In these polarized times, one thing it seems everyone wants to see is improved roads and bridges. And to no one’s surprise, the devil is in the details. From the long and short of it, the infrastructure bill stands to become another political football running towards the 2018 mid-term elections. While there are a lot of gaps to fill in on the plan, perhaps one can take that as a bipartisan effort. The author of the Art of the Deal has performed an impressive feat with passing tax reform legislation -- which also started out with scant details. Perhaps this is the start of another ambitious project.
President Trump’s long-awaited infrastructure plan sets the lofty goal of $1.5 trillion in new spending to modernize the nation’s transportation and public works systems. The plan is similar to what was leaked a few weeks back. Of the huge projected number of $1.5 trillion, only a fraction will specifically come from the federal government: $200 billion.
The burden of cost -- at least structurally -- will lie with state and local governments. There’s no identified source of the rest of the money, and for that matter, even for the $200 billion. US spending on infrastructure would come from killing other programs and shifting that money over to infrastructure.
Also, in general, the proposal outlines about half of the government spending would come in the form of matching grants, in which states would receive their half by coming up with proposals of their own. Another quarter would be used for rural projects in block grants so that the governors could decide spending. This portion seems to be a nod at Democrats, who agree with a rural projects initiative, especially in the form of providing broadband access to outlying communities.
Basically, Trump wants to generate the $200 billion in funding by reducing most domestic programs. The only three he doesn’t want to cut are border security, the military, and law enforcement.
The need for infrastructure is underscored universally based on two primary issues: (1) underinvesting over a long period of time, and (2) the overly bureaucratic “permitting process,” which can take “as long as a decade simply to build critical infrastructure that’s already properly funded,” according to a senior administration official on Saturday.
Trump also wants to speed the permitting process, requiring approvals in 24 months or less. His plan would cut back on bureaucratic overlap by identifying a single agency to take the lead for every permit required, eliminating duplicative procedures. “The process we have in the United States just takes way too long and is not really focused on outcomes,” a senior White House official told reporters on February 10. “We want to shorten the process while at the same time preserving environmental protections.” Trump wants to put one agency in charge for permitting, which everyone seems to agree is currently out of control. This is potentially another point of bipartisan agreement, although environmental groups don't want to be completely cut out of the decision-making.
“They’re not serious about infrastructure,” says a representative of the business community familiar with the White House plans. “They don’t want to put any new money into it. They’re going to use it as political bait, to portray the Democrats as getting in the way of rebuilding the country.”
Former hedge fund manager Tom Steyer spoke on CNBC, saying, “This administration continues to cut the very programs and forward-thinking approaches we need to still be a global player, and continues to move backward and tries to recreate the past. That’s not going to work.”
Democrats have a plan that seeks $1 trillion in funding, but favor direct sources of revenue, namely in the form of a federal gas tax. Trump himself has suggested the raising the gas tax, and while it does have support from the GOP-led Chamber of Commerce, it’s not currently part of Trump’s infrastructure plan.
NATSO, the national association representing America’s truckstops and travel plazas, said today that the association will actively oppose key aspects of the Trump Administration’s new infrastructure proposal. Specifically, NATSO is concerned about provisions designed to increase interstate tolling and commercialized rest areas.
“Interstate tolls cost the government significantly more to administer and enforce than the existing motor fuels tax. Why would anyone fail to support an increase in the fuel tax and, at the same time, work to create another type of tax (such as toll roads) that costs more to collect than the fuel tax?” said NATSO President and CEO Lisa Mullings.
Not only do toll roads cost more than the fuel tax for the government to administer, interstate tolls divert traffic to secondary roads. This diversion not only damages these roads, it increases accident rates.
NATSO also strongly disagrees with the White House proposal to commercialize rest areas. Rest areas built after 1960 can only sell vending machine items. Rest areas before this date can sell food and fuel, and as a result have stifled business growth at the exits; in counties with commercial rest areas, there are 56 percent fewer restaurants, convenience stores and truckstops than other counties.
“We urge the President to reverse his support for rest area commercialization. Commercialization allows the government to hand-pick one company to operate exclusively at the state rest areas; this company behaves as a monopoly simply by virtue of its location on the highway shoulder or median,” Mullings continued.
Nearly 97,000 gas stations, truck service businesses and restaurants operate within a quarter mile of the Interstate Highway System, employing more than 2 million Americans. These businesses are the economic backbone of off-highway communities, providing jobs and supporting the local tax base in the majority of small towns across America, contributing billions in state and local taxes.
Peter DeFazio, Ranking Member of House Transportation & Infrastructure Committee, said in a statement that the plan "devolves the federal role in our infrastructure to the pre-Eisenhower era, placing the burden on the 50 States, territories, and local governments to raise almost all of the funds, and encouraging them to sell off our roads, bridges, transit systems, and water systems to Wall Street and foreign corporations.
"We had a State-based system before Eisenhower’s interstates. It didn’t work. For example, the Kansas Turnpike. Kansas started construction in 1954, and Oklahoma said they would build the next segment. But, Oklahoma delayed that project for 18 months. So, for 18 months, before the Eisenhower plan, it ended in a farmer’s field at the border.
"The White House would take us back to this disjointed system...This is not a real infrastructure plan – it’s simply another scam...to privatize critical government functions, and create windfalls for their buddies on Wall Street. This fake proposal will not address the serious infrastructure needs facing this country, so our potholed roads will get worse, our bridges and transit systems will become more dangerous, and our tolls will become higher. And Wall Street? They’ll throw another party."
The White House says this is just the beginning of the negotiations. Trump is expected to host key lawmakers from both parties to discuss ways forward.
Stay up-to-date with the latest commentary and insights on FreightTech and the impact to the markets by subscribing.