Why Donald Trump's $1 Trillion Infrastructure "Plan" Actually Matters
Road infrastructure ain't sexy, but it shapes nearly every aspect of your life.
Regardless of your stance on political issues—and the now constant rancor surrounding them—you must admit that a changing of the guard such as the one that will transpire this week is an opportunity to tackle old problems with renewed vigor. Although much of America's road infrastructure has fallen into disrepair over the past several decades, the new administration promises $1 trillion in spending on that front.
Speculating on how policymakers will live up to their promises (or not) is akin to crystal ball gazing. But outside the intense spotlight of top-of-pyramid political theatrics, there's plenty of information to be gleaned about how our roads and highways are likely to shape up in the coming years. With more people driving more motor vehicles and more trucks transporting more goods, it's as important an issue as ever. So here's a top-down look at the big picture.
In one of his first promises as president-elect, Donald J. Trump vowed to institute a $1 trillion program to rebuild America's roads, bridges and airports. Specific details are scarce this early in the game, but the administration's transition team laid out a funding philosophy in which tax incentives would attract contractors and investors to back job-creating construction projects. Wilbur Ross and Peter Navarro, the Trump policy advisers who wrote the plan, compared their approach to incentives used in real estate development.
Critics like Ronald Klain, a former Obama administration official, deride the program as a "massive corporate welfare plan for contractors." But it's important to note that in her breeze-though Senate confirmation hearing, Elaine Chao, the incoming transportation secretary, was clear that private investment wasn't the only tool the administration would need to rebuild and upgrade ailing infrastructure.
"We look forward to working with you to explore all the options, and to create a mix of practical solutions—both public and private—that provide the greatest cost-benefit to the public," Chao said to her interlocutors at the hearing last week.
Acknowledging the likelihood that federal spending would also be part of Trump's infrastructure plan, Chao also acceded to the poor state of the Highway Trust Fund—the current funding mechanism for federal highway projects. But she offered little in the way of specifics when it came to how the overburdened HTF would be nursed back to health without resorting to General Fund transfers, as has been been the case over most of the last decade.
That said, it's too soon to say how things will play out. Trump has promised action in the infrastructure corner within his first 100 days in office, but movement on infrastructure issues is more closely tied to Congressional and state funding. For her part, Chao presents as a promising infrastructure policy leader, having served as President George W. Bush's labor secretary and as deputy secretary of transportation and director of the Peace Corps under the elder President Bush.
The Crumbling Highway
To understand the severity of America's highway troubles requires a bit of time traveling. After the Great Recession hit, back in 2008, Americans drove fewer miles and used less fuel. The federal Highway Trust Fund—established by the Federal Aid Highway Act of 1956 to fund road construction and maintenance—is funded by an 18.4 cent-per-gallon tax on gasoline and a 24.4 cent-per-gallon tax on diesel. The plunge in travel and consumption numbers meant less revenue was coming in to pay for road construction.
To give you an idea of the proportions of the hit the HTF took, here are some numbers:
• 2007: 254 million registered motor vehicles traveled about 3 million miles, consuming roughly 176 billion gallons of fuel.
• 2009: At the recession's nadir, 254 million registered vehicles traveled 2.9 million miles, consuming only 168 billion gallons of fuel.
• 2014: Having trended back toward economic recovery, vehicle registrations had surpassed 260 million and vehicle travel crept back up to 3 million miles. But thanks to more efficient vehicles, fuel consumption was at 173 billion gallons.
As increased fuel efficiency and decreased motor vehicle took their toll on HTF revenue, economic recovery spurred more active use of urban roads and highways connecting commerce hubs. Simply put, the physical effects of heavy use outstripped the money coming in to pay to fix and improve roadways.
"Between 2014 and 2016, vehicle travel around the country has grown about 3 percent a year, and a lot of that came from economic growth, pent-up demand and lower fuel costs," Rocky Moretti, the policy director of a transportation research organization called TRIP, said in an interview. "Additional mobility is a positive sign; it reflects economic activity. But it puts a lot of stress on aging infrastructure, which has created a lot more congestion."
Joung Lee, policy director for the American Association of State Highway and Transportation Officials, said in an interview that although infrastructure development is needed across the country, regions buzzing with new development and urban zones criss-crossed with aging roadways were most in need of attention.
"On the urban side, you're looking at the impact of congestion on economic growth, and on the rural side, you're looking at the cross-continental connectivity that's so crucial to commerce," he said.
Alms for the Highway Trust Fund
It's no secret that the federal Highway Trust Fund is in rough shape. The reason for its dismal condition is simple: the HTF is funded by a fuel usage tax that hasn't been raised since 1993, thereby exposing it to the ravages of more than two decades of inflation.
According to the Congressional Budget Office, the federal gasoline tax has been insufficient to pay for federal highway expenditures since 2008, when the economy took that big nose dive. With economic hardship came a reduction in vehicle miles traveled, which in turn slashed revenue that would otherwise have been bound for the HTF. Vehicle miles traveled have increased since the downturn, but improved fleet efficiency and expanded use of alternative fuels have combined forces with a static tax rate and inflation to keep the HTF in the poorhouse.
Here's what CBO says about the HTF's dire straits:
Since 2008, lawmakers have transferred about $143 billion from other sources to maintain a positive balance in the trust fund. Second, adjusted for changes in construction costs, total federal spending on highways buys less now than at any time since the early 1990s.
The problem is not getting better. Lee said that last year, the federal government spent about $54 billion on highway projects, while the HTF brought in only about $38 billion in revenue. Unfortunately, raising the gas tax is a political issue that few elected officials want to touch.
