Surprise! Trump’s $1 Trillion Infrastructure Proposal Was a Bait ‘n Switch

His new $200 billion proposal still got some things right—and other things very, very wrong.

By now it is obvious that Trump’s $1 trillion infrastructure plan is a bit of a bait and switch. Trump’s budget proposal does not include a $1 trillion federal program from new tax revenues but rather $200 billion of new federal dollars to spur an additional $800 billion from the private sector and state and local governments.

The good news is that the Trump administration has floated the need to increase the federal gas tax, which is long overdue. This is not to be downplayed; for most politicians, proposing to raise the gas tax is a third-rail issue.

The federal gas tax has not been raised in a quarter century and has lost 42 percent of its spending power to inflation. The surface transportation system it supports has hit its 40-year expiration date, which means we need to completely rebuild the system over the next 10-20 years with far less resources dedicated to it than is required. Keep in mind that it costs far more to rebuild an existing system than to build it from scratch. For example, building highways on farmland costs far less than rebuilding while still handling the existing traffic. This can mean only working at night and on weekends at huge labor cost premiums and doing the work lane-by-lane.

However, the 20 percent federal funding might be just fine if—a big if—the feds do what I outlined in the Washington Monthly (a story that also ran simultaneously in The American Conservative).

I propose letting local governments and place management organizations (business improvement districts, community improvement districts, etc.) make the decisions about what surface transportation to invest in, because they know best. And it makes even more sense now that they might be asked to provide 80 percent of the funding. (The second definition of the Golden Rule: He or she with the gold, rules.) The federal surface transportation world is frozen with out-of-date rules and top-down mandates, such as the rule that 80 percent of federal funding go to highways and only 20 percent to “alternative transportation.” The definition of “alternative” includes everything aside from highways, such as transit, bus, bike, walking, etc. But these are all things that are in very high demand not only in urban areas but also in suburbs and small rural towns.

I also proposed in the article that there be two local funding sources. The first, increases in sales and property taxes, has been used extensively for over a decade, especially to pay for transit and bus. Sales taxes usually fund bond measures, and over 70 percent of these bond measures have been for transit and bus improvements. Given the general anti-tax tone of these times, this is remarkable. Locals tend to know best about what surface transportation needs they have and are willing to pay for them.

The other local funding source that would absolutely be required to get the additional $800 billion is private sector “value capture”. The developers around highway intersections and transit stations should contribute to maintaining and upgrading the infrastructure that makes their property holdings thrive. Value capture has been used abroad extensively in other highly developed cities and countries abroad, and this mechanism has been used in the US for some transit line extensions. One hundred years ago, the real estate industry built about 80 percent of the extensive rail transit system serving metropolitan areas in order to get customers to their developments. Transportation drives real estate development. Those developers and property owners that benefit should help pay for 30-40 percent of the needed funding for our transportation system. Local taxes and toll roads can pay for the other 40-50 percent of the funding that is required.

You may have noticed that I have not mentioned the states. That is because most state Departments of Transportation are really Departments of Highways, which was actually what they were most commonly called until about twenty years ago. But, despite their name change, their primary focus and way of thinking about infrastructure have remained largely the same: highways only. Giving decision-making exclusively to state governments, therefore, would almost certainly result in old, outdated plans for more highways being dusted off (most of which are “shovel-ready”) when in most cases that is exactly what the locals do not need or want. Any money allocated to the states should be mandated for rebuilding and maintaining their highways, not building yet more highway lane-miles. We are going to have a hard-enough time rebuilding what is already in the ground, much less building new stuff. In addition, all highways should be allowed to toll for their use; it is the ultimate user fee. Don’t think for a second that the current pittance of a gas tax has been paying for the highways.

Even if the Trump administration fails to get their infrastructure initiative through Congress, local funding—from public and private sources—for “walkable urban” infrastructure is happening already. Transit, bus, bike and pedestrian improvements are being funded and built in localities around the country.

The Trump infrastructure plan may contribute to the critically required surface transportation the country needs, but the “walkable urban” train has already left the station.

Christopher B. Leinberger

Christopher B. Leinberger is the Charles Bendit Distinguished Scholar and Research Professor and chair of the Center for Real Estate and Urban Analysis at the George Washington University School of Business and a nonresident senior fellow at the Brookings Institution Metropolitan Policy Program. His most recent book is The Option of Urbanism: Investing in a New American Dream. This story is being co-published by the Washington Monthly and the American Conservative.