The Art of the Infrastructure Deal

AP Photo/Seth Perlman File

A road construction project backs up traffic in Springfield, Illinois. 

For policy wonks, the only bright spot of the dismal 2016 election campaign was the unprecedented attention given the pitiful state of American infrastructure. It was the only area of common ground that Donald Trump and Hillary Clinton were able to carve out, although quality of the discussion never rose beyond a grade-school tug-of-war over who would spend the most.

In the waning days of the Trump transition, hopes are dwindling that the president-elect can deliver, even though he recognizes that the country’s transportation, water, and other infrastructure assets need an historic overhaul and that innovative, new projects could use some federal juice. There are indications that infrastructure policy expectations may have to be significantly dialed back, despite the fact that transportation is the one sector where Trump’s views align with reality.

Trump’s infrastructure proposals rely principally on the government providing tax credits to private industry to do the infrastructure work, as well as some revenues from tax code revisions that lower corporations’ tax rates in return for the repatriation of their income. The president-elect’s plan has caused concern that these diverse financing strategies won’t generate the trillions required to meet the nation’s infrastructure needs.

For one thing, Trump’s priorities are clearly not Mitch McConnell’s. No one can kill a president’s hopes and dreams quite like Capitol Hill’s own repo man. This week, the Senate majority leader effectively declared that Trump’s infrastructure plans were no better than President Obama’s American Reinvestment and Recovery Act. “What I hope we will clearly avoid, and I’m confident we will, is a trillion-dollar stimulus,” McConnell said. “Take you back to 2009. We borrowed $1 trillion and nobody could find that it did much of anything.”

When the 115th Session of Congress gets gaveled-in next year, McConnell’s first priorities are to erase Obamacare from the face of the earth and enact tax cuts for the rich. This focus on tax reform does not bode well for the scope of infrastructure investments that Trump has called for. It is unlikely that a stand-alone infrastructure bill would emerge in this kind of climate. What can probably get done is a tax reform bill with an infrastructure component.

Why no free-standing infrastructure bill? Republicans may point to two pieces of legislation to provide cover for their continued intransigence on substantive infrastructure spending. The FAST Act signed into law late last year devoted $305 billion to highways, mass transit, and other transportation sectors, giving Republican lawmakers a we-already-did-transportation-infrastructure out. Similarly, the recent passage of the $10 billion Water Infrastructure Improvements Act for the Nation, known as the WIIN Act, includes dollars for shipping, flood control, and water quality projects as well as Flint’s drinking water crisis.

The widespread success of bond and tax measures in November’s election will also bolster some conservatives’ views that infrastructure spending begin and ends at home. In November, voters approved 34 of 49 local and statewide transportation initiatives totaling about $200 billion.

The art-of-the-deal-minded president has already indicated that he may be willing to settle for that. When asked about infrastructure, his right-hand man Stephen Bannon told the Hollywood Reporter last month, “We’re just going to throw it up against the wall and see if it sticks”—not exactly a framework for a transformative investments.

Mixed signals do not bode well for the sector. At a recent summit on infrastructure held by the Intersector Project, a nonprofit organization of government, business, and advocacy groups, U.S. Representative John Delaney, a Maryland Democrat, noted that tax incentives are “just a slice” of what needs to be done. He would like to see a $1 trillion portfolio of “infrastructure solutions” that sends monies to the Highway Trust Fund, a new infrastructure bank, and established federal programs that have been proven successes.

But he also offered some cautions: With Republicans in control of Congress and the White House, things will get done. What is unknown is whether they will be the type of groundbreaking financing and funding investments that many rank-and-file members of Congress on both sides of the aisle want to see.

“The voices for tax reform are very loud and very strong,” Delaney said. “If there is large tax reform done and there is a little piece of infrastructure as part of that, as kind of a bone to the Democrats, and that tax reform in general is not consistent with the kinds of things that Democrats want in tax reform, then that feels like something that will get jammed through on a partisan basis. Infrastructure may just become the carrot that some people dangle to try and get some bipartisan support.”

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