The White House released President Trump’s infrastructure plan today, which calls for spending $200 billion federal dollars as seed money to stimulate a total of $1.5 trillion on “gleaming new infrastructure.” Almost lost in the dozens of pages of documents issued by the administration is that the reason why the federal government supposedly needs a new infrastructure program is that our infrastructure is crumbling, and the reason it is crumbling is that politicians would rather spend money on gleaming new projects than on maintaining the old ones.
The White House proposes several new funding programs. The administration could have dedicated one or more of these programs to maintenance and repair of worn-out infrastructure. Instead, all $200 billion can be spent on new projects, and knowing politicians, most of it will be. To make matters worse, funds for most of the programs would be distributed in the form of competitive grants, but experience has proven that competitive grants are highly politicized.
“In the past, the Federal Government politically allocated funds for projects, leading to waste, mismanagement, and misplaced priorities,” agrees White House economic advisor Gary Cohn. The administration’s solution, Cohn continues, is to “stimulate State, local, and private investment.” In other words, instead of most decisions being made by Washington politicians, they will be made by local politicians. But if local politicians were any better at maintaining infrastructure, then we wouldn’t have tens of thousands of local bridges classed as “structurally deficient” and the New York, Washington, Boston, and other subway systems wouldn’t be falling apart.
The White House says that the federal funds it proposes to allocate to infrastructure may be spent on either new construction or maintenance, which is an advantage over some existing federal programs that can only be spent on new construction. But just because the new funds can be spent on maintenance doesn’t mean they will be.
The New York subway system is falling apart because the city doesn’t have enough money to maintain it. Yet it has enough money to spend $10 billion on a tunnel between Penn Station and Grand Central Terminal for Long Island Railroad trains, which the New York Times has called “the most expensive subway in the world.” It also has enough money to build the eight-mile Second Avenue subway, which at $2.1 billion a mile must be the second-most expensive subway in the world.
The Washington Metro system is falling apart because the region is short $10 billion to maintain it. Yet Virginia was able to find enough money to build the Silver Line and Maryland to build the Purple Line; the costs of these two projects would have been enough to fix most of the existing Metro system.
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The Boston rail transit network is also falling apart because the region can’t find the $470 million a year needed to maintain it. Yet is was able to find $2.3 billion to build a 4.3-mile light-rail extension. In all of these cases, local politicians decided to spend money on new projects even though 50 to 80 percent of the money in each case could have been spent on maintenance.
The truth is that our infrastructure isn’t in as bad shape as some claim. State highways are in good condition; local roads less so. Rail freight systems are in good condition; rail transit systems less so. In general, infrastructure paid for out of user fees are in good condition; infrastructure paid for out of tax dollars less so.
This means there is a simple way to take the politics out of infrastructure and make sure that managers maintain it: fund it out of user fees, not tax dollars. Managers of user-fee-funded infrastructure tend to do the best job of maintenance because they know users will stop paying to use their facility if it become unreliable.
To its credit, the White House program does make some token movements in the direction of more user fees. For example, it would allow states to charge tolls for all interstate highway, something that is now, for the most part, proscribed by Congressional edict. But even this depends on state politicians asking their constituents to pay tolls for something they have been getting for “free,” which is unlikely to happen.
In the end, however, the major impact of the Trump plan is to drop 200 billion new dollars onto state and local governments on top of existing federal spending programs. This will merely provide more insulation for state and local politicians from having to ask users to pay for the infrastructure they build. The result will be that most, if not all, of that $200 billion will go to build new infrastructure that we probably don’t need and can’t afford to maintain rather than maintaining what we have.
Infrastructure needs at least 14 trillion dollars. That’s 350 billion dollars for the next 20 years… what are you willing to live without for the next 20 years to make it happen?
I’ll wait
You fix it one at a time and if you got money left over, set it aside for a rainy day.
User fees will work only if diversion is stopped. 15 percent of the federal gas tax is diverted to the Mass Transit Account. It’s worse at the state level. In some states less than 50 percent of Highway user revenue is spent on highway infrastructure.
Transit passengers are getting a “free ride” (heavily discounted, actually), paid for by drivers.
Yet roads are mostly funded by property taxes and aren’t expected to be profitable to survive :$
Highways are funded in large part by gas taxes, at least what’s left after transit wonks skim the till.
Roads should be funded by user fees/tolling, and they should at least break even to exist. Such a system would reveal how the state has unsustainably overbuilt some environments and under built others.
“Yet roads are mostly funded by property taxes and aren’t expected to be profitable to survive ”
But, that’s a form of user fee. The local government better do a good job spending my money to expand and maintain local roads or we’ll find another government at the next election.
Cutting ribbons for something new is usually more fun for elected officials than overseeing the (not usually sexy) process of repairing and rehabilitating capital assets.
“roads are mostly funded by property taxes and aren’t expected to be profitable to survive”
You do understand the difference between local roads and highways, don’t you?
Most roads are local roads and serve the important purpose of providing access to property. Of course they’re funded by property taxes. Property owners benefit.
Arterial roads, aka highways, serve the important purpose of moving high volumes of travelers, aka highway users. Of course they’re funded by user taxes. Users should pay for their use in proportion to their use, aka in proportion to their benefit.
Roads don’t make “profits”, they yield “public benefits”. All roads, from local to arterial, should yield benefits. When local roads stop providing access to land, they should be abandoned.
Benefits should exceed costs. More specifically, user benefits should exceed user costs. That principle is more often applied to highways and roads than it is to transit. In the world of transit finance, benefits accrue to one group (passengers, unions, consultants, contractors, developers, etc.) while costs are borne by other groups (general taxpayers and drivers).
Cost shifting and cost spreading is subsidizing and, as pointed out by the Antiplanner and others, cost shifting leads to perverse incentives.
The problem is who gets to see the President.
I am convinced that if he could spend one hour with the Antiplanner, the new plan would be 80% maintenance and 20% new (with new choo choo trains being prohibited).
You don’t complain about sidewalks not being profitable either.
Your argument is political, not economic :$