The White House released President Trump's infrastructure plan today, which calls for spending $200 billion federal dollars as seed money to stimulate a total of $1.5 trillion on "gleaming new infrastructure." Almost lost in the dozens of pages of documents issued by the administration is that the reason why the federal government supposedly needs a new infrastructure program is that our existing infrastructure is crumbling, and the reason it is crumbling is that politicians would rather spend money on gleaming new projects than on maintaining the old ones.
The White House proposes several new funding programs. The administration could have dedicated one or more of these programs to maintenance and repair of worn-out infrastructure. Instead, all $200 billion can be spent on new projects, and knowing politicians, most of it will be. To make matters worse, funds for most of the programs would be distributed in the form of competitive grants, but experience has proven that competitive grants are highly politicized.
"In the past, the Federal Government politically allocated funds for projects, leading to waste, mismanagement, and misplaced priorities," agrees White House economic advisor Gary Cohn. The administration's solution, Cohn continues, is to "stimulate State, local, and private investment." In other words, instead of most decisions being made by Washington politicians, they will be made by local politicians. But if local politicians were any better at maintaining infrastructure, then we wouldn't have tens of thousands of local bridges classed as "structurally deficient" and the New York, Washington, Boston, and other subway systems wouldn't be falling apart.
The White House says that the federal funds it proposes to allocate to infrastructure may be spent on either new construction or maintenance, which is an advantage over some existing federal programs that can only be spent on new construction. But just because they can be spent on maintenance, doesn't mean they will be.
The New York subway system is falling apart because the city doesn't have enough money to maintain it. Yet it has enough money to spend $10 billion on a tunnel between Penn Station and Grand Central Terminal for Long Island Railroad trains, which the New York Times has called "the most expensive subway in the world." It also has enough money to build the eight-mile Second Avenue subway, which at $2.1 billion a mile must be the second-most expensive subway in the world.
The Washington Metro system is falling apart because the region is short $10 billion to maintain it. Yet Virginia was able to find enough money to build the Silver Line and Maryland to build the Purple Line; the costs of these two projects would have been enough to fix most of the existing Metro system.
The Boston rail transit network is also falling apart because the region can't find the $470 million a year needed to maintain it. Yet is was able to find $2.3 billion to build a 4.3-mile light-rail extension. In all of these cases, local politicians decided to spend money on new projects even though 50 to 80 percent of the money in each case could have been spent on maintenance.
The truth is that our infrastructure isn't in as bad shape as some claim. State highways are in good condition; local roads less so. Rail freight systems are in good condition; rail transit systems less so. In general, infrastructure paid for out of user fees are in good condition; infrastructure paid for out of tax dollars less so.
This means there is a simple way to take the politics out of infrastructure and make sure that managers maintain it: fund it out of user fees, not tax dollars. Managers of user-fee-funded infrastructure tend to do the best job of maintenance because they know users will stop paying to use their facility if it becomes unreliable.
To its credit, the White House program does make some token movements in the direction of more user fees. For example, it would allow states to charge tolls for all interstate highway, something that is now, for the most part, prescribed by Congressional edict. But even this depends on state politicians asking their constituents to pay tolls for something they have been getting for "free," which is unlikely to happen.
In the end, however, the major impact of the Trump plan is to drop $200 billion new dollars onto state and local governments on top of existing federal spending programs. This will merely provide more insulation for state and local politicians from having to ask users to pay for the infrastructure they build. The result will be that most, if not all, of that $200 billion will go to build new infrastructure that we probably don't need and can't afford to maintain rather than maintaining what we have.