Tuesday, May 16, 2017

Here's Why Trump's $1 Trillion Infrastructure Plan is Likely to Go Nowhere

by Nomad

Second to None

As a candidate, Trump talked a lot about the sorry state of the US infrastructure. The list was extensive, from roads and highways barely navigable because of potholes to bridges literally rusting away. There were less conspicuous things in desperate need of an overhaul, for example, the electric grid and water systems.
And nobody's denying that America is coming apart at the seams.

The UK Guardian reported only last month:
The most authoritative report of the country’s infrastructure gave the country’s crumbling roads, bridges, dams, schools and other essential underpinnings an overall D+ grade ... Not a single element of America’s framework received an A grade. 
It's a crying shame for the world's wealthiest and most powerful country. Moreover, the long-term neglect has put lives in danger.

The report card, broken into sections, analyzes
  • aviation (D), 
  • bridges (C+), 
  • dams (D), 
  • drinking water (D), 
  • energy (D+), 
  • hazardous waste (D+), 
  • inland waterways (D), 
  • levees (D), 
  • parks and recreation (D+), 
  • ports (C+), 
  • railways (B), 
  • roads (D), 
  • schools (D+), 
  • solid waste (C), 
  • public transit (D-) and 
  • wastewater (D+) resources.
A few hours after declaring victory last November, Trump was still carrying on.
“We’re going to rebuild our infrastructure, which will become, by the way, second to none.”
Ostentatious  words and yet, so far, all we've seen the administration are repeated assurances that "the team" was hard at work on super duper infrastructure plan.
All $1 trillion of it.
From the get-go, Trump's much-ballyhooed promises were greeted with a lot of skepticism and distrust. Trump wasn't as much interested in rebuilding America, his critics claimed, than putting more money into the pockets of private investors.

Back in December, Ryan Bradley writing for Fortune, attempted to make sense of it:
Private companies will not simply bank-roll and build our infrastructure, but own it, incentivized by massive tax credits, worth 82% of the down payments. With $167 billion in private investment, the $1 trillion plan does not hit taxpayers, the authors claim, because the tax credits would be offset by new revenue from the economic stimulus created.
Infrastructure that pays for itself?  Not quiet.
The 82% tax credit, for example, means that savvy investors can suddenly own and collect tolls on a very expensive road after putting up relatively little in real dollars.

Tax Break Trap

In a recent interview with the Boston Globe, Transportation Secretary Elaine Chao (former Labor secretary under Bush and wife of Speaker of the Senate, Mitch McConnell) said that a draft spending proposal will likely debut this summer. The debut deadline has been pushed back several times.
That will come, she said, only after the administration tackles tax reform.

Immediately after the November debacle, Obama and Clinton advisor Ronald A. Klain warned that Trump's infrastructure plan was not really an infrastructure plan at all.
Just like Trump's health care replacement, Trump's plan, Klain claims, it was another tax break trap.
Backing Trump’s plan is a mistake in policy and political judgment they will regret, as did their Democratic predecessors who voted for Ronald Reagan’s tax cuts in 1981 and George W. Bush’s cuts in 2001....It’s a tax-cut plan for utility-industry and construction-sector investors, and a massive corporate welfare plan for contractors.
According to Klain, unlike Hillary Clinton's 2016 proposal, Trump's infrastructure plan won't directly fund new roads, bridges, water systems or airports. 
Instead, Trump’s plan provides tax breaks to private-sector investors who back profitable construction projects. These projects (such as electrical grid modernization or energy pipeline expansion) might already be planned or even underway. There’s no requirement that the tax breaks be used for incremental or otherwise expanded construction efforts; they could all go just to fatten the pockets of investors in previously planned projects.
Democrats, he writes, had better be wary of supporting Trump's sketchy plan. As one source notes, Democrats will be digging their heels in:
Democrats’ enthusiasm has waned sharply as the likely contours of Trump’s plan have become clearer — and as his low polling numbers have lessened the political incentive to cooperate with him.
If he is expecting anything close to bipartisan support, he is delusional. The real question at this point is whether his own party will come around.

High Risk of Complete Collapse

On the other side of the aisle, conservative deficit hawks will greet any government spending proposal with folded arms and sour looks. Despite past attempts to hide it, the divisions within the Republican-controlled Congress could rupture at any time.

All in all, the chances that Trump will be slapped down once again are very high.
Even without both the tax reform plan, the controversial border wall, the increase in military and the trillion dollar infrastructure proposal, Trump might have trouble just keeping things running.

Last month, according to Bloomberg, Wall Street weighed in on the possible passage of Trump's so-called "skinny" budget and gave it zero chance. Zilch. And, keep in mind, that the infrastructure proposals have to come after the key ingredient for the budget, tax reform.

Officially, Congress should have worked out a new budget on April 28. That didn't happen, even after weeks of tense back and forth.

On May 1, with the prospect of a shutdown looming, congressional leaders managed to work out an agreement which would keep the US government funded until September. The cost $1.2 trillion. That was the best they could do.  

And, if you are wondering, No, that doesn't include the infrastructure spending bill. That spending bill alone would, if approved, automatically double that amount. 

Someday Soon

Congress seems to be growing a bit impatient at the delay. This week, the Senate is holding two key hearings this week in anticipation of the infrastructure spending bill that seems to have gotten lost in the mail.  

On Monday of this week, Secretary Chao told the U.S. Chamber of Commerce that Trump's infrastructure plan will be sent to Capitol Hill soon. (She apparently has forgotten that she said that tax reform would come before the infrastructure spending proposal.)
"The administration will share its vision of what the infrastructure plan will look like in the next several weeks, which will kick off our collaboration with Congress."
To placate fiscal conservatives who must be clutching their pearls at the idea of adding another trillion in debt to the budget, Chao explained that plan would call for "spending $200 billion, which would be used to leverage $1 trillion in private infrastructure money over a decade."
Where would that $200 billion in federal spending come from? It would be offset by cuts elsewhere in the budget, "in order to avoid saddling future generations with more debt."

You have to read between the lines on anything sly Elaine says. 
Basically, toll roads and bridges will be built by cutting government assistance programs for the elderly and poor.

Until the squabbling begins over that, "in the next few weeks" hapless voters on both the left and the right will get to enjoy having their fillings loosened traveling down the highways, praying every time it rains that some dam upstream doesn't collapse and playing Russian roulette every time they cross a bridge.

Here's an interesting infographic, courtesy of Visual Capitalist