Tag Archives: infrastructure

Infrastructure Yes; Federal Deficits NO!

The American Society of Civil Engineers (ASCE) will surely benefit if the federal government were to spend a trillion or three dollarson infrastructure. So it is no surprise that its latest infrastructure report card says the nation needs to spend not one, not three, but four-and-a-half trillion dollars on infrastructure.

Yet there is no reason for the federal government to get involved in any of the infrastructure needs claimed by ASCE. In fact, the potential for federal spending on infrastructure is probably doing more harm than good since other people aren’t doing what they should be doing because they are counting on, or at least hoping for, the floodgates of federal funding to open.

Here are some of the most important infrastructure needs identified in the ASCE report:

  • Transit gets the lowest grade of any of ASCE’s infrastructure categories. Not coincidentally, transit is the most tax-dependent and gets more federal subsidies of any of the other infrastructure categories.
  • Railroads get ASCE’s highest grade. They also happen to be the least subsidized, being almost entirely private. Will anyone learn this lesson about private vs. public ownership of other infrastructure.
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APTA Wants a Piece of the Infrastructure Pie

Everyone wants a piece of Trump’s trillion-dollar infrastructure plan, even though they don’t really know what that plan is. Perhaps most arrogant of all, the American Public Transportation Association thinks that transit industry should get $200 billion, or 20 percent of the total.

That’s the same transit industry that carries 1 percent of all passenger miles in the United States–and no freight. That’s the same transit industry into which taxpayers have pumped more than $500 billion in operating subsidies and $350 billion in capital improvements since 1990, only to see annual transit trips per urban resident fall from 47 in 1990 to 40 in 2016. That’s the same transit industry that’s likely to be mostly replaced by self-driving cars in a few years. So, sure, blow $200 billion on it.

APTA’s plan might sound reasonable to transit fanatics who think that transit is worth a lot more than roads. But this assumes that the entire trillion-dollar infrastructure plan is for transportation. In fact, infrastructure includes things like Flint, Michigan’s water supply, a smart electrical grid, and high-speed internet to rural and low-income areas. With all these potential projects, why should an obsolete transportation system that carries 1 percent of passenger travel and no freight get 20 percent of the funds?

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Confusion about Infrastructure

The Christian Science Monitor thinks that the Democrats wrote their infrastructure plan as a “political bridge to President Trump.” Fox News thinks that Trump might “get on board” the Democrats’ plan. Statements like these show that many reporters–and by extension members of the public–haven’t yet figured out the real issues behind the infrastructure debate.

As Business Insider points out, there’s a bigger difference between the two sides over “how it’s paid for” than “what gets built.” The Democrats want the federal government to spend a trillion dollars, money it would have to borrow. Trump wants private investors to spend their own money. Never the twain shall meet.

But Business Insider doesn’t understand how Trump’s idea will work. If Trump is going to rely on the private sector, it says, then only projects that generate revenue will be built because “projects that don’t generate revenue for the private sector generally don’t get financed.” But there are two kinds of public-private partnerships. The kind that Business Insider is writing about is called demand risk because the private partner takes the risk that tolls, fares, or other user fees won’t repay the cost.

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Competing Infrastructure Plans: Trump vs. Democrats

Senate Democrats have proposed an infrastructure plan that calls for $1 trillion in federal deficit spending. In detail, the plan calls for:

  • $100 billion for reconstructing roads & bridges;
  • $100 billion to “revitalize Main Street,” that is, subsidies to New Urbanism and affordable housing;
  • $10 billion for TIGER stimulus projects;
  • $110 for reconstructing water and sewer;
  • $50 billion for modernizing rail (Amtrak and freight railroad) infrastructure;
  • $130 billion to repair and expand transit;
  • $75 billion for rebuilding public schools;
  • $30 billion to improve airports;
  • $10 billion for ports & waterways;
  • $25 billion to improve communities’ resistance to natural disasters;
  • $100 billion for a next-generation electrical grid;
  • $20 billion for broadband;
  • $20 billion for public lands and tribal infrastructure;
  • $10 billion for VA hospitals;
  • $10 billion for an infrastructure bank;
  • $200 billion for “vital projects” that “think big” such as building “the world’s fastest trains.”

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Not All Infrastructure Is Created Equal

An op-ed in the New York Daily News argues that Trump’s infrastructure plan “will result in wasteful spending and do little to fix crumbling facilities or promote economic growth” unless it is properly targeted, and the best way to target is to spend only on infrastructure that can be built and maintained with user fees.

