Infrastructure: Can We Finally Think Big?

Infrastructure: Can We Finally Think Big?

The defining challenge of the next president’s infrastructure agenda will be persuading Congress to come along for the ride.

October 31, 2016

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This article appears in the Fall 2016 issue of The American Prospect magazine. Subscribe here

The Great Depression stimulated America’s first major investments in modern infrastructure. Undertakings like the Hoover Dam, LaGuardia Airport, the Lincoln Tunnel, the Golden Gate Bridge, and thousands of lesser-known road, rail, sewer, waterway, levee, and energy projects put millions of people back to work and transformed the American landscape. These marvels of American 20th-century infrastructure have long since ceded pride of place to European and Asian 21st-century state-of-the-art projects. Today, New Deal–era and even older assets barely keep the United States moving; many, if not most of them, have long since passed their useful lifespans.

The Great Recession brought the country to another crossroads on infrastructure. But where the New Deal went full throttle on innovation, President Barack Obama’s Rooseveltian instincts were curbed by 21st-century economic realities, obsession with deficits, and Republican intransigence. Most of the hundreds of billions in American Recovery and Reinvestment Act (ARRA) projects went to aid for cash-strapped states and to tax cuts for the middle class, not to long-term infrastructure. To stave off economic Armageddon, getting people back to work fast was the prime directive and shovel-ready was the mantra. “Timely, targeted, and temporary” meant uncomplicated highway projects. According to Casey Dinges of the American Society of Civil Engineers, only about $100 billion went to infrastructure, and about half of that went to transportation.

The gulf between the aspirational New Deal and the modest ARRA leaves Obama’s successor with a conundrum. The country’s infrastructure deficit demands a three-pronged response over the next decade: An accelerated maintenance program in sectors from aviation to waterworks, in tandem with the building of the next generation of infrastructure investments worthy of a major international economic power. There is also the need of financing a green transition.

Daniel Piraino/Creative Commons

Roebling Wept: Building the new Tappan Zee Bridge over the Hudson on the cheap. 

In 2013, the American Society of Civil Engineers’ quadrennial “Report Card for America’s Infrastructure” showed that the United States needed to invest $3.6 trillion by 2020, in 16 sectors, to raise the country’s overall score above a D+. It is doubtful that the next report card, due out in early 2017, will show substantial gains.

State and local office-seekers, not presidential candidates, are the ones who usually debate how much to spend on filling potholes, upgrading drinking and wastewater pipelines, and financing public improvements generally. But the subject came roaring into the 2016 presidential election with a ferocity that hasn’t been seen since Franklin Roosevelt bested Herbert Hoover. Moreover, in a presidential campaign noted for its unparalleled hostility, both Hillary Clinton and Donald Trump agree that the United States must spend more on infrastructure.

Despite Republicans’ continued insistence that Americans are weary of tax-and-spend Democratic policies, a 2015 American Public Transportation Association/Mineta Transportation Institute study found that 75 percent of Americans support increased spending on public transit infrastructure. This November, voters will consider state ballot initiatives totaling $200 billion on public transit investments alone.

Though voters may back the next president on increased infrastructure spending, Congress is not a willing partner. State transportation policy-makers greeted the passage of the five-year, $305 billion Fixing America’s Surface Transportation Act (the FAST Act) with enthusiasm, not because of its size (spending increases were small) but because states finally could count on a reliable stream of federal funds after years of short-term, sometimes last-minute, authorizations.

But keeping infrastructure assets in good repair is beyond the capacity of most states and localities. New York and New Jersey and their shared Port Authority are looking at a price tag of more than $20 billion on new Hudson River rail tunnels. New York will spend about $8 billion on LaGuardia Airport renovations and on rebuilding and completing the new Tappan Zee Bridge—which is being constructed on the cheap, just like its predecessor. New Jersey must find nearly $1.5 billion to renovate the Bayonne Bridge. States respond by stretching out investments, so projects such as New York’s Second Avenue Subway line that could be completed in years take decades—a tactic that adds costs by snarling traffic and inviting overruns.

