Think tank claims states will make better infrastructure investment decisions
As the Trump administration works to put together his promised $1 trillion infrastructure investment plan, multiple stakeholders have been waiting to offer their critique of the legislation. Though a detailed plan is still months away, some things have become clear: Trump envisions less federal spending and more state and private investment spending.
In a recent Tax and Budget Bulletin, the Cato Institute’s Chris Edwards lays out the argument for why that is the proper approach to building a world-class infrastructure.
According to Cato’s calculations, “the federal government owns 13% of the total [infrastructure] while state and local governments own 87%.
“The federal government owns just a small share of the nation’s infrastructure, but it exercises control over state, local, and private infrastructure through taxes and regulations,” Edwards writes. “Federal policymakers should reduce these interventions to spur an increase in investment, and they should reform federal policies that bias state and local governments against privatization.”
The Cato Institute believes in individual liberty, limited government, free markets and peace.
Trump’s $1 trillion infrastructure plan is expected to rely heavily on private investment for close to $800 billion in investments. That is in line with Edwards’ point about government investment in infrastructure.
“Policymakers should cut federal spending on infrastructure, not increase it, by privatizing some federally owned assets and phasing out federal aid to the states,” he writes. “Those two reforms would cut federal infrastructure spending by three-quarters — from about $124 billion a year to $31 billion.”
Reducing the federal government’s role in infrastructure would spur private investment and more efficient state and local investment, says Edwards. “Everyone agrees that improving America’s infrastructure would raise living standards and improve our business competitiveness. The way to get there is through decentralization and market-based reforms.”
The Cato Institute released a graphic, “Seven ways to improve infrastructure policy without spending a dime.” The graphic notes the following areas of reform:
Privative airports, air traffic control and Amtrak
- Localize responsibility for infrastructure spending and taxation as much as possible
- Remove barriers to tolling, road pricing and airport charging
- To get more “bang” for the taxpayers buck, use cost benefit analysis to allocate funds
- Remove the income tax exemption for municipal bond interest income
- Streamline environmental regulations which delay and raise the cost of projects
- Repeal the Davis-Bacon Act and Buy American regulations
In his preliminary infrastructure investment announcement, Trump called for privatizing the nation’s air traffic control system and many have argued for privatizing Amtrak, which continues to lose money.
“While the federal government owns relatively little infrastructure, its policies have a large effect on the infrastructure owned by the state, local, and private sectors,” Edwards argues. “The federal government is the tail that wags the dog on the nation’s infrastructure — and not in a good way.”
According to Edwards, federal laws and regulations only increase costs and slow down construction projects, even though many of those projects are for infrastructure that is actually owned by the states, including schools and other state and local buildings.
“Although some federal interventions may be beneficial, the accumulated mass of regulations, subsidies, and taxes has created a growing hurdle to efficient investment,” Edwards says. “For example, the average time for states to complete reviews for highway projects under the National Environmental Policy Act increased from 2.2 years in the 1970s to at least 6.6 years today. The number of environmental laws and executive orders affecting transportation projects has increased from 26 in 1970 to about 70 today.