Ineffectual, Wasteful Infrastructure Ambitions

Randal O’Toole takes a look at a key part of the incoming administration’s economic policy, and sees the Trouble with Trump’s Infrastructure Ambitions.  There are, simply expressed, four problems:

  1. Not all spending of this kind is equally valuable: “Many advocates of infrastructure spending assume that all infrastructure contributes equally to economic vitality, but this is far from true. Digging a hole and filling it up may create a few jobs but no long-term economic growth. Transportation projects, for example, produce growth only if they generate new passenger and freight movement that would not have taken place without them.”
  2. New transportation infrastructure is less useful than properly-repaired, existing infrastructure: “Today, few areas need new transportation infrastructure. The nation has 2.7 million miles of paved roads, 140,000 miles of railroads, and more than 5,000 airports with paved runways…We have crumbling infrastructure because politicians would rather fund new projects than maintain existing ones. We build projects that fail to contribute to the economy because those same politicians follow fads rather than make sure taxpayers’ money is well spent.”
  3. Project spending often produces little additional revenue: “Traditionally, when a state or local government builds new infrastructure, it sells bonds, uses the revenues to pay for the infrastructure, then repays the bonds with local tax revenues. Since local tax revenues will be about the same whether the infrastructure is productive or a white elephant, officials have little reason to discriminate between good and bad projects.”
  4. The Trump plan cleverly circumvents existing, democratically-enacted debt limits to allow big spending: “Trump’s method of tax credits gets around these debt limits. Private contractors borrow money and build the infrastructure, and state or local governments would contract to pay the contractors, sometimes millions of dollars per month. Since the contractors, not the government agencies, borrowed the money, it doesn’t count against the democratically set debt limits, but local taxpayers are obligated to repay the debt anyway.”

Schemes like these don’t #DraintheSwamp; they breed stronger, and more numerous, crocodiles.

(In a small rural town like Whitewater, a full generation’s worth of big projects has not improved the community’s economic well being.  The percentage of all residents in poverty in 1999 was 27.4%, and of families was 10.6%. The percentage of all residents in poverty in 2014 was 36.7% and of families was 15.2%.)