Trump's Infrastructure Plan: Fiction? Scam? Actually, Both

(Photo by Oliver Contreras/SIPA USA via AP Images)

Trump hosts a meeting on infrastructure with state and local officials at the White House on February 12, 2018.

Fiction: invention or fabrication as opposed to fact; belief or statement that is false, but that is often held to be true because it is expedient to do so

Scam: a dishonest scheme; a fraud

First, it’s a fiction. There is no $1.5 trillion plan. It’s $200 billion—that’s all the federal government says it’s going to spend—but then it’s not that either. That $200 billion doesn’t factor in the billions in cuts to transportation, water, energy, and other projects. The Highway Trust Fund that states and cities rely on is zeroed out. Budgetary shell games (a.k.a. budget cuts) are not the new investment that will fill the gaping need in American drinking water, waste water disposal, transit, roads, bridges and other vital infrastructure.  

Paul Krugman summed it up in a tweet: “So the real net spending on infrastructure being proposed is basically zero. All that's left is an effort to privatize things that can make profits.”

In reality, the Trump plan shifts the vast majority of infrastructure spending onto state and local governments—which compels them to levy tolls, taxes and fees (there’s no other source of funds) on local businesses and individuals. Trump’s plan thereby ensures that wealthier regions will invest more and poor regions less, further exacerbating the economic divides across the country and continuing to let our infrastructure fall into disrepair.

But it’s not just a fiction. It’s also a scam. Trump has come up with a scheme that sounds so good, it’s hard to believe it’s true. In fact, it’s not. It’s really a plan for the privatization of American public infrastructure—like Trump University, which promised students that they could make millions for a small investment in tuition, but which only made Trump richer. Trump’s plan promises to give out “incentives” that will stimulate billions in private investment—and control—of water systems, roads, and other basics of life.

Here’s how it works. The plan allocates $100 billion over ten years to an Infrastructure Incentives Program, which “would encourage increased State, local, and private investment in infrastructure.” The privatization push comes from the requirement that these federal dollars cannot constitute more than 20 percent of a project’s cost. This approach represents a significant cost shift onto cities and states, which would be required to fund at least 80 percent of any project. Many cities and states will be unable to generate the amount of new revenues needed to meet infrastructure needs, especially as the new tax law crimps state spending by limiting the state and local tax deduction. Instead, local and state government will essentially be forced to use private financing and engage in privatization schemes.

Moreover, there are myriad struggling communities where raising new revenues for infrastructure is simply not an option, nor will projects in these communities look attractive to private investors seeking high returns. The Infrastructure Incentives Program, a centerpiece of Trump’s plan, will leave millions of Americans who live in places like Flint and Puerto Rico completely behind.

The plan also expands the use of subsidized Private Activity Bonds (PABs) in ways that make projects more attractive for private investment. Projects funded with PABs must have “public attributes,” but Trump’s plan allows PABs to be used in a wider range of projects. The plan would allow PABs to retain their tax-exempt status even when a public project is purchased by a private entity and the private-use limits are exceeded. The plan floats several change-of-use options to ensure that projects that change from public to private hands would continue to qualify for tax-exempt debt.

Next, the plan proposes to sell off assets, including the Ronald Reagan Washington National Airport, the Dulles International Airport, the George Washington and Baltimore Washington Parkways, the Tennessee Valley Authority transmission assets, the Southwestern Power Administration’s transmission assets, and others. Trump’s infrastructure plan would make it easier to privatize existing federal assets by allowing the federal government to take assets directly to market, instead of allowing state and local governments to buy the property at discounted rates, as it has traditionally done.

Finally, the plan explicitly paves the way for increased privatization in specific sectors:

Interstate Highways: The plan would allow states to toll existing Interstate highways. While on its face, this provision doesn’t explicitly call for privatization, the lack of tolling revenue makes them an unattractive target for private investors. Private investors may be more than willing to give states up-front payments for the long-term ability to operate and collect tolls from a highway segment.

Interstate Rest Areas: Interstate rest areas have long been safe places for motorists to stop and rest or for families on road trips to eat their picnic lunches. The plan would remove the current prohibition against commercial activity at interstate rest areas.

Transportation: The plan removes barriers from and otherwise encourages alternative project delivery (shorthand for private financing) in transportation.

Transit: The plan specifically eliminates constraints for using public-private partnerships in transit. The plan codifies and makes permanent the Federal Transit Administration’s (FTA) framework for public-private partnerships, which is currently a pilot program with limits on how many projects can participate. Additionally, the plan would increase the federal funding share from 25 percent to 50 percent to attract more private investment in transit projects, and eliminate the program requirement that participants utilize existing union staff.

Airports: The plan eliminates the ten-airport cap in the current airport privatization program. The plan would remove these requirements on the number and size of airports that can participate in the privatization program. The plan would further incentivize the privatization of airports by altering the current law that requires 65 percent of airport carriers to approve the privatization of an airport. While it is not included in Trump’s infrastructure plan, a proposal to privatize the nation’s air traffic control operations is included in his FY 2019 budget proposal.

Water: The plan is a gift to private water corporations. Privatization of water-related infrastructure would be incentivized in a number of ways. It allows the Clean Water State Revolving Funds to provide financial assistance to privately owned treatment works. It removes important regulatory requirements for privately owned treatment works, including the Clean Water Act and Resource Conservation Recovery Act, making it easier to privatize by reducing environmental standards on private companies.

Currently, only the Army Corps of Engineers is authorized to perform construction and operations work on a project that utilizes funds appropriated from the Inland Waterways Trust Fund (IWTF) or the General Fund (GF). The Trump plan would authorize the secretary of the Army to enter into contracts with private entities to use IWTF or GF money for construction, maintenance, and operations work. Moreover, the plan expands the allowable contract period to 50 years, clearing the way for long-term privatization contracts. Finally, the plan explicitly authorizes privatization of operation and maintenance activities at hydropower facilities, which have long been restricted and deemed inherently governmental.

Veterans Affairs Facilities: The plan would create a pilot program that would allow the Department of Veterans Affairs (VA) to exchange existing VA land or facilities for a lease of space in a new private facility that would be built on VA land. This essentially allows private corporations to take control of both public land, and build and operate privatized VA facilities.

Public Lands: The plan suggests that it will fund capital and maintenance needs of public lands from new revenues derived from energy development on public lands. The approach sets up dynamic where the Department of Interior becomes more dependent on resource extraction as a major source of funding.

In sum, the Trump plan fails to recognize the fundamental truth that infrastructure is inherently a national responsibility, even while locally delivered. Workers commute on transit systems, roads, and rails to bring supplies to factories and goods to market; water is fundamental to life, health, and a productive economy; and now, broadband is the connective tissue that binds the nation together and drives the economy. Trump’s plan pits region against region and people who can pay against people who can’t, even as it weakens our standing in the global economy. And this is from the president who knows how to build things. Or does he?

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