Unfortunately, neither Clinton’s five-year, $275 billion plan nor Trump’s “at least double her numbers” calculation begin to address the trillions needed in leaky pipes, corroded tracks, decrepit trains, and faulty wiring, much less 21st-century smart grids, protections against sea-level rise, and innovative green investments.

 

IN A WORLD OF LOW INTEREST RATES, federal, state, and local officials should be moving aggressively to finance infrastructure investments. But so far, the perverse deficit obsession that is the legacy of the Great Recession has discouraged new debt financing, even for infrastructure. Of the dozens of transportation ballot initiatives before voters across the country this November tracked by the Center for Transportation Excellence, only a few questions involve bond issues; most of the others rely on increasing taxes.

In California, Proposition 53 proposes to strip state lawmakers’ authority to issue revenue bonds for projects above $2 billion. The measure, led by a multimillionaire grower and deficit hawk, Dean Cortopassi, is evidently aimed at blocking California’s debt-financed high-speed rail and the construction of two tunnels to convey water from northern to southern California.

Former Pennsylvania Democratic Governor Ed Rendell, a senior adviser to Clinton’s infrastructure policy team (which includes former Federal Aviation Administration Administrator Jane Garvey and former U.S. Department of Transportation Deputy Secretary John Porcari) recommends $2 trillion in government and private-sector spending on a ten-year infrastructure-revitalization program.

In the first 100 days, if Clinton is elected, Rendell would like to see a menu of short-term options, such as reviving the Build America Bonds program, strengthening a transportation financing program, ending prohibitions on new interstate highway tolls, and calling for an infrastructure bank. Longer-term proposals might include revisiting a capital budget for the federal government, an idea that has been repeatedly rejected. Trump has not, at the time this story went to press, provided a detailed infrastructure program.

The Obama administration’s Build America Bonds program, enacted as part of the stimulus, was quite popular. Rendell says there was a “gold rush” on the program before it ended. According to a 2011 U.S. Treasury Department report, the program issued $181 billion in bonds to states, the District of Columbia, and two territories, and saved them $20 billion in borrowing costs. Most municipal bonds are tax-exempt, but under the Build America Bonds program, the federal government paid a portion of the interest payments for the state or locality, reducing the payments they made. But the program added to the deficit and got shelved.

In 2011, Obama proposed allocating $10 billion to capitalize an infrastructure bank, setting financial parameters for carefully selected projects, and using private capital and local funds to leverage federal costs. Projects would be self-financing and selected by a seven-member board of governors, a framework akin to a Federal Reserve System for infrastructure. House Republican leaders declared the proposal dead on arrival.

Arizona Department of Transportation/Creative Commons

Showing Its Age: Work is ongoing to connect Loop 303 with Interstate 10 in Goodyear, Arizona. 

There are many questions and not enough clear answers: Would the bank work like a revolving loan fund with payback required? What master planning process should determine priorities for investments in transportation, water, and energy? How would the bank avoid (or perhaps co-opt) pork-barrel pressures? Can the president deploy a sophisticated political strategy to sway Congress?

An infrastructure bank bill would be a jurisdictional nightmare, says Beth Osborne, a Transportation for America senior policy adviser and former U.S. Department of Transportation official. “It is going to die in Congress because every committee has jurisdiction, but nobody has jurisdiction and nobody owns it,” she says. “That’s a bad legislative strategy.”

Rendell believes that the politics can be overcome. “If somebody lucidly and clearly explains how we can do this without impacting the federal deficit and without putting it up for a revenue vote, I think you’ve got a chance,” he says. But it’s hard to imagine winning support for an infrastructure bank—which does involve borrowing—without challenging the premise that debt-financing is always bad.

“We have to build some faith that what pays back the bonds that we use to finance infrastructure is going to be the increased economic activity that results from having a better economy that is better served by the kind of infrastructure that makes commerce possible,” says George McCarthy, the president of the Lincoln Institute of Land Policy, an independent Cambridge, Massachusetts, think tank.

If the basic set of assumptions is not changed, then the government will be thrown back on incremental expansions of existing approaches. That could include deeper coordination among existing federal loan programs, such as the Transportation Infrastructure Finance and Innovation Act (TIFIA), the Railroad Rehabilitation and Improvement Financing program, and the Water Infrastructure Finance and Innovation Act, so they could operate in concert as an “infrastructure bank lite,” says Robert Puentes, president and CEO of the Eno Center for Transportation.

