Foundation

Trump's Infrastructure Plan Faces Fiscal and Political Obstacles

by Spencer Woody / /

During the presidential campaign, HIllary Clinton proposed a $275 billion infrastructure plan with the vast majority of that funding going to public infrastructure grants. In response, then candidate Donald Trump said that he would “at least double” Clinton’s investments in America’s infrastructure, which he compared to that of a “third-world country.” Trump later proposed investing $1 trillion over ten years in America’s infrastructure.

Trump's plan was developed in the same way his campaign was run. He would see that his opponent had a policy, he would decry the ineffectiveness of that policy, and then proceed to create a broad general policy that was more comprehensive, but not necessarily more coherent, than his opponent’s plan. This pattern can also been seen in how Trump formulated his broad health care policies.

Now President-elect Donald Trump is attempting to hold to those broad, general promises and increase investments in transportation and infrastructure. In theory, this plan would reward those Rust Belt states that carried Trump to the presidency.  

The details on Trump’s plan are not fully developed, but general ideas and policies have been laid as a foundation. Trump’s plan would heavily rely on private investments. The plan provides nearly $137 billion in federal tax credits to those willing to invest in public infrastructure projects. In order to incentivize investors to undertake the risk involved in this endeavor, and help investors gather the needed financing, the plan provides federal tax credits to cover 82% of the equity contribution of a given project. Trump hopes that reducing the difficulties involved in the equity aspect of financing will encourage investors to willingly and substantially invest in infrastructure.

In order to have the plan be revenue neutral, Trump’s advocates argue that the tax credits granted to investors will be offset by the new taxable income created by the infrastructure projects, namely contractor profits and wage income from new workers. The plan assumes that the income are taxed under Trump’s tax plan and not the current tax rates.

There are a number of limitations and reservations about Trump’s plan from people all along the political spectrum. The majority of policymakers seem to be open-minded to Trump’s approach to financing new infrastructure spending, but have more questions for Trump’s incoming administration than answers from them.

Many progressive Democrats believe the plan is simply a giveaway to the politically well connected. Even if the plan’s tax credits were offset with new federal revenue, some opponents, like Vermont Senator Bernie Sanders, has called the plan “corporate welfare.” Sanders and other opponents, in addition to claiming Trump’s infrastructure plan does not force corporations to pay their fair share, say that the plan grants tax credits to the wealthy businesses and investors at the expense of taxpayers.

On the left, a number of moderate Congressional Democrats doubt the plan will be revenue neutral, but are more concerned that the plan will “privatize roads” and fail to adequately address infrastructure projects that are less profitable for private investors, like fixing underground pipes. They complain that the plan does not require infrastructure investments in certain areas and the tax credit seems to be issued without regard for the need of the given investment.

On the right, there are fiscal hawks in Congress are reluctant to sign any bill that would add to the deficit or debt. With a $19.9 trillion national debt and the need to cut federal spending on the minds of Congressional Republicans, increasing federal deficits would be a poor start for their governing majority. Moreover, Republican leadership doubts that a stand-alone infrastructure bill would pass Congress and that it would most likely be paired with tax reform.

Infrastructure policy is something that President-elect Trump could use to bring the parties together. Speaker Paul Ryan has noted that there are a number of different infrastructure plans being considered in Congress, including a number of objections and interest that must be taken into account when crafting a infrastructure plan. The interests and objections of taxpayers should be the loudest heard in Congress. Neither Trump nor Congress should enact plans that lack a clear vision, increase the federal deficit, or fail to adequately address the needs of taxpayers. Trump’s plan needs more details, clearer rules, and a narrowly tailored goal if it is going to improve infrastructure without ballooning federal deficits. Broad and grandiose campaign promises must give way to detailed policy plans. Trump will learn that one-upping his opponent on the campaign trail was easy, but turning promises into passable legislation is much more challenging.


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