Trump infrastructure plan will boost spending, cut costs

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Everyone can get behind infrastructure spending, right? Don’t count on it. Democrats are terrified of adding to Trump’s “wins” as we approach the midterm elections.

Successfully initiating an overhaul of our nation’s dilapidated roads and airports would be a significant and popular achievement.

{mosads}Even before it was released, critics geared up to trash President Trump’s proposed infrastructure program as too small, too reliant on the private sector, too insensitive to climate change, too hazardous to our health and not nearly helpful enough to blue states.


Here’s the reality: Our roads and airports are crumbling; we need $4 trillion in updates; our economy will increasingly suffer from the inefficiencies brought on by antiquated facilities; and nearly all Americans want this fixed.

But, the federal government has little money left in the till. So, we have to be smarter in how we finance our needed investments, and to save money, we need to cut regulations to speed the permitting process. That’s what Trump is proposing, and he has it exactly right.

Let’s review Trump’s program: The plan advocates spending $200 billion over 10 years, mostly as competitive grants designed to encourage outlays by local authorities on transit, water systems and highways.

The president’s team hopes that the federal money will act as “seed” capital, resulting in as much as $1.5 trillion in spending by state and local governments, as well as private sources.

The $200 billion will include $50 billion in direct grants to rural areas for items like broadband access, a campaign pledge of Donald Trump, and $20 billion will go to providing bonds and loans to finance various infrastructure projects. Another $20 billion would finance “next-century” infrastructure; what that would look like is unclear.

What is clear is that nearly everything about our airports, ports, tunnels and transit systems is most definitely “last-century” and needs to be updated.

Unhappily, after passing a plumped-up budget last week, and with increased deficits looming, Congress is not prone to spend more on bridges and roads, as popular as such programs are. Nor is it likely that state and local governments can pick up the slack; many face budget deficits of their own.

The private sector, on the other hand, is overflowing with cash and credit. That is where much of our prospective infrastructure overhaul must come from, despite opposition from Democrats. Even though some Democrat governors have been big boosters of so-called “public-private partnerships,” or P3s, there remains among liberals two essential concerns about the use of private money.

First is the long-standing liberal aversion to anyone anywhere making a profit; the second is that such ventures tend to be more efficient and consequently eager to cut labor costs. In some states, that means relying on non-union workers; that does not please union bosses, or their beholden elected Democrats.

The due bill is substantial. The United States spends 2.4 percent of GDP on projects like bridges and airports, compared to 5 percent in Europe and 9 percent in China, for instance.  

The American Society of Civil Engineers says we have a $2 trillion, 10-year spending gap and that we must increase outlays to 3.5 percent of GDP by 2025. 

Suggesting the federal government only fund a portion of the needed spending is not as radical as it sounds. Today only 16 percent of infrastructure spending flows from Washington, with the balance provided by state and local governments and also private entities.

The use of private funding is commonplace in OECD countries, where some 10 percent of infrastructure spending involves P3s. In the U.S., only about 1 percent of projects have been financed in that manner, since most spending has historically been backed by municipal bonds.

That said, local authorities are increasingly strapped for funds and therefore eager to adopt the new approach, even though P3s are still not approved in all states. In Virginia, for instance, former governor (and Democrat) Terry McAuliffe is a big booster of partnerships, claiming that his state has led the nation in their use.

Speaking last year at the Milken Conference, McAuliffe not only extolled the virtues of P3s but also acknowledged that we urgently need to overhaul today’s cumbersome permitting process for infrastructure projects.

This is the other part of the Trump proposal, which has already attracted blow-back from those worried that green-lighting projects more quickly and simplifying the permitting process will weaken environmental protections.

The White House argues that the spiderweb of regulations and restrictions drives up costs and hurt taxpayers; they are correct.

Consider: The Wall Street Journal reported that, “It took four years to construct a new runway at Seattle-Tacoma International Airport, but it took 15 years to get the permits.” We’re not talking about a controversial new coal mine here. We’re talking about a needed expansion of a public facility. 

Or consider this, from the same piece: “New U.S. highway construction projects usually take between nine and 19 years from initial planning and permitting to completion of construction, according to a 2002 Government Accountability Office study.” 

Such delays are frustrating, but more importantly, they are expensive. One score-keeper reports: “Since 1993, long-term annual construction inflation for buildings has been 3.5%/yr., even when including the recessionary period 2007-2011. During rapid growth periods, inflation averages more than 8%/yr.”  In other words, way ahead of inflation. 

Other countries facing similar quagmires, like Australia and Canada, have passed laws allowing expedited approvals. The Trump White House wants to follow suit.

Elaine Chao, secretary of Transportation, has been crafting the new infrastructure proposal over the past year, but she identified improving the process of how we spend money as critical early on.

Setting out, she had to coordinate with 16 different agencies, as well as state and local governments and representatives from the private sector. No wonder it took a year.

Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. For 15 years, she has been a columnist for The Fiscal Times, Fox News, the New York Sun and numerous other organizations.

Tags Broadband access Deficit reduction in the United States Donald Trump Elaine Chao Government Government procurement Infrastructure Public sphere Public–private partnership roads and bridges United States federal budget

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