If there’s one issue that both Republican and Democrats can agree on, it’s the idea of repairing, modernizing and expanding U.S. infrastructure.
After all, better roads, bridges, rail systems, waterways, hospitals and other critical infrastructurecan increase public safety and, many believe, support economic growth.
But that doesn’t mean President-elect Trump’s proposal for $1 trillion in additional investment over 10 years will get a free pass from liberals, conservatives or budget hawks.
Critics are already callingout the plan’s potential shortcomings and lack of clarity on key issues.
While Trump’s Web site doesn’t offer many details, experts have also relied on a recent paper from two of his economic advisers — economics professor Peter Navarro and billionaire investor Wilbur Ross — as a guide to what Trump favors.
Here are just a few of the criticisms:
It won’t pay for itself as promised.
The idea of borrowing $1 trillion would almost certainly get pushback from conservatives and deficit hawks. But the Navarro-Ross paper asserts that $1 trillion can be raised from private companies in exchange forjust $140 billion in federal tax credits plus returns on their investment from the revenue generated by the projects they fund.
The plan further asserts that the cost of the tax credits could be fully offset by additional tax revenue that results from the jobs the infrastructure projects create, plus contractor profits from those projects.
But that seems to assume the jobs would be filled by the otherwise unemployed who would then get a paycheck and owe income tax, or by underemployed workers who would boost their taxable earnings.
It also seems to presume there will be enough workers who are qualified, available and willing to relocate if necessary.
The problem: “We’re close to full employment,” said Douglas Holtz-Eakin, a former director of the Congressional Budget office who now runs the American Action Forum, a conservative think tank.
That is, many if not most of those jobs may instead be filled by workers who are hired away from other jobs.
It’s a giveaway to developers.
The Trump planisn’t sitting well with liberals. Just this week Bernie Sanders and New York Times columnist Paul Krugman charged that the plan would be little more than a tax giveaway for companies.
“[Trump’s plan] would enrich a few well-connected people at taxpayers’ expense while doing very little to cure our investment shortfall [in infrastructure]. Progressives should not associate themselves with this exercise in crony capitalism,” Krugman wrote.
Under the plan, private investors could invest in an infrastructure project by putting a certain portion of money down and borrowing the rest. They would recoup 82% of their down payment through the federal tax credit. And the future revenue the project generates would cover the money they borrowed plus interest, and possibly more.
What’s not clear from the plan is whether the credits would only be awarded for new projects, not ones already planned or under way.If there is no distinction, then it is “simply a way to transfer money to developers with no guarantee at all that net new investments are made,” the liberal Economic Policy Institute noted in a blog post.
Important projects might not get done.
To make their investments worth it, private companies would have a stake in the future revenue generated by the infrastructure they help to build or maintain.
But many critical projects aren’t natural revenue generators, such as fixing pipes or protecting against hazardous waste water.
So will those projects go begging if more attention is given to ventures that hold the promise of more revenue?
Or will it be well received by the public if they have to start paying higher prices (e.g., through higher utility prices) to pay off private investors on projects that aren’t obvious revenue generators?
Will private companies, as a result of their investments, end up owning public assets? Navarro has not yet responded to CNNMoney’s request for comment.
The plan lacks vision.
It’s also unclear just how broadly “infrastructure” will be defined under the Trump plan. Trump himself has mostly stressed transportation infrastructure (e.g., roads and bridges), as well as hospitals and schools. The repair and maintenance of those are important but also might be considered shorter term goals.
Experts like Joseph Kane, a senior research analyst at the Metropolitan Policy Program of the Brookings Institution, see the need for a federal plan that offers a “clear narrative” about what we want our infrastructure to do in the future. And,Kane said, it should outline a long-term strategy that includes investment in “resilient” infrastructure such as storm water facilities to help regions better withstand what Mother Nature throws at them in the future.
CNNMoney (New York) First published November 22, 2016: 3:40 PM ET