Written by: Michael Warren, Capstone National Partners
Earlier today, the Trump Administration released its 53-page infrastructure proposal. The proposal plans to spend $200 billion/year in federal dollars for ten years. In addition, the White House expects the spending to spur hundreds of billions more in state, local, and private investment, resulting in about $1.5 trillion in economic activity.
The proposal further develops goals and specifics including how federal dollars would be generally allocated, methods to further incentivize private investment, financing options for state and local governments, a desire to expedite the permitting process, and a loosening of certain environmental regulations.
What is missing from this proposal? How Congress intends to pay for it.
- Of the $200 billion in proposed spending, half would go to an incentive program that would give grants to proposed infrastructure projects, with priority given to applicants who raised taxes or installed tolls. Grants could meet 20 percent of the overall project’s cost, which is less than the historical 40 percent that the federal government traditionally guaranteed. Around 20 percent of the federal spending would be dedicated to rural infrastructure projects. The last portion of funds would go to “Transformative Projects,” which could be high tech or innovative infrastructure; like constructing hyperloop train tunnels.
- Furthermore, state and local governments would have broader financing options. Tax-exempt debt for infrastructure projects would be expanded, states could more easily add tolls to interstate highways, and it would become easier to lease public assets. These financing options would allow for state and local governments to contribute more money to infrastructure projects.
- The permitting process would also be expedited – and streamlined — under Trump’s proposal. A single agency would oversee the environmental reviews and there would be a 21-month deadline for a completed assessment. The final decision on permitting would have to be made three months after the first deadline, making the entire permitting process two years. This would streamline the permitting process because projects would not have to wait for multiple agencies to review a project, and there would be a hard deadline the agencies would have to meet.
- Environmental regulations would be further relaxed under this infrastructure plan. The Department of Interior would be given permission to approve oil and gas pipelines across lands controlled by the National Parks Service: a rule that environmentalists loathe, but could accelerate development.
The lingering question is the source, or combination of sources, of federal dollars. We have heard that the Trump administration is considering allocating funds from existing transit and transportation funds, but another possibility is raising the gas tax by a quarter. Raising the gas tax could solidify funding for the Highway Trust Fund far into the future. With that said, the gas tax has not been raised since 1993, and could be a hard sell to Republicans, given the recent tax cut.
