Trump passed up a huge opportunity to give Americans an economic boost when he chose to focus on tax cuts
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- Republicans hoping for an easy win on infrastructure may be overly optimistic about the prospect for bipartisan cooperation.
- The effects on the economy from a large infrastructure bill early in the Trump administration would have been much more direct and palpable that the unlikely promise of large wage growth from corporate tax cuts.
- Critics of Trump's early outlines of a plan worry that his focus on public-private partnerships could lead to taxpayer subsidies of private profit.
- Also, bad blood between the President and Democrats could keep them from finding any common ground.
- "One year into the Trump presidency, Republicans have failed to take any action to address the nation's most urgent needs, such as infrastructure," says Democratic Senator Martin Heinrich.
This one is an easy lay-up, Washington lore goes, because Democrats are largely in favor of increased infrastructure spending - in fact, it was Republican opposition that prevented it from happening under President Barack Obama. Advertisement
Republicans are hoping, on the heels of their first legislative victory under President Donald Trump, to quickly pivot from tax cuts to the next item on their agenda, infrastructure.
There are two major problems with this logic. One, it assumes Democrats, whose support would be needed to pass an infrastructure bill, are going to be on board.
We'll get to why that is no longer a reasonable expectation, but the more fundamental issue with the notion of a bipartisan infrastructure plan boils down to a problem of definition: Just what does Donald Trump, a casino owner and real-estate developer, consider to be major infrastructure?Other than lip service to cutting red-tape and talk of job creation, the Trump administration has offered little detail into the types of projects it might actually prioritize.
What it has said is that it favors "public-private partnerships" that sound nice in theory but could in effect wind up being taxpayer subsidies for private companies who then get to profit from quasi-monopolies in transport. Democrats are not going to be on board with this.The plan is "rooted in having the federal government spend less money on infrastructure and instead to privatize and turn things over to states or private companies," Austan Goolsbee, former chief White House economic adviser under President Barack Obama, told me in a recent interview.
A missed opportunity for real economic benefitsThe cost of a missed opportunity to address the country's notorious infrastructure deficits can hardly be overstated. Advertisement
For one thing, the effects on the economy from a large infrastructure bill early in the Trump administration would have been much more direct and palpable that the unlikely promise of large wage growth from corporate tax cuts.
Also: the state of America's infrastructure is dire. The American Society of Civil Engineers gives the United States a D for its roads and a C for its bridges. The US Department of Transportation estimates it could cost as much as $1 trillion just to bring the current Interstate and highways system up to date.Americans spend 5.5 billion hours in traffic each year, costing families more than $120 billion in extra fuel and lost time, according to a 2014 report from the Obama White House, while businesses pay $27 billion a year in extra freight transportation costs, increasing shipping delays and raising prices on consumer goods. There are also safety repercussions. Bad roadway conditions are a significant factor in approximately one-third of US traffic deaths.Advertisement
The Business Roundtable, a powerful Washington-based lobby group, estimates that every dollar spent on infrastructure translates into around a $3 boost to economic activity. That's a pretty good bang for the government's buck, particularly with interest rates still at historic lows.
Railways, dams and levees are also creaky, leaving the country exposed to not only basic security risks but also transportation bottlenecks that can be economically crippling. Not to mention actually dreaming about the future and what it might look like, with high-speed rail, less climate-damaging cars and the sci-fi stuff that resides only in the imagination of writers (but is so often a spark of future realities).Think of the recent devastation of Puerto Rico's electrical grid following Hurricane Maria, and the opportunities to rebuild in a way that gives the island a supply of solar energy, creates jobs and stimulates investment. Now think of that post-crisis approach applied to the nation's poorest urban centers, suburbs and farms, money spent on revitalizing communities depressed by decades of rising income inequality worsened by the Great Recession of 2007-2009. Advertisement
Imagine the millions of jobs that could be created in raising America's infrastructure to the standard of its rich-country peers, and even many emerging economies.
Sounds nice right?One reason not to get too hopeful is the president will not be willing or able to spend nearly as much as is needed - well over $1 trillion, conservatively - because of constraints of his own making, including lots of money and especially political capital expended giving major tax cuts for corporations and wealthy Americans. Advertisement
"By increasing the cost to finance infrastructure for states and local governments, the recently enacted (tax bill) will lower investment in our nation's infrastructure," argues Brookings Institution Fellow Aaron Klein in a new report.
But tax cuts burned supportThen there's the matter of how the tax cuts were actually passed. They made it through on a strictly partisan basis under a process known as budget reconciliation, which allows certain types of legislation to pass the Senate without any danger of a filibuster. But they can only be applied to bills affecting government revenue or spending on programs like Social Security and Medicare, not on big-ticket programs like infrastructure.The Republican majority in the Senate has shrunk further to just 51 after the surprise victory of Democrat Doug Jones in Alabama, and the acrimony it created has sapped the president's political capital, including his ability to reach across the aisle. Advertisement
"One year into the Trump presidency, Republicans have failed to take any action to address the nation's most urgent needs, such as infrastructure," said Democratic Senator Martin Heinrich in a statement.
This bad blood means Democrats are unlikely to support any Republican plan, whereas if Trump had started with infrastructure if might have been a very different story."I think infrastructure doesn't go anywhere," said Goolsbee. "New presidents get a year or so to do anything, and I think they've used it up."Advertisement
This column does not necessarily reflect the opinion of Business Insider.
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