Conservative and libertarian fears about Donald Trump’s infrastructure rhetoric will be somewhat allayed by today’s budget. In the presidential campaign and early days of the administration, there was much talk of “shovel ready projects” and “creating jobs” with $1 trillion of new investment, which sounded suspiciously like a federal stimulus package and vastly more borrowing. But that language was nowhere to be seen in this new document. In fact, infrastructure as a pressing issue was somewhat downplayed.
Where once it was talked about as the third priority behind healthcare and taxes, President Trump’s opening message did not feel infrastructure important enough to list in the “eight pillars of reform.” Healthcare, tax, immigration, education, welfare, regulation, energy and reductions in federal spending were front and center, but infrastructure appeared in a B-list of “additional priorities” alongside student loan reform and paid parental leave.
Good infrastructure is of course important to an economy’s productive potential. But with the unemployment rate as low as 4.4 percent, construction unemployment lower than in 2007 and interest rates rising, there was little robust argument for an infrastructure stimulus, even if one subscribes to Keynesian economics. In fact, rushing through projects without assessing “bang for the buck” would have allowed a dogs dinner of rent-seeking and undermined long-term productivity through bad project selection, whilst doing nothing to stimulate the economy today.
It’s very welcome then that this budget instead emphasized the need for long-term reform of how infrastructure is “regulated, funded, delivered, and maintained.” In a move that will upset the Senate Democrats, it explicitly repudiated the idea that a huge increase in federal funding is the solution. It recognizes that “underlying incentives, procedures and policies” are more important to allow infrastructure responsive to demand.