Category: Infrastrucure

Missing from the Infrastructure Plan: Resilience

1280px-Road_damage_from_Hurricane_Nate_in_Jackson_CountyAs you might have heard, President Trump released a “$1.5 trillion” infrastructure plan on Monday, a topic the President himself finds “sexy.”

Sexy or not, the plan doesn’t deliver what it promises. The $1.5 trillion in funding is really $200 billion, with the hope that it spurs an additional $1.3 trillion from cash-starved states, localities and the private sector. It’s not unlike handing your betrothed a lump of coal and telling her there’s a diamond ring in there somewhere.

In fact, it’s not even $200 billion, since the budget proposal the White House also released this week envisions cutting almost that exact same amount from transportation and other infrastructure programs. So the plan to devote an additional $1.5 trillion to fix our roads, bridges, rails and more is really a plan to add . . . zero.

Nonetheless, it is a plan, and since Congress these days is in a deficit-be-damned mood, we very well may see a real plan to spend more on infrastructure. Taken at face value, the Trump plan has some good elements, notably strengthening existing loan and bond programs that have a track record of working, and some not-so-good ones, such as allowing the Interior Department to approve natural gas pipelines that cut through national parks.

But the one thing that’s missing from the plan is nearly any recognition that the nation’s infrastructure is increasingly vulnerable to natural disasters and the impacts of climate change. In fact, the words “resilience” and “disaster” are not mentioned once in the document.

This is the case despite the fact that weather-related events in 2017 alone cost the country a record $306 billion, a good chunk of it in damaged or destroyed infrastructure.

And despite the fact that the threats to infrastructure due to a changing climate are already well-known, as the 2014 National Climate Assessment points out:

Sea level rise, storm surge, and heavy downpours, in combination with the pattern of continued development in coastal areas, are increasing damage to U.S. infrastructure including roads, buildings, and industrial facilities, and are also increasing risks to ports and coastal military installations. Flooding along rivers, lakes, and in cities following heavy downpours, prolonged rains, and rapid melting of snowpack is exceeding the limits of flood protection infrastructure designed for historical conditions. Extreme heat is damaging transportation infrastructure such as roads, rail lines, and airport runways.

And despite the fact that research shows that investing in resilient infrastructure can save money; a 2018 study from the National Institute of Building Sciences found that “mitigation funding can save the nation $6 in future disaster costs, for every $1 spent on hazard mitigation.”

True, the White House plan is just that: a plan, and not fleshed-out legislation. It is by design a starting point in the discussions, and not every little detail was included.

But it’s long past time to think of resilience as a “little detail.” It makes absolutely no sense to spend trillions of dollars to fix roads, bridges, water systems, schools and more without making sure that they can withstand whatever nature throws at them.

Hopefully Congress can see its way to weaving resilience into the plan, by requiring federal dollars be spent on projects that take climate adaptation into account and prioritizing projects that address threats from rising sea levels, drought, forest fires and other hazards.

If not, the plan really will be nothing more than a lump of coal.

Image: Damage from 2017’s Hurricane Nate in Mississippi. Source: Wikipedia

On Infrastructure, There’s No Such Thing as Free Money

Miami_traffic_jam,_I-95_North_rush_hourSince the 2016 election, the one issue on which most everyone has pinned their hopes for bipartisanship has been infrastructure. Rebuilding “our highways, bridges, tunnels, airports, schools, hospitals” was one of the only policy items then-President-elect Trump mentioned in his victory speech, and it’s an area where even Democrats think they can find common ground with the White House.

Everyone loves infrastructure. But paying for it is another matter. The debate over how to pay for fixing all those highways, bridges and so on is as old as . . .  well, as many of those highways and bridges themselves. The American Society of Civil Engineers estimates that we need some $3.7 trillion through 2025 to maintain and update our infrastructure, but planned investments total just $1.8 trillion.

That’s a large funding gap to fill.

Providing $1.9 trillion in extra funding over the next seven years is a hard sell, particularly with a GOP-led Congress. (Let’s put aside for a second that said Congress just passed a $1.5 trillion tax cut package, and of course the U.S. has spent $5 trillion in the Iraq and Afghanistan wars.) As a result, Washington think tanks and policy wonks have spent countless hours in devising all sorts of innovative ways to finance infrastructure, with the goal of making the multi-trillion-dollar price tag more palatable.

