Paying for the trillion dollar infrastructure promise

Paying for the trillion dollar infrastructure promise
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President TrumpDonald John TrumpSchiff: Surveillance warrant docs show that Nunes memo 'misrepresented and distorted these applications' Chicago detention facility under investigation following allegations of abuse of migrant children Ex-Trump aide: Surveillance warrants are 'complete ignorance' and 'insanity' MORE’s vision for a $1.5 trillion infrastructure project is compelling. “We will build gleaming new roads, bridges, highways, railways, and waterways all across our land,” he promised in his State of the Union speech.

There is, of course, the nagging question of how to pay for a massive infrastructure overhaul in the face of a $20 trillion national debt.

In its proposal, the administration makes a commitment to spending $200 billion over 10 years — which, as it happens, is only a few percentage points over current spending on public infrastructure. There is no guarantee about the other $1.3 trillion.

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While there is probably close to that amount of private money hunting for good returns, it is not clear that there is that much value in projects that will attract private money, projects that produce an income stream or from which an income stream can be extracted, like toll roads and bridges, locks, and fee-for-service water supply systems — anything we can readily put a fare box on.

 

Of course not all payback money for private investors has to come from user fees. For projects that cannot reliably extract sufficient fees for services, availability payments can be used. These are annual payments from a public agency to a private vendor to lease facilities and services for an extended period. This isolates the private vendor from uncertainties or impossibilities of user fees, with the gap being filled from other public revenue sources, like sales or property taxes. That means we all will pay for these services.

But even these options are not likely to cover the needs. Some communities will be left out in the cold. That is a reason for a Trump administration proposal called the rural set-aside, which would apparently be paid for in part by reduced funding for public transit in our cities. Infrastructure assurance for rural areas is important, and it will not be a revenue generator, but cities are engines for innovation, sources of ideas and economic growth. A national infrastructure plan for this country must be able to pay for rural infrastructure and rebuild our cities at the same time. 

Where will the money come from, not just for the modest $20 billion the president wants to add to the infrastructure pot each year, but also for the debt burden local and state governments? State and local governments are not exactly flush with cash but will be expected to pay for an even larger share of public infrastructure investments. In the long run, we cannot borrow ourselves out of this infrastructure shortfall — we need new revenue.

On the transportation side, user fees are the tried and true source of funds. The Highway Trust Fund, now barely sustained with motor fuel taxes that have not increased for the past 25 years, could be a reliable source if Congress has the courage to increase it. In that last quarter century, construction costs have doubled, consumer prices have increased 73 percent, and the vehicle fleet has literally turned over. It is cheaper than ever to drive on our highways because the distance new cars travel on a gallon of fuel has gone up 22 percent in that period, and there are many more hybrids and all-electrics on the roads today that pay little or nothing to use the highways in most states.

The cars-on-roads world has changed since 1993, but the Congress has not. Charging users to travel on the roads is an efficient and reasonably fair way to cover the costs of operation and maintenance, and some new construction. We have been doing it for half a century, but voters and their representatives seem to have forgotten this successful arrangement.

At the national level the gap between motor fuel tax receipts and the functional need and political desire to invest in our highway system has been filled by transferring funds from general revenues (e.g., income tax funds) to the Highway Trust Fund each year — $143 billion since 2008. This is revenue that could have been used to meet other needs not so readily supported by user fees, like education, health care and defense.

Twenty-six states have raised motor fuel taxes in the past four years to address their own needs. Few if any state legislators lost their jobs because of this, in large measure because they got credit for highly visible infrastructure improvements, closing the loop by showing their constituents a real return on their increased fuel taxes.

But the states shouldn’t and can’t do it alone. Transportation is a networked system, the value of which comes from connectivity. Trips and shipments don’t stop at state borders. Mississippi River locks move grain from many states to export terminals in Louisiana. Interstate 40 carries people and freight across the nation. The economic vitality of Kansas, Kentucky, and Connecticut depends in part on their connectivity to the nation and the world. The parts and the whole are interconnected, and that defines the federal interest in transportation infrastructure. 

Here is one practical way to bite this bullet. Recognize that we’ve allowed drivers to use up transportation infrastructure without paying the full cost. With fuel prices low, and the economy surging, it may well be the right time to pick up the bill for the surface transportation piece of the president’s infrastructure program, and for a much bigger program that will truly meet the needs, by raising the federal motor fuel tax.

Infrastructure is an ideal bipartisan issue. The benefits show up in every corner of the nation. If the federal government can figure out how its share can be paid with dollars and not promises, those gleaming new structures can actually be built.

Joseph L. Schofer is a professor of civil and environmental engineering at Northwestern University. He is also the host of The Infrastructure Show, a podcast that explores many aspects of the nation’s infrastructure system and the threats it faces.