President Trump is considering whether to issue a tremendous amount of government debt to finance a $1 trillion investment in U.S. infrastructure, which would mark a major break from his campaign pledge to attract large quantities of private money to finance upgrades to roads, bridges, ports and numerous other facilities.
Trump’s new view is that the United States can borrow money so cheaply now because of low interest rates that it makes sense to borrow the money, according to comments he made in an interview with the New York Times. He also said that an infrastructure arrangement that includes public and private money “can be very expensive.”
“We are borrowing very inexpensively,” Trump told the New York Times. “When you can borrow so inexpensively, you don’t have to do the public/private thing.”
Trump was asked if the total federal commitment could be $200 billion or $300 billion, but he answered quickly, “No. More than that. Much more than that.”
His comments show the rapid evolution on one of his top campaign priorities — a major investment in infrastructure that he believes will create millions of new jobs. He also said he believes Democrats and labor unions will rally to his support.
“We want to do a great infrastructure plan, and on that side I will say that we’re going to have, I believe, tremendous Democrat support,” he said.
Trump said the support from Democrats could be so strong that he’s considering whether to package the infrastructure plan with a health-care overhaul bill to win bipartisan support. This idea does not seem to be one under consideration on Capitol Hill.
Gabe Horwitz, the director of the economic program at the centrist research group Third Way, said that a bipartisan deal combining infrastructure with health-care reform was unlikely, given the divisions between Republicans and Democrats on the Affordable Care Act. “I think that just completely misses the mark,” Horwitz said. “Democrats are never going to support these efforts to completely gut Obama’s signature health-care law.”
The White House’s infrastructure strategy has multiple facets. They are looking at rolling back regulations, laws, and policies that prevent private-sector infrastructure investment. White House officials believe this alone could pull in hundreds of billions of dollars in new projects without requiring any government money.
But the biggest component of their plan has always been the $1 trillion in financing for new projects. Treasury Secretary Steven Mnuchin has said the government would likely commit several hundred billion dollars toward the package and the private sector would come up with the rest.
White House officials have studied whether to offer tax credits to attract private investors or create other incentives, but they had not reached a firm decision on how to proceed.
But Trump’s comments to the New York Times suggest the U.S. government’s payments could be much more substantial if it decides not to partner with private investors after all.
"It’s a significant shift,” said Douglas Holtz-Eakin, who was chief economist on President George W. Bush’s Council of Economic Advisers from 2001 to 2002.
Both Republican and Democratic lawmakers have put forward proposals for infrastructure funding, but Trump’s comments seem less in accord with GOP thinking on the issue than with a plan advanced by Democratic senators in January, which – as Trump did – calls for a federal investment of about $1 trillion.
Holtz-Eakin argued it was “unrealistic” to think that Trump could increase federal spending by $1 trillion, financed mostly through the federal debt. The economist also said that infrastructure policy should be guided by scouting out specific proposals with real benefits, rather than setting arbitrary targets for nationwide spending.
“There is, in my view, probably a list of things that would have genuine impacts on national connectivity,” he said. “It’s not sensible to pick a number. You should identify projects that meet the criteria.”
Trump said no final decision had been made. His comments in the interview did not identify a clear agenda on infrastructure, noted Ronald Klain, a former senior aide to President Obama. “It’s hard to know where he is. It’s hard to know where his people are,” Klain said.
Trump did say, though, that he is setting up a “commission” that will be led by New York developer Richard LeFrak and Steve Roth, one of New York’s top commercial real estate investors. He suggested this commission will have direct input in what projects are approved and rejected.
“They are going to, along with me, put on a group of 20 people, 20 to 25 people on a commission,” he said. “We’re going to run projects through them. And they will have great expertise in that room. We’ll have it from both coasts, and right down the middle. We’re going to have representatives from various parts of the country that are all are very, very successful in terms of infrastructure.”
Trump didn’t say what sort of protocols could be put in place to ensure that people on the commission don’t benefit financially from any of the approved projects and investments.
Issuing more government debt to pay for the projects could change the total cost to taxpayers. It could ultimately cost more by driving up U.S. debt and future interest payments, but it could cut back on costs such as tolls and user fees that private developers might charge.
The U.S. government currently spends more money than it brings in through revenue, and issuing additional debt to pay for infrastructure projects could widen this annual deficit unless major cuts are made elsewhere in the budget or new taxes are imposed.
Some Democrats and Republicans have in the past suggested reworking the tax code in a way that creates a one-time bump in revenue, and using this money for infrastructure projects. The White House hasn’t said whether this idea is under consideration.