So in his State of the Union address, Trump announced a new infrastructure scheme plan to be unveiled next week. It’s believed the plan will propose $200 billion in new federal funding that will leverage an additional $1.3 trillion in state, local and private sector spending.

The response so far, has been less than ecstatic. As the New York Times reported:

The increased infrastructure spending would be offset by unspecified budget cuts. Officials would not detail where those cuts would come from, or how the proposal would effectively leverage at least $6.50 in additional infrastructure spending for every dollar spent by the federal government, a ratio many infrastructure experts consider far-fetched … Administration officials say an increase in federal funds would unleash a wave of spending from cities, states and the private sector, the result of unspecified incentives in the plan. But many local and state officials have expressed concern in recent days that the administration’s faith in that potential effect is misplaced.

Ultimately, this “infrastructure alchemy” – spinning fiscal gold out of thin air – ignores several immutable facts: if fixing our infrastructure costs trillions, someone (read: the public) will have to pay for it, whether through increased fees, higher taxes, or the fiscal consequences of deficit spending.

And second, the public is less opposed to shelling out for infrastructure than some might think: polls show the public supports more spending on infrastructure, and while public opinion is split on raising taxes for infrastructure, it’s hardly a third rail.

Most importantly, we know how to pay for infrastructure, because we’ve done it, and have been doing it, for years, with programs and funding mechanisms that have a track record of working. Yet policymakers have neglected, or in some cases, worked to undermine many of these provisions, even as they exclaim the need to invest more in infrastructure. Consider:

  • The federal gas tax, which has served as a reliable financing tool for highways since the dawn of the Interstate Highway System (with a slice for mass transit since 1982). But the tax has not been raised since 1993 (although some states have raised theirs). The U.S. Chamber of Commerce estimates that raising the tax by 25 cents per gallon would being in an extra $394 billion over the next 10 years.
  • The tax treatment of bonds, both public and private. Municipal bonds help state and local governments issue debt for building and repairing infrastructure at a more favorable rate; The Committee for a Responsible Federal Budget notes they “comprise a substantial municipal bond market, with over $3.7 trillion in outstanding bonds and $11.3 billion traded daily in 2012.”  Meanwhile, private activity bonds primarily benefit a private entity but with some public benefit, like hospitals and airports. Both bond types survived elimination attempts in the year-end tax bill but could not avoid changes that have investors worried about their future attractiveness.
  • Other bond programs, like Build America Bonds, that were created as part of the 2009 stimulus package. Over the next two years, $181 billion in BABs were issued. However, BABs were authorized for only two years, and direct payments to issuers were cut as part of the 2013 budget sequester.
  • Federal loan programs, which leverage an average of $40 for every dollar of federal spending, but often are funded at levels far below the need. One example is Transportation Infrastructure Finance and Innovation Act (TIFIA) which provides financial assistance in the form of direct loans, loan guarantees, and standby lines of credit. A successful program, but it’s authorized to allocate just $285 million in 2018 and $300 million in each of 2019 and 2020.

Certainly, each of these programs has their drawbacks: the gas tax is regressive, disproportionately hurting lower-income Americans, and also loses its purchasing power as cars get more fuel-efficient. Other financing tools like bonds may seem like “free money,” but their reach is only as far as demand on the bond markets will take them. And some of the programs are tainted by partisanship, such as Build Americas Bonds which, despite their success, are inexorably tied to President Obama’s stimulus package.

But instead of coming up with shiny new ideas that are unproven, overly complex and could lead to a host of unknown unintended consequences, policymakers would be wise to look at what already works and build on them.

Ultimately, there’s no free money. But if we can drain $1.5 trillion from the Treasury to pay for “job-creating” tax cuts and $5 million in Middle East wars to protect our way of life, expending money to fix the roads, transit and other infrastructure on which both our economy and quality of life depends should be common sense.

If we fail to do so, there should be no mistake about the reason: It’s not that we don’t know how to pay for infrastructure. It’s that we don’t want to.