“Infrastructure investments are off to the side, where they are unconnected to things like social-mobility goals or economic or environmental goals, [but] infrastructure is the common thread that cuts through all these things,” says Puentes. “If you are looking at doing housing, transit, and water investments in the same cities, by combining and coordinating them you get better bang for the buck, because we all know that these things are all connected anyway.”

On the transportation front, the FAST Act moved existing loan programs forward in the “lite” direction by steering them (along with an existing bond program and a new grant program) into a Build America Bureau that debuted in July. The bureau coordinates with the Office of Infrastructure Finance and Innovation that oversees the popular Transportation Investment Generating Economic Recovery (known as TIGER) grant program. By shaking up the Transportation Department’s organizational chart, in part to respond to past concerns about a lack of efficiencies and a lack of transparency, the department aims to improve coordination, provide more assistance to applicants, and get funding out the door faster. But there was one big step back, too: Congress slashed the well-regarded TIFIA program’s annual funding from $1 billion in 2015 to just under $300 million in 2016, rising only slightly in succeeding years—a 70 percent cut.

 

Kevin Rofidal, United States Coast Guard/Wikimedia Commons

The 2007 Minnesota bridge collapse, last year’s Philadelphia Amtrak crash, the ongoing Washington, D.C., subway maintenance crisis, and the Flint drinking-water debacle failed to create national urgency on infrastructure investment. Here, cars rest on the collapsed portion of I-35W bridge, after the collapse. 

INTEREST COSTS FOR A NEW debt-financed infrastructure initiative will never be lower than they are right now. With the Federal Reserve poised to raise rates, the next president faces a narrowing window of opportunity to move an agenda predicated on low borrowing costs. On the revenue side, there are only a few options that can pass political muster. Removing federal prohibitions on interstate tolls should be one of them. Since states handle tolling, federal deficit issues do not come into play. Such a shift also might compel state officials to start conversations about whether to continue to rely on a fuel tax or switch to a vehicle-miles-traveled or other user fee based on the amount of driving an individual does. “If you were looking to make a federal investment that would generate new revenues that states could then use to wean themselves off federal money, that would be the way to do it,” says Jim Aloisi, a former Massachusetts secretary of transportation.

Similarly, prodding Congress to use taxes collected for specific purposes in those areas would solve other problems. U.S. ports are constrained by poor water and land access. Increases in the size of ships and cargo volumes as a result of an expanded Panama Canal promise to create further bottlenecks. Only about half of the harbor maintenance tax established to fund navigation channel–maintenance activities like dredging by the U.S. Army Corps of Engineers (a much maligned but indispensable infrastructure-building agency) goes to those activities, since Congress has directed those revenues to other federal budget programs.

The best short-term federal revenue opportunity is the one that is the most controversial and consistently dead on arrival: increasing the federal fuel tax and linking it to inflation. The tax has not been raised since 1993. Congress keeps the Highway Trust Fund solvent with transfers from general revenues.

According to a 2013 Congressional Budget Office report, increasing the gasoline and diesel-fuel taxes by 35 cents a gallon and indexing them to inflation would generate roughly $450 billion over ten years. McCarthy of the Lincoln Institute argues that the United States is “backpedaling.” Low gas prices have stimulated rather than suppressed American driving habits. “If we care about climate, we should make it more costly to burn fuel, and just suck it up,” he says.

Eight states—Georgia, Idaho, Iowa, Michigan, Nebraska, South Dakota, Utah, and Washington—passed gas-tax increases in 2015. This year, Maryland and Washington state also authorized increases. Given the urgency on infrastructure spending, state lawmakers’ fears about voter retribution may have already peaked. A 2015 American Road and Transportation Builders Association analysis found that in 2014, 95 percent of Republican state lawmakers and 88 percent of Democratic state lawmakers who voted to approve state gas-tax increases in 2013 and 2014 won their 2014 re-election races.

