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