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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The third issue that many people don’t understand is the difference between Trump and the Democrats over jobs. The Democrats’ plan estimates that number of jobs that will be created by spending money on construction and maintenance. They used a simple formula: each billion dollars of spending generates 13,000 jobs (about $76,000 per job). Of course, they really mean job-years, and that formula works as well for digging holes and filling them up as for building roads or water lines.
Trump is less concerned about the immediate jobs than whether projects generate long-term benefits for the economy. Digging a hole and filling it up creates short-term jobs, but if there are no jobs after the project is done, it wasn’t worth it. A transportation improvement that generates new travel will generate jobs in the long term. A transportation project that merely substitutes one form of travel for another will generate few, if any, long-term jobs.
So there are three irreconcilable differences between Trump and the Democrats: where the money comes from in the short run (public vs. private); how it is financed in the long run (feds vs. state & local); and what kind of jobs they should shoot for (short-term vs. long-term). In short, while both sides talk about “trillion-dollar plans,” they mean very different things.
One unforgivable crime of economists was that they supported this idea that just “creating jobs” is economic advancement. A law requiring holes to be dug and filled back in “creates jobs” but is a total economic loser. Meanwhile a job digging something out of the ground that other people badly want does have multiplying effects through the economy.
When government wants to spend money just to grow jobs, perhaps the safest bet is to do maintenance of infrastructure that is heavily used like bridges and roads. At least you can be relatively sure the work will have broad economic benefit.
But how it is paid for (both literally and politically) is important. Transit like DC Metro will try to jump on that theory and get paid for all the maintenance they deliberately deferred and that is a problem. But I have to note that any political system that allows DC Metro to EXPAND and the same time the undone maintenance problems are KILLING PEOPLE is so broken and corrupt that logic no long matters. This under the nose of the Washington Post is just disgusting and proves the end of the Washington Post as journalism.
I would not assume that only Democrats like to hand out money for projects to their constituents. I have met many Republican farmers who expect the taxpayer to subsidize them, and Republican developers who want subsidized roads and infrastructure to their projects. Get users to pay with fees for their projects.