“Why is there such a different perception on the political implications of casting a vote like that in Washington?” says Dinges of the American Society of Civil Engineers. “It’s been so long since they had a vote like that, how do they even know?”

Paradoxically, the demise of earmarks created a kind of black market in horse-trading that is even less transparent. Unlike their state and local counterparts who can link a sales-tax increase to a specific project, federal lawmakers aren’t able to spell out how a higher fuel tax benefits certain projects. The complexity of funding in sectors like transportation does not help members of Congress make a case for taxpayers to pay more, says Osborne of Transportation for America. “That just sows confusion, and confusion is not a good thing when you are asking people for money,” she says.

Yet federal lawmakers might think differently about a yes vote if they were able to see their state’s top maintenance and brand-new projects funded by a fuel-tax hike. Rendell would pitch allowing every state to submit a list of the most important rehabilitation and new projects that could get kickstarted with a fuel-tax increase.

Identifying the right mix of financing plans and sustainable revenues is only a first step. Scarce federal funds should flow to the most critical national projects in transportation, water, energy, and other sectors. Ideally, those would be undertakings that capture politicians’ attention and excite voters enough to pay for them. But which ones? A Treasury Department–commissioned, third-party report-in-progress aims to identify between 25 and 50 of the country’s most economically significant transportation and water infrastructure projects. (Typically, the transportation and water sectors involve more public dollars than others, such as energy, which is largely private.) Such a plan—one that links a national infrastructure strategy and well-vetted projects to sound financing and funding plans—along with a new president supporting a political course of action to move the whole enterprise forward, stands a better chance of getting serious attention from a skeptical public.

One piece of Obama’s stimulus legacy that offers a proven template for selecting and funding projects is the Department of Transportation’s TIGER grant program. Successful and popular (especially since it does not require state or local matching funds), the competitive annual grant program has bipartisan appeal, distributing more than $5 billion to various levels of government in all 50 states and several territories. It gives preference to projects of national, regional, or metropolitan-area significance, involving both private and public entities that span multiple communities and regions, and displays creative and collaborative problem-solving. There is a fierce and unmet demand for these grants. In 2016, the department received 585 project applications, adding up to $9 billion. Officials distributed $500 million to 40 projects that support nearly $2 billion in investments. Competition assures that funding goes to communities and entities that have done their homework. But it also highlights the need to assist communities that may not have the money or the people power to pull together a federal application.

 

THE 2007 MINNESOTA BRIDGE collapse, last year’s Philadelphia Amtrak crash, the ongoing Washington, D.C., subway maintenance crisis, and the Flint drinking-water debacle failed to create national urgency on infrastructure investment. Business leaders wring their hands over waning American competitiveness, but their appeals fail to make the connection to America’s outmoded infrastructure. European and Asian capitals may have sleeker buses that travel in dedicated lanes and high-speed intercity connections, but many Americans have not experienced public transportation outside the U.S.—only about 40 percent of Americans have passports —so extolling transit systems thousands of miles away from Main Street does not move the needle. Obama’s interest in generating excitement about infrastructure with initiatives like high-speed rail led Congress to parry his moves for reasons that had more to do with politics, ideology, and race than with America’s international competitiveness deficit.

Political scientist Richard Neustadt said that presidential power is “the power to persuade.” To promote his Interstate Highway System, Dwight Eisenhower appealed to national unity. “Together, the united forces of our communication and transportation systems are dynamic elements in the very name we bear—United States,” Eisenhower said in 1955. “Without them, we would be a mere alliance of many separate parts.” But Eisenhower ultimately managed to gain congressional support for the highway system—and a Highway Trust Fund to help maintain it— not by extolling the virtues of transportation or national unity but by linking it to national defense. Eisenhower’s success provides a road map: yoking important infrastructure investments to a credible rationale for them that gives federal lawmakers political cover and gives voters a mission they can get behind.

But the coarsening of contemporary political discourse has tarnished a president’s persuasive powers. Today, decaying infrastructure increases the nation’s vulnerability to natural disasters, terrorism, and other threats—national security issues that many federal lawmakers are eager to trumpet until it comes time to act. Whether a plan for substantive investments backed by sustainable funding actually gains traction in the first 100 days of the new administration depends on the new president’s ability to convince Congress that infrastructure matters now. Sustained infrastructure investments could begin to allay economic insecurities by using improved physical capital to build the human capital that is key to rebuilding the middle class.

