So this is kind of cute. While most of us were tearing our hair out over the FBI and Hillary Clinton's emails last weekend, Donald Trump's campaign quietly released a plan to privatize new infrastructure development in the United States. I know, that's not very sexy on the surface. But given that the man might be president come Tuesday, it seems worth remarking upon. Because it could mean we'll all be paying to drive on more roads built for profit.
Trump, as you might have noticed during this long, emotionally torturous campaign, likes to wax poetic about America's collapsing bridges and “third-world” airports, and he has vowed to fix up the country by doubling Hillary Clinton's proposed spending on infrastructure. At the same time, he’s also promised to pass gargantuan tax cuts while limiting the budget deficit.
This has all raised an obvious question: How, exactly, does America’s angriest clementine plan to pay for all of this building? I mean, Mexico isn't going to cover the wall and repairs to I-95, is it?
Thankfully, we now have an answer from two of Trump's chief economic advisers. In a report from Oct. 27, University of California–Irvine professor Peter Navarro and private equity honcho Wilbur Ross outlined how the candidate would transform about $167 billion of federal tax credits into $1 trillion of infrastructure spending. Factor in the effects of economic growth, they argued, and the cost to taxpayers would amount to zero, zilch, nada. Or, as they put it, the whole thing would be “budget neutral.”
Of course, it‘s not really free. Americans would just end up paying for the construction a bit later on.
Under Trump's plan—at least as it's written (more on that in a minute)—the federal government would offer tax credits to private investors interested in funding large infrastructure projects, who would put down some of their own money up front, then borrow the rest on the private bond markets. They would eventually earn their profits on the back end from usage fees, such as highway and bridge tolls (if they built a highway or bridge) or higher water rates (if they fixed up some water mains). So instead of paying for their new roads at tax time, Americans would pay for them during their daily commute. And of course, all these private developers would earn a nice return at the end of the day.
The federal government already offers credit programs designed to help states and cities team up with private-sector investors to finance new infrastructure. Trump's plan is unusual because, as written, it seems to be targeted at fullyprivate projects, which are less common. That may or may not be what the campaign entirely intended; in an email exchange, Ross and Navarro suggested to me that the tax credits could also be used for public-private partnerships, but they were a bit vague and muddled on the details. In any event, one obvious disadvantage of relying so heavily on private developers, as the Washington Postnotes, is that it would mostly encourage new building in wealthy areas that can afford to pay high user fees. Private companies go where there are private profits to be earned, after all. Poorer areas—areas where infrastructure may be more likely to be crumbling!—could end up being neglected.