Some time in the next few days or weeks you’re going to start hearing about President Trump’s infrastructure plan. It will be sold as a $1 trillion investment in rebuilding America. It will be sold as a jobs program. It will be sold as a boon for the working man.
Don’t believe a word of it.
To be clear, we could desperately use a large and meaningful commitment to rebuilding America’s infrastructure. Years of tax cuts, service cuts and neglect have led to a degradation of our highways, railways, airports, bridges, tunnels, waterworks, sewers, the energy grid, our schools and our hospitals. The very bones of America are cracking and calcifying and they require a heavy investment in order to bring them back to strength.
The fact that doing so could provide employment for hundreds of thousands of people is, obviously, an added benefit. The official unemployment rate is low, but it’s deceiving. Thousands of people of working age have simply left the workforce and a large number of people still nominally in it are underemployed and are receiving far lower wages and far worse benefits — if they get any — than they have in the past. We’re a wealthy country, but that wealth is concentrated in the hands of fewer and fewer people while an entire class of people and the communities in which they live are atrophying or even dying.
While an investment in infrastructure and the men and women who would build it would be expensive, there is virtually no downside, in the long term, to making said investment. From the building of our railways to New Deal public works projects to the war effort to the interstate highway system to the space race, we’ve seen how putting our nation to work in order to build its infrastructure and industrial and technical capacity has benefitted America over and over again.
But that’s not what Trump will propose. Rather, he’ll be proposing a welfare program for banks, venture capitalists and corporations. Yet another giveaway to the rich that will do little if anything to help the country or its workers.
As is evidenced by the only document on infrastructure his campaign or administration has released, Trump will propose a grand expansion of “public-private partnership” projects in which private companies will be offered tax and financial incentives to bankroll various projects. Tax breaks to private investors who want to finance toll roads, toll bridges, or other projects that generate their own revenue streams which the private companies will collect, in whole or in part.
While such public-private partnerships have been successful in Canada and Australia, the results here have been spotty at best. According to the Congressional Budget Office, there have been 36 PPP programs in the U.S. since 1991. Fourteen of them are complete. Three have declared bankruptcy. One required a public buyout. The rest are still in construction stage. It’s a relatively untested and thus far uneven method for addressing our infrastructure needs.
Regardless of how the existing projects pan out and regardless of the theoretical promise of such programs, the idea of incentivizing private, profit-driven investment in infrastructure has at least four big problems:
The first problem: A huge portion of our infrastructure are not profit-generating, nor is it intended to be. No one is going to make a fast buck getting lead-poisoned water system rebuilt. You can’t profit from repairing an existing road or bridge that is part of a non-toll road. You’re not going to get private industry jazzed to build a public school, a public hospital or a levee along the Mississippi. Those things do not represent a profit opportunity for private industry and no amount of tax breaks are going to cause companies to pursue them. They’ll just build for-profit private schools and hospitals and a parallel toll road and bridge system that serves to economically segregate people who want to pay to get to work from those who can’t.
The second problem: The sorts of projects that do present profit opportunities already have ample incentive: THE PROFITS. There’s a lot of money to be made in energy generation, for example. And a lot of companies in that business already. Adding that sort of thing to an infrastructure bill is only going to serve as a tax money giveaway to companies doing things the’re already doing. It will also incentivize those who might’ve started projects in 2017 to delay them until a bill is passed to make sure they lock in those goodies from America’s taxpayers.
The third problem: As it stands, most of the major public-private projects already in existence are financed with bonds purchased by giant investment funds like pension funds, worker’s comp funds, public endowments and sovereign wealth funds. These investors already have zero or minimal tax liability, so the new tax incentive-fueled partnerships will do nothing to attract them. Many of the new players Trump’s plan would potentially incentivize don’t have the capital to take advantage of the opportunities and the calculus will not change for those that already do.
The fourth problem: All of this will be sold with the argument that the tax breaks being offered will pay for themselves many times over. Specifically, that hundreds of billions of tax breaks to corporations and investments will generate the equivalent of a trillion dollars in projects. This is a classic trickle down, supply-side argument which has proven to be an abject failure over and over again for the past 35 years. It never works that way in practice and experts do not believe it will work here. What happens is that the tax breaks are gobbled up, the benefits don’t pan out as expected and tax payers end up paying for a huge part of it all anyway.
While there is some use for public-private partnerships in infrastructure projects, they seem best-suited to smaller projects in which the public and the private sector’s interests are congruent. Trump’s plan, in contrast, is likely to be a giveaway to developers, real estate moguls, venture capitalists, fund managers, tax lawyers, CEOs and starry-eyed entrepreneurs cum dreamers like Elon Musk. All of whom, not surprisingly, have been invited to the few meetings Trump has had regarding infrastructure since he took office. The idea is to benefit America’s businessmen, not its workingmen, and to hope, somehow, that some good things spin out of it.
It doesn’t have to be this way.
America faced a far greater crisis of infrastructure — and a far greater crisis of unemployment and underemployment among the working class — once before. In the wake of the Great Depression we were a nation close to ruin. A quarter of the population was out of work and, as opposed to crumbling, our infrastructure was virtually non-existent. We were a 20th century nation living in a 19th century country.