The country should also avoid building new infrastructure that will soon be obsolete. For example, Bay Area Rapid Transit (BART) spent nearly half a billion dollars building the Airport Connector, a 3.2-mile elevated cable-car line to the Oakland Airport. BART expected to cover operating costs by charging people $6 to travel between the airport and the nearest BART station. Instead, it is losing money, and they are blaming Uber and Lyft. It was a dumb idea even if they did recover operating costs, but new technologies have made it even dumber still.

The Trump Administration needs to learn the Antiplanner’s Law of Transportation Infrastructure: Any transportation technology that requires new infrastructure is doomed to failure because it will be unable to compete against technologies using existing infrastructure such as the nation’s hundreds of commercial airports and millions of miles of highways.

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America Has Enough Infrastructure

Many people in Washington are talking about infrastructure spending. Infrastructure is a bi-partisan issue, because every elected official is happy to spend other people’s money on projects that will get their names in the paper and contributions to their re-election campaigns.

George Will throws a dose of cold water on the party when he points out that it’s hard to spend money on infrastructure when we’ve thrown up so many roadblocks in the form of environmental reviews. But that’s not the real problem with infrastructure spending. The real problem is that we really don’t need any new infrastructure.

Most writers assume that government spending on infrastructure has a multiplier effect: that every dollar spent will generate more than a dollar of gross domestic product. That worked for early highway spending, which generated a huge amount of new travel and shipping that didn’t exist before. It won’t work for most infrastructure spending today.

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Trump’s Trillion-Dollar Infrastructure Plan

On the campaign trail, Donald Trump promised to spend twice as much on infrastructure as whatever Hillary Clinton was proposing, which at the time was $275 billion. Doubling down again in a speech after winning the election, Trump now proposes to spend a trillion dollars on infrastructure over the next ten years.

President Obama had proposed to fix infrastructure with an infrastructure bank, though just where the bank would get its money was never clear (actually, it was perfectly clear: the taxpayers). Trump’s alternative plan is for the private sector, not taxpayers, to spend the money, and to encourage them he proposes to offer tax credits for infrastructure projects. He says this would be “revenue neutral” because the taxes paid by people working on the infrastructure would offset the tax breaks. In short, Trump is proposing tax credits in lieu of an infrastructure bank as a form of economic stimulus.

America’s infrastructure needs are not nearly as serious as Trump thinks. Throwing a trillion dollars at infrastructure, no matter how it is funded, guarantees that a lot will be spent on unnecessary things. As Harvard economist Edward Glaeser recently pointed out in an article that should be required reading for Trump’s transition team, just calling something “infrastructure” doesn’t mean it is worth doing or that it will stimulate economic growth.

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The Who-Gets-to-Decide Crisis

“There is now a consensus that the United States should substantially raise its level of infrastructure investment,” writes former treasury secretary Lawrence Summers in the Washington Post. Correction: There is now a consensus among two presidential candidates that the United States should increase infrastructure spending. That’s far from a broad consensus.

“America’s infrastructure crisis is really a maintenance crisis,” says the left-leaning CityLab. The “infrastructure crisis is about socialism,” says the conservative Heritage Foundation. “There is no widespread crisis of crumbling infrastructure,” says libertarian Cato Institute. “The infrastructure crisis . . . isn’t,” agrees the Reason Foundation.

As Charles Marohn, who classifies himself as a traditional conservative, says, the idea that there is an infrastructure crisis is promoted by an “infrastructure cult” led by the American Society of Civil Engineers. As John Oliver noted, relying on them to decide whether there is enough infrastructure spending is like asking a golden retriever if enough tennis balls are being thrown.

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Asking the Right Questions About Infrastructure

“The American economy is a growth Ponzi scheme where we try to . . . generate a short-term illusion of wealth by having our cities, neighborhoods and families take on enormous long term liabilities,” says Strong Towns founder Charles Marohn in an interesting article about the so-called infrastructure crisis. What he calls the “Infrastructure Cult” leads the nation to go deeply into debt building more and more infrastructure without ever asking “why do these investments not generate enough productivity — enough real return — to be sustained?”

Marohn and the Antiplanner have had our differences in the past. Marohn thinks the suburbs are dead. He thinks most urban arterials, which he derisively calls “stroads,” should be designed downwards in ways that will vastly reduce mobility.

When addressing an issue such as infrastructure, it is important to ask the right questions. So far as I’ve quoted above, Marohn has done so. However, I fear he will miss one important question, which is: How should we measure whether particular infrastructure investments generate enough productivity to be worthwhile?

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Spend More or Less on Infrastructure?

USA Today thinks the federal government needs to spend more on infrastructure. An opposing view suggests that most of any spending increases would go for unnecessary new projects, not for repair of existing infrastructure.

Certainly, something must be done about the impasse over the federal transportation bill. But increased spending isn’t necessarily the solution; we first need to make sure that the money that is being spent is going to the right places.

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