Today we bring you a conversation with Hunter Blair, the budget analyst at the Economic Policy Institute. Blair discusses Trump’s newly released infrastructure plan and explains why unloading the burden of majority of funding to states and localities is the wrong approach.
Sarah Jaffe: We are talking on Monday. The Trump infrastructure plan, if we can call it that, has been released, and you have been looking at the potential things that might be in it for a while. Tell us about what the overall structure of this thing is, what is in it, and what should we be afraid of?
Hunter Blair: I think the structure of the plan is what we expected to see. It is only $200 billion in federal funding, as opposed to the headline claims of either $1.5 trillion or $1 trillion that the administration had been claiming. Of that, $100 billion goes to this sort of grant program that kicks the funding decisions to states and localities. They are required to come up with 80 percent of the funding and the federal government only provides 20 percent. There is $50 billion for rural projects. All of it comes back to what appears to be their belief that state and local governments need to spend even more on funding our infrastructure. Then, there are quite a lot of boilerplate claims about leveraging the private sector.
Let’s talk about the state funding question right now because there is…. Well, there are a couple of big problems with taking it all to the states.
State and local governments already account for the vast majority of our public infrastructure spending. [The Congressional Budget Office] had a report where 77 percent of public infrastructure spending on transportation and water infrastructure comes from state and local governments. It strikes me that if we think that this type of system has led to an underinvestment in infrastructure, kicking still further of the onus onto the states seems wrong.
Then, of course, there is the problem that … unlike the federal government, states can’t really run a deficit.
Yes, that is absolutely right. As far as funding is concerned, if the federal government is unwilling to fund it and sends the decisions to the states, states are going to have to raise taxes or put tolls or user fees on whichever piece of infrastructure, because, as you say, they can’t run the sorts of deficits that the federal government can.
There are several questions about what this is going to look like in practice. What kinds of infrastructure are we talking about here? He has made some promises all over the place, but when it comes down to it, what kinds of things are they suggesting be built?
As far as their claims about leveraging the private sector, what we are talking about there are mostly very large mega-projects. Things that you would see in big urban areas. That is the main takeaway for most of the funding. There is the small rural account, but it is $50 billion over 10 years.
Obviously, we have crumbling infrastructure on many levels. One of the big ones … on a lot of people’s minds still is clean water. I live in a small city in New York that has water problems. Flint still doesn’t have clean water. Is there anything at all in this plan, such as it is, that would take into account things like that?
Unless a state or local government decided that that was where to put a particular part of the funding, no. Even then, we have already seen how states and local governments have responded to the types of funding constraints that they are under, and so the idea that we are going to get some sort of noticeable increase in infrastructure with a plan like this — and particularly noticeable increases in places that were having trouble getting state and local governments to fund fully — seems wrong.
One of the big reasons that people wanted to talk about a big massive infrastructure project is, of course … job creation, and particularly the kinds of jobs that people have been losing…. Under a plan like this that is contingent on states eking out some money and/or private companies doing things, what does the picture around job creation look like here?
As far as states and local governments … since this isn’t a real infrastructure plan and it is just kicking all of the decisions to states and local governments, we have seen how they have responded to those decisions. We have seen the underinvestment. So, getting more jobs from this is not likely to happen. As far as the public/private partnership type of things go, what we are looking at is, historically [public/private partnerships] have avoided … prevailing wage laws. It is very probable that if, let’s say there was a significant increase in infrastructure, if a lot of that came from public/private partnerships, it would not be surprising if these were much worse jobs than they should have been.
Let’s go a little bit deeper about this public/private partnership thing. It is kind of a buzz term that gets thrown around a lot by politicians of both parties, frankly. Talk a little bit about the history of what [they] look like in practice where we have seen them operate and what the pitfalls have been.
You are right, we hear about it a lot from a lot of politicians about very boilerplate claims, “We are going to leverage the private sector to find this many dollars.” At the end of the day, private entities don’t bring any more funding to the table. Either the federal government is going to fund it or you are going to be looking at taxes or tolls or user fees. Private companies do not build our infrastructure for free and they don’t manage or maintain anything of the sort for free and they expect to earn a return. They will earn that return through partnerships that allow them to collect tolls or pay them through state and local taxes. Leveraging the private sector, it gets thrown around a lot, but it certainly doesn’t bring any new money to the table.
It just brings a different type of financing to the table. It brings that financing at a time [when] interest rates are still incredibly low. It seems like also the wrong time to be talking about it. Along with that, public/private partnerships bring their own sorts of problems that you have to deal with. Typically, the public sector has provided infrastructure in the US because a lot of infrastructure has natural monopoly characteristics: high fixed costs and low marginal costs that would allow private companies to keep out competitors. This means that they would have the incentives to hike prices or deteriorate the service quality, which means even if a private sector entity is providing the infrastructure or managing the infrastructure, you still need a strong role for the public sector in regulating it to ensure efficient pricing or good service quality. Again, you are not really getting around needing a strong public role by introducing public/private partnerships.
I am just picturing a giant bridge over the Hudson River that says “Trump” on it in gold. What are you going to do? Sell naming rights to infrastructure? It makes no sense to me. But I guess that is the slippage here — as you say “public/private partnership” and what that actually means is that we give public goods to private ownership. Then, it gets a name.
Talk a little bit about what an actual infrastructure plan that fixed problems that we know we have — like crumbling bridges and water that poisons children — and what ideally that would look like to put people to work and fix problems and maybe keep us all from dying in a climate change catastrophe.
I think, ideally, we have seen how much the state and local governments have taken on and have seen where that has gotten us as far as underinvestment in infrastructure across the board. I think that an ideal infrastructure project would be on that size — $1 trillion, $1.5 trillion, $2 trillion — but it would be real federal dollars put on the table to make the sorts of investments we need. Beyond that, I think public investment is larger than just infrastructure. We should be investing in early childhood education and things like that.
It is interesting to think about the kinds of things and the kinds of jobs that are considered “infrastructure investments” and “infrastructure jobs.” That we don’t think about our public schools as infrastructure in the same way that we think about a bridge.
Right, but it is absolutely a part of the type of public investments that our country needs. It should be part of a broad public investment plan.
The plan is now out. People have been talking about it, thinking about it, organizing around these issues of infrastructure for a while. What can people do to pressure for real investments — not giveaways to private companies and dumping the responsibility on the state?
I think you do what you typically do. Call your congressperson or senator and tell them about the type of infrastructure plan that you would actually like to see: real infrastructure investment from the federal government, not just kicking it to states and localities to figure out where to get funding from.
How can people find out more about this and keep up with your work?
You can find out more at www.EPI.org.
Sarah Jaffe is a reporting fellow at The Nation Institute and has covered labor, social and economic justice and politics for Truthout, The Atlantic, The Guardian, In These Times and many other publications. She is the cohost of Belabored, a labor podcast hosted by Dissent magazine, and the author of Necessary Trouble: Americans In Revolt (Nation Books, 2016). Follow her on Twitter: @sarahljaffe.
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