"Consensus at this point is that there's no shortage of ways to put money into the HTF," Lee said, explaining that increased state-level gas tax, freight fees, per-barrel fees on imported oil, a percentage-based state sales tax and mileage-based user fees are some of the many options being explored. "The question is, what's possible politically? As long as we're stuck in that mode, it's difficult to come up with a solution."
State, federal and regional agencies are looking for ways to fix America's highway funding woes. Congress passed legislation at the end of last year — the FAST Act — aimed at studying new new models of highway construction and financing, honing in on highway freight corridors, high occupancy vehicle lanes and the possibility of expanding toll facilities on improved highways. Several states and regions — California, Colorado, Florida, Indiana, Minnesota, Nevada, Oregon, Texas, Washington, New York City and states along the I-95 corridor — are actively looking into rolling out mileage-based user fees, which would shift focus away from ever-shifting gasoline consumption. At the state level, many legislatures — aware that the congestion and roadway safety bucks stop with them — are considering raising their own fuel taxes to stay ahead of the curve on highway construction and maintenance costs.
The Trump administration's plan to involve more private funding in infrastructure development is also on the table, although typically, private investment has been reserved for larger projects. Lee said public-private partnerships, known as P3s in infrastructurist jargon, often work well in high-density development corridors, where investors can help spread risk and are more likely to see a healthy return on their investments.
"Though not a silver bullet, Congress will likely be interested in continuing to explore ways to involve the private sector in increasing infrastructure investment, whether in an infrastructure package or other legislative initiatives," Jeff Urbanchuk, a spokesman for Rep. Bill Shuster (R-Pa.), chair of the House transportation committee, said in an email. "Cutting red tape has always been one of the Chairman’s priorities in bills to address our infrastructure needs, and he continues to look for ways to streamline the project delivery process."
The FAST Act includes provisions to reduce the amount of environmental review paperwork that can hold up the construction process, but lawmakers and other stakeholders have called for even more simplified regulation expected to reduce the cost and timeline of future projects. Chris Ward, an AECOM executive who served as executive director of the Port Authority of New York and New Jersey, said in an op-ed last month that building a new highway in the face of environmental challenges could take a decade or two.
Tollbooth Willie's Revenge
As Rep. Shuster points out, there's no magic wand fix to the incredibly complicated problem of infrastructure improvements. Private investment into some projects frees up public money for other ones, but investors are looking for a different type of return on their investments than the sort of public good return sought by government agencies. Aubrey Lane, Virginia's transportation secretary, pointed out in an op-ed last month that private investors are in the game to make money, and that financial misstep or misfortune can spell increased financial burden for taxpayers.
That said, the addition of toll facilities to an ever-growing list of funding solutions seems to be a solid approach that — unlike the anachronistic fuel tax currently in use – could be a way to charge roadway users by actual use.
"Tolling is an important tool in the funding toolbox of options for clearing a massive backlog in highway infrastructure funding," Patrick Jones, executive director of the International Bridge, Tunnel and Turnpike Association, said in an email. "It isn’t the only option, and it’s not the right approach for every project, but paying for projects through tolling or other forms of user financing means public agencies and their private partners can move farther, faster, to deliver safe, reliable mobility that businesses and individual drivers need, expect, and deserve."
Neither tolls nor higher fuel taxes will appeal to motorists who may already be running tight budgets. A look at the historical context of highway development, however, can be helpful in understanding how every road, at some point or other, costs money. Peter Norton, a transportation history and policy expert from the University of Virginia, said in a recent essay that when the details of the Interstate highway system were being hammered out in a series of political battles in the mid-Fifties, President Dwight Eisenhower was in favor of using tolls to pay for roads while keeping taxes low. Thus interstate highways couldIIII have been toll roads but for the successful political maneuvers of anti-toll interests.
But times have changed. In the Fifties, most of the finned barges on the market realized similarly poor fuel economy numbers (meaning more money for the HTF), and manned toll booths could create real congestion. Today, ever-increasing fuel efficiency, hybrid and electric powertrains and a more public transportation-oriented urban population have brought roadway tolling back into the limelight outside of the mid-Atlantic region, where such facilities predated the interstate highway system. In many places, modern RFID cashless tolling allows motorists to zip through toll plazas without even slowing down.
Congestion pricing is another modern development that allows toll lane installation along existing freeways. In this scenario — used extensively in Northern Virginia, just outside Washington, D.C. — several lanes are set aside for faster-moving traffic, but at a premium. There are also "free" lanes that are not subject to tolling.
"Congestion pricing means everyone wins," Jones said. "When minutes matter, you use the tolled lane. When your schedule is a bit more flexible, you stay on the regular road, which isn’t a “free” road, since you’re still paying for it through your taxes. But you still reach your destination sooner than you would have without the managed lane nearby."
There is much work to be done where road and bridge infrastructure are concerned. Like it or not, America's transportation system is still very car-centric, and many of its goods and services move over paved roadways as well. According to a recent report by the Texas A&M Transportation Institute, the average amount of fuel wasted in urban congestion across the U.S. in 2014 was about 6.6 million gallons. In New York City, America's most populous city, that number stood at nearly 297 million gallons, and in Los Angeles, also known for its horrible gridlock, 195 million gallons of excess fuel were consumed.
That extra fuel might put a few dollars into the tin cup of the Highway Trust Fund, but it also impacts the lives of millions of motorists in terms of time lost, money spent and air quality degraded. Think of all the time wasted, money lost and sanity squandered as you sit in a car or on a bus among thousands of other cars and buses on a broken roadway, breathing in fumes as minutes and hours of your life slip away. When you think of it that way, infrastructure and how it's funded — however un-sexy — take on new importance.