The White House on Monday unveiled its plan to raise $1.5 trillion in capital for public works. This will cause sticker shock among Republicans, but the President’s innovative regulatory reforms deserve debate and may even garner some Democratic support.
is proposing to spend $200 billion in federal funds to leverage $1.3 trillion in state, local and private investment in public works. This bid is probably dead on arrival since Republicans have little appetite for more spending after blowing the budget sequestration caps last week.
Many bridges and airports need a face-lift, though claims of crumbling roads are overwrought and often politically motivated. One problem is that public works like other discretionary programs are being squeezed by entitlements, which constitute nearly two-thirds of federal spending. But even while politicians in Washington gripe that we—always the royal “we”—don’t spend enough on public works, they consistently prioritize other discretionary programs.
Consider: Of the $787 billion stimulus in 2009, only about $60 billion financed public works. Most was spent on safety-net programs and other progressive causes. More Hurricane Sandy recovery money went to “community development” than repairing train tunnels.
Many projects that do receive federal funding aren’t national priorities, such as California’s bullet train. That’s because the government typically awards “competitive” grants to politically favored projects rather than those that would produce the biggest economic benefits. The Obama Administration rigged cost-benefit analysis to reward projects that would promote public housing and reduce carbon emissions.
Mr. Trump’s plan includes $100 billion in “incentives” to spur state and private investment; $50 billion for rural projects; $30 billion in revolving federal credit and capital funds; and $20 billion for “bold and innovative projects” that may not attract private investment “because of the project’s unique characteristics.” By any other name, this is a national infrastructure bank synonymous with cronyism.
State and local governments have shown they’re willing to finance worthwhile projects. According to the Pew Charitable Trusts, more than half of states have raised gas taxes over the past five years to pay for public works. Many innovative projects have no trouble attracting private investment. Consider the Cadiz pipeline, which aims to move 16.3 billion gallons of groundwater each year from the Mojave Desert to Southern California. Or the new desalination plant in Carlsbad, Calif.
Mr. Trump and Congress should instead focus new federal funding on national or regional priorities such as improving port security and repairing the Hudson River train tunnels, which would benefit most of the Northeast. Congress could also shift from categorical and competitive grants to block grants that give governors flexibility. This would also make state and local politicians more accountable for their spending. Let
California Gov. Jerry Brown
choose between spending billions more on his bullet train in the Central Valley or improving commuter rail in the Bay Area.
The real earth-moving parts of Mr. Trump’s plan are the regulatory reforms, some of which will need to be fleshed out. The President wants to establish “one agency, one decision” for environmental reviews that would avoid regulatory hop-scotch. Good idea. Mr. Trump also suggests reducing environmental reviews to two years that can now drag out for a decade. Even many Democrats would like to expedite their favorite projects that have been grounded due to the discovery of a tiger salamander or other endangered species.
Another idea with merit is delegating environmental review and permitting decisions to states. California has been assigned these responsibilities under agreements with the Federal Highway Administration, as have Texas, Florida and Ohio. According to
California has reduced the approval process from the “notice of intent to final environmental impact statement” on highway projects on average by 10 years.
Tucked into the plan is modest flexibility on Buy America requirements and Davis-Bacon, which requires contractors on federal projects to pay workers prevailing wages set by unions. These raise construction costs. While this flexibility is commendable, Mr. Trump’s plan will also require tens of thousands of more workers. The Associated General Contractors of America reported last month that 78% of contractors had a hard time hiring. Apprenticeships can make up some of the shortage, but the government will need to increase H-2B visas to avoid delays or exorbitant project costs.
Democrats are ripping the President’s plan, and no doubt many think they can get more money if they win control of Congress in November. But they shouldn’t be so sure. President Trump deserves credit for opening a debate in Congress about why merely spending more on public works won’t help the public.
Appeared in the February 13, 2018, print edition.