The growing nature of the challenge — Transportation Secretary Elaine Chao recently cited approximately $4 trillion in infrastructure needs — has gummed up the system’s ability to solve it, outside observers said.
“This has been going on for a long time,” said John Forrer, an associate research professor of strategic management and public policy at George Washington University. “The worse it gets, the harder it gets.”
Political demands for spending in the short run, with immediate benefits, end up taking precedence over calls for rebuilding costly infrastructure for the long-term good, Forrer said. “The problem’s gotten so bad that the traditional solutions being offered by the individual participants won’t get at the problem anymore. . . . We’ll need to see more leadership on the issue, bringing together all sides.”
That disconnection between aspiration and reality has been on display as opponents spar over two fundamental questions: how much construction the Trump plan would actually fund; and what to do about the looming shortfall in the nation’s Highway Trust Fund, a major source of federal infrastructure funding.
Trump administration officials pressing for the president’s 10-year, $200 billion infrastructure initiative have concentrated their sales pitch on the contours of the plan, which they assert will prompt $1.3 trillion in state, local and private spending. The plan would give governors block grants benefiting rural areas, set aside funds for “transformative” projects and create a $100 billion incentive plan.
Chao and the secretaries of energy, labor, agriculture and commerce are to appear before the Senate Commerce Committee on Wednesday for a hearing on the administration’s plan.
Critics have repeatedly dismissed the administration’s proposal as a “scam,” and last week, Senate Democrats released their own infrastructure initiative, which calls for $1 trillion in federal spending. It would be paid for by undoing major elements of the Republican tax cuts passed last year, as well as ditching a tax break benefiting investment managers.
Economists at the Penn Wharton Budget Model, citing decades of academic research, said the Trump plan would result in, at most, $30 billion in new spending on infrastructure, beyond the $200 billion in federal funds. That is because, they said, states and localities would spend less of their own money on such projects, seeking to rely on federal money instead, a common phenomenon known as substitution.
Trump administration officials accused the Wharton economists of failing to read or understand the plan, which would require a state or locality to prove that it had created a new revenue source to be eligible for the federal incentive grants. “Just by legal and mathematical rules, it’s impossible” to have passing out $100 billion in incentive grants lead to anything but a minimum of $500 billion in total new spending, an administration official said, since the required ratio of federal to state or local spending is 4 to 1.
The official did say that a fairer critique of the administration’s approach would be that states might not want to sign up if there is such a tight requirement that they come up with new revenue themselves. The Wharton economists, in turn, responded that other administrations have tried over decades to create airtight requirements that federal money augment, not replace, local spending, and that those efforts have routinely failed.
A struggle over the nation’s 18.4 cent-per-gallon federal gas tax also has hovered over the administration’s plan. The tax was last increased in 1993.
Starting early in Trump’s term, some of the president’s top advisers pushed for increasing the tax, which is not indexed to inflation and has experienced an erosion of its value.
Trump’s budget, released last month, projected a shortfall of more than $120 billion in the Highway Trust Fund.
Administration officials say they are cognizant of the problem but are concentrating on trying to get support for the infrastructure plan.
An increase in the gas tax has support from some in Congress from both parties and from business groups of various stripes. But it also has vigorous opponents, particularly among conservative lawmakers, and an increase did not make it into the massive tax bill passed last year.
In a White House meeting last month, Trump told members of Congress that he supported a 25 cent-a-gallon increase and that he would be willing to take political heat for the move.
A White House official said she would not discuss the contents of a closed-door meeting.
“The gas tax has its pros and cons, and that’s why the president is leading a thoughtful discussion on the right way to solve our nation’s infrastructure problems,” the official said.
Chao has said that none of the options for paying for infrastructure are welcome or pain-free.
“Gas tax increases can be said to be the most regressive of all user fees or taxes . . . against the most vulnerable within our society, and that’s the lower-waged worker,” Chao said. But “somehow, we’ve got to pay for $1.5 trillion” in infrastructure improvements, as called for in Trump’s plan.
“We want to work with Congress and come to some kind of an agreement on how to pay for this new expenditure,” Chao said. “The most noteworthy item is that nothing is off the table, and this is different from in the past.”