The response: The New Deal, which included m
ultiple employment and public works programs. Some of them — mostly via the Works Progress Administration, or WPA — were immediate, so-called shovel-ready projects that put laborers and unskilled people to work quickly via direct government investment. People building small buildings, planting trees and clearing recreation trails and the like. It’s the sort stuff most of us think about when we think of the New Deal. They were, obviously, critically important to our recovery from The Great Depression and their impact still resonates today.But these quick, direct, job creation-focused projects were not the only part of the equation. Indeed, a much more significant program — with more significance to the current infrastructure conversation — was the Public Works Administration (PWA). It focused on large, complex long-term projects like dams, bridges, hospitals, schools and transportation infrastructure. It gave us stuff like airports, the Lincoln Tunnel and the Grand Coulee Dam.
If you squint super hard, I suppose the PWA could be seen as something at least roughly akin to public-private partnerships in that the federal government did not mount these projects directly or unilaterally with big signs at each job site advertising them as part of FDR’s America. Rather, funding was given to states which, in conjunction with the PWA, devised projects and hired construction firms which, in turn, hired their own workers. I suspect, when Trump’s plan is rolled out, some will make comparisons to the PWA for this reason. But there are huge differences between how the PWA operated and how Trump’s infrastructure plan will operate, both structurally and philosophically.
Most obviously, the PWA and state governments decided what the projects were, prioritized them and put them out for bid. They did not create tax incentives and then just hoped that the free market would get the job done. Our public officials, agencies, commissions and citizens groups have a clear, day-to-day understanding of the needs of our communities. Developers and contractors are not in the business of gauging those needs. They’re in the business of doing what they’re hired and paid to do. Letting them, as opposed to the people, both as citizens and through their government, make those decisions is to have the tail wag the dog.
Likewise, the PWA featured active management and oversight by the government. Trump’s plans, in contrast, will almost certainly feature all manner of middle men — investors, financiers and management companies — handling projects on a day-to-day basis, taking cuts and fees in ways they’d never be allowed to under a well-regulated public project. Indeed, they’re already preparing for this. Now, to be sure, there is obviously a danger of inefficiency and graft in ANY project, but taking these projects completely out of the hands of those in a position to police it and institutionalizing and laundering the graft via fees and payments to financiers guarantees it. Every dollar that goes to one of these middle men is diverted away from bricks, mortar and the paychecks of people who work for a living.
There was no prioritization of profit-generating projects in the PWA and no requirement, as Trump’s plans will almost certainly set, that projects be “deficit-neutral.” As stated above, there are vast swaths of public infrastructure that are not intended to be profit-generating — quick, how much money did the Interstate Highway System make last year? — and should not be viewed through that lens. They are, by definition, projects to serve the public, and asking whether private industry can make a buck off of any given project is the wrong question to ask.
As for “deficit-neutral,” sure, we all want to keep the deficit down, but it costs money to do things and pretending that it does not is what caused our infrastructure to be neglected in the first place. The first inquiry for any project should be “is this needed?” The second should be “is this feasible?” When it comes to “can we afford it?” the answer should include both the costs of the project and and inquiry as to whether it’s possible to raise additional revenue to support it if necessary. America was not built without taxes and without the expenditure of public funds. It will not be rebuilt without them either. As my friends on the right enjoy reminding me, there is no such thing as a free lunch. As I enjoy reminding them, government is not the enemy. It is the means of administering a civilization.
So what do we do?
The specifics of any infrastructure plan will be subject to a lot of messy negotiation and legislation, all of which will be informed by outside interests and the usual political wrangling that surrounds any large scale government project. I’m not an expert in these matters and cannot say if $X billion should go to roads while $Y billion should go to water systems.
But I can point to some general principles that can and should guide our country’s approach to a much-needed infrastructure initiative:
- Infrastructure funds should be spent on infrastructure. Not on tax cuts and not on handouts to Wall Street and developers with the hope that those turn into infrastructure;
- Infrastructure projects should be determined by need — the need to repair existing structures and systems, the need to improve access to centers of commerce, employment and education, and the need to ensure the safe and healthy delivery of the basic needs of citizens, such as water, energy and medical services — not by their ability to turn a profit;
- Infrastructure should support good jobs that provide fair wages and benefits, and contracts which favor those things and discourage anti-labor practices and the ignoring of workers rights should be required; and
- Infrastructure projects should not be harmful to the environment and should acknowledge and anticipate, as best as practical, future climate change. They should also, whenever possible, employ and promote advanced energy technologies and the advanced energy economy.
The final principle is not one that can be enforced via legislation, but it is one that is nonetheless important philosophically speaking: Infrastructure should be understood as an investment, not merely an expense.
Politicians and commentators are great at talking about the cost of things but poor at talking about their value. We should endeavor, however, as we take on the task of rebuilding America’s infrastructure, to focus on what these projects will bring us over 10, 20, 50 and 100 years, not just on what they’ll cost to build.
As we do so, we should look at the Timberline Lodge on Mount Hood and at the Riverwalk in San Antonio. We should look at LaGuardia Airport in New York and the Fort Peck Dam in Montana. The Triborough Bridge and the Blue Ridge Parkway. The Overseas Highway of the Florida Keys, the Lincoln Tunnel and the Hoover Dam. We should know that, today, as we enjoy some of these things and merely utilize others, they are all part of the essential fabric of America. They, and countless other projects and engineering feats are the foundation upon which America’s greatness was built. They are its very bones.
None of these were built with an eye toward lowering the taxes of a developer or giving a tax break to a Wall Street financier. And none of the great works in our future should be either.
