In Donald Trump’s victory speech early Wednesday morning after winning the presidency, the first thing he mentioned was his infrastructure plan.
“We are going to fix our inner cities, and rebuild our highways, bridges, tunnels, airports, schools, hospitals,” he said. “We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it.”
He had already promised during the campaign to spend $1 trillion on infrastructure projects without increasing government spending. But the details he’s laid out complicate that picture and could end up costing Americans dearly.
In a report the campaign released in late October, Trump economic advisers Peter Navarro and Wilbur Ross promised “a private sector solution to the provision of public infrastructure.” Rather than have the government raise or borrow money — borrowing that right now would come with very low interest rates — and spend the money on building public projects, Trump instead proposes private infrastructure projects. The government would give these private investors tax credits, and then the investors would raise the money they need to build things like roads and bridges.
The Trump camp claims that this plan won’t cost anything because the tax revenue from increased infrastructure activity would cover the cost of the government’s credits. But that leaves out what the American people would have to pay themselves.
Private investors are only going to be interested in infrastructure projects that come with revenue streams that can make them profits after the projects are completed. Trump’s report makes it clear that it is only talking about projects with “strong and clearly defined cash flows.” Those revenue streams come directly from the people who use infrastructure: the drivers who pay highway tolls as they travel over them, the commuters who pay fees to cross bridges, the households paying higher rates to private companies to use a water system.
There is a possibility that Trump’s plan would also allow for some hybrid projects that wouldn’t be entirely privatized; Slate’s Jordan Weissmann asked Trump’s advisers, who said the tax credits could be used for public-private partnerships, but didn’t give many details.
But not only would private projects end up costing Americans in higher fees, they also would be unlikely to address some of the most pressing infrastructure needs. Not all projects are ripe for increased fees. That is particularly true in low-income communities, where some infrastructure needs are acute but residents couldn’t necessarily bear to pay more for them.
As one potent example, the residents of Flint, Michigan have demanded that all of their water pipes be replaced after the lead poisoning crisis in which officials didn’t use corrosion control chemicals and the lead from the pipes leached into the water. They still can’t drink straight from their taps, and the pipes could be permanently damaged. But Flint is a city where more than 40 percent of people live below the poverty line and residents have already been paying some of the highest rates in the country. They aren’t likely to be able or willing to shoulder even higher costs in return for an upgraded system.
Even beyond these issues of higher fees were somehow addressed, the claims made by Trump’s advisers that the cost of tax credits would be completely covered by increased tax revenues are dubious. The report says that tax revenue would come from two streams: building infrastructure would necessitate hiring more workers, and if those workers weren’t working before they would start paying taxes on their wages once they were earning them; and it would also mean more profits for the investors in the projects, who would then pay more in taxes on those profits.
But given that the unemployment rate is under 5 percent, it’s possible that many of the workers hired on these projects are already employed and paying taxes, so nothing new would be raised from them. And it is also possible that investors who spend money on the projects would be diverting the money from a different project, which would offset the increase in tax revenue.