Gage Skidmore/Creative Commons

Unfortunately neither Clinton's five-year, $275 billion plan nor Trump's "at least double her numbers" calculation begin to address the trillions needed to bring American infrastructure into the 21st century. Here, Clinton speaking at a town hall in Manchester, New Hampshire.

Nevertheless, what stands between the new executive and infrastructure investment is not funding or lack of interest of average citizens; it is the disconnect between Congress and the rest of the country on spending priorities. Part of the problem is that some of the people who have come to Washington to make law repeat the canard that government is the problem and cannot not be trusted, regardless of the evidence that Americans rely on all levels of government to stave off or at least mitigate catastrophes, from hurricanes to recessions.

The next president has to hammer home strong messages over the cant from Washington partisans who are content to let America crumble. Launching transformative infrastructure investments begins with a philosophical shift that reworks attitudes toward government in order to identify the mechanisms required to unleash the trillions needed to start that work. States and localities do not have the resources, funds, or big-picture point of view to consistently deliver world-class infrastructure projects. Building infrastructure in the 21st century means tying a national economic program to infrastructure projects that provide good middle-class jobs for construction workers, planners, procurement specialists, and others, preferably before another decade goes by.

“There was a time when America was great as a result of good leadership, sound planning, and the ability to actually get people to see beyond short-term, narrow self-interest to longer-term kinds of benefits,” says McCarthy of the Lincoln Institute. “The middle class was created with infrastructure; people just don’t understand that. … We need a leader who can actually get people to see it.”

Despite natural and man-made disasters like Katrina and Flint, too few Americans have grasped the fact that we face an infrastructure emergency. Unlike the Great Depression, the financial collapse and the Great Recession created a psychology of public-sector austerity rather than a 1930s-style wave of new public investment.

What continues to escape America is the will to power forward, instead of being forced into action by a slow-rolling catastrophe. Can the next president cajole 535 lawmakers to think differently and imagine Eastern and Gulf coastal cities being hardened against sea-level rise with newly created wetlands, state-of-the-art flood barriers, drainage systems, permeable surfaces, and new construction, elevated and set back from shorelines? Or interior cities and towns keeping tabs on well-maintained levees?

Surely, in a wealthy country, drinking water can be clean and the pipes that convey it lead-free. The power grid can be smart—fully automated and backed up, with vastly improved transmission and distribution facilities and a vigorous cyber-security program that monitors threats, designs responses, and prepares the public for outages of all types. It’s not a stretch for the United States to have smooth and well-paved highways everywhere, mass transit that works, modern air-traffic control, or high-speed rail hugging the coasts from Maine to Florida and Washington state to southern California.

The price tag for these wonders easily runs in the tens of trillions of dollars. Yet what seems fiscally utopian is urgently needed. Can the next president provide the leadership to narrow that gap?

 

Eight Projects We Need

Hudson River “Gateway” Tunnel Rail Project: The Hudson Rail Tunnel is the only passenger rail link between New York’s Pennsylvania Station and Amtrak’s Northeast Corridor between Boston and Washington, D.C., the country’s most heavily traveled rail line. Hurricane Sandy flooded the Hudson River tunnels in 2012, which made a bad situation infinitely worse. Roughly 450 trains travel through the tunnel every weekday. The tunnel opened in 1910.

Chicago Region Environmental and Transportation Efficiency Program (CREATE): Consisting of 70 projects in northeastern Illinois, this freight and passenger-rail project aims to alleviate bottlenecks where the rail tracks intersect with roadways, and passenger and freight lines with each other. Freight transport suffers lengthy delays—it can take more than a day for freight rail to traverse the Chicago area, since passenger trains have priority. Delays through Chicago have cascading effects on freight transport through the rest of the country. As of June 2016, 27 of the projects have been completed; others are at various stages of completion, or are waiting for additional funding.

AP Photo/Gerald Herbert

Water from the Mississippi River roars through the Old River Control Structure towards the Atchafalaya Basin in Concordia Parish, Louisiana, Tuesday, May 17, 2011. 

Mississippi River Flood Control: Baton Rouge, which experienced historic flooding this summer, had federal flood-control projects that were never finished after massive floods in 1983. In December 2015, Missouri experienced historic flooding and nine levees were overtopped. Levees received a D- from the American Society of Civil Engineers. The extent of the national levee system is unknown and there is no national levee safety program. An increase in severe storms promises to exacerbate this issue.

Smart Grid: The 2009 stimulus prodded the United States toward an automated, digital, 21st-century answer to the country’s antiquated electricity distribution framework. It is a complex task—the private sector oversees much of the infrastructure, another group of companies and independent organizations transmits the power, and state utilities regulate prices. Major concerns include getting consumers to switch to smart meters and continuing research into energy-storage options, especially from renewable energy sources like wind and solar.

Interstate 10 Improvements: The fourth-longest U.S. interstate highway route runs from California to Florida. California and Arizona have launched major projects to relieve congestion in Los Angeles and Phoenix, and communities in other states along the 2,500-mile route are also pursuing new initiatives. Alabama officials are particularly eager to begin construction of a new span over the Mobile River.

Targeted High-Speed Rail: As President Obama discovered, high-speed rail is a national priority bogged down in congressional parochialism and regional resentments. The next administration should scale back, not abandon, his grand vision. There are four long-distance U.S. routes that merit investments. California currently suffers from buyers’ remorse over its expensive, slow-developing San Francisco-to-Los Angeles high-speed route. It’s an understatement to say that the project would transform transportation patterns on the entire West Coast.

A proposal for a route from Oklahoma City to South Texas via Dallas, Austin, and San Antonio presents an intriguing opportunity to relieve growing congestion in the Southwest. Currently, the Federal Railroad Administration and the Texas Department of Transportation are studying the route. This project is certain to draw more interest, especially if a privately financed Dallas-to-Houston bullet train project falls apart. The Dallas-to-Houston bullet train, which would be the first of its kind in the country, has local and political support. But a mounting rural offensive against the line over potential eminent-domain takings and ongoing doubt that the project can be constructed and operated without public subsidies poses hurdles. Aside from coordinating environmental studies, the federal government has bowed out of that project, leaving Texas to mediate the feud.

Thanks to the largest loan in Department of Transportation history, Amtrak plans to deploy brand-new trains on the Northeast Corridor from Boston to Washington, its busiest and only profitable route. For the most part, those trains will run on existing power, rail beds, and bridges, spotlighting more poor American infrastructure choices. Amtrak got a small annual boost under the FAST Act, but the nearly $30 billion the company needs for a complete Northeast Corridor overhaul is unlikely to materialize in the near future. Vice President Joe Biden said it best: “Why in this country are we so boneheaded to not understand the essential value of a rail system that is modern throughout the whole country? Why do we argue about whether or not it makes sense?”

Nuclear Waste Repository: In 2015, Great Britain added identifying radioactive waste storage sites to its roster of national infrastructure priorities. In the United States, the unique properties and requirements of handling spent nuclear fuel have typically meant that nuclear waste disposal gets evaluated apart from industrial hazardous waste disposal. But the problem is immense and has been virtually ignored since President Obama halted the controversial siting process for a national nuclear waste depository at Yucca Mountain, Nevada, in 2010. The focus has shifted to short-term aboveground storage alternatives until an underground repository gets sited, but those facilities are more expensive and more dangerous than underground storage. Meanwhile, nuclear power plants continue to store waste on site, an expensive and increasingly risky proposition.

Coastal Resilience Projects: About half of Americans live within 50 miles of coastlines, and Hurricanes Katrina and Sandy demonstrated that these American communities are unprepared for severe storms that destroy lives, property, and infrastructure. With federal assistance, states and localities are exploring ways to “harden” coastal environments to absorb and recover from flooding by nourishing marshlands, restoring beaches and dunes, and similar efforts. A more difficult set of projects will involve important public conversations on eminent-domain issues: Americans may finally have to cease building in certain areas and abandon regions that regularly suffer damage only to be rebuilt, often with public funds, in order to save lives and communities beyond.

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