How Will the U.S. Pay for Infrastructure?

(Bloomberg Businessweek) -- House Democrats have kicked off their push for a major infrastructure package this year to upgrade U.S. roads, bridges, and other public works. One sticking point: There’s no consensus on how to pay for it. Democrats are promising significant new federal spending, unlike the proposal the administration of President Donald Trump released last year under D.J. Gribbin, who served as the very first special assistant to the president for infrastructure policy. Democrats said Gribbin’s plan relied too much on states, localities, and the private sector for the $1.5 trillion in spending that Trump promised. Ultimately, that proposal didn't advance in Congress. Gribbin left the White House last April and is now a consultant and nonresident senior fellow at the Brookings Institution. He spoke with Bloomberg Businessweek about what progress we can expect to see on infrastructure as Congress begins its debate.
 
President Trump campaigned on a promise to rebuild crumbling infrastructure, but he started with trying to repeal Obamacare and cutting taxes. Would there be more progress today if he’d started with infrastructure?

I don’t think so. It wasn’t like there was a deal sitting out there that was baked and could have moved earlier. You didn’t have bipartisan support for a plan. You had bipartisan support for a concept. The concept of, “Yes, we should do more.” Should it be better? Everyone agrees. And then as soon as you start getting into, “How do we make it better,” people balk and go, “Wait a minute. Why can’t someone else just cover the cost of this?”
 
What was the biggest challenge you faced in crafting a plan and trying to get it enacted?

There were two big challenges, one a matter of logistics, one a matter of policy. The first was just the sheer number of people involved. We literally had hundreds of people involved in providing input and expressing opinions. The policy one: The biggest challenge there was this misperception that infrastructure is paid for by someone else and the feeling that the federal government could pay for infrastructure without that imposing a cost on state and local taxpayers.
 
Some pessimists say there won’t be an infrastructure bill without some kind of agreement on how to pay for it—and definitely not unless the president personally pushes for the new revenue.

I would argue that that is true, and that you would also need leadership on both sides of the Capitol as well. It’s an issue that’s complicated enough that you're going to have to have broad bipartisan leadership to be successful.
 
What about raising the gas tax?

There are two needs that need to be met. One is there is a gap in terms of funding for the Highway Trust Fund that needs to be addressed. And the second is there needs to be a rethinking of the federal government's role now that the interstate system is complete. To have success, you need to have both of those elements. Just ticking up a little bit the amount of federal revenue that flows to states will be helpful, but that won’t come even close to solving the problem.
 
Democratic Congressman Peter DeFazio of Oregon is the new chairman of the House Transportation and Infrastructure Committee. He often invokes your name as the architect of a plan with no “real money.” How do you respond?

Given that we have a system that's three-quarters funded by nonfederal revenue, I don't see why more nonfederal revenue is not “real money.” To define “real money” as being just money that comes through his committee is—I mean, I can see from his standpoint why that would be politically appealing, but it's not how the system currently works.
 
The plan had $200 billion in federal funding over a decade, but mostly in incentives for states, cities, and the private sector to spend the balance of $1.5 trillion in promised investment. Critics said that wasn’t nearly enough federal money.

The mistake is talking about federal funds. It doesn't really matter whether the funds are federal, state, or local. What matters is that there's increased investment in infrastructure. And so, what we were trying to do is increase investment overall, being somewhat agnostic as to where that investment is coming from. The most efficacious way to do that is to incentivize state and local governments to raise money and keep it locally, as opposed to send money to Washington and have that money sent back to them.
 
How did you address that?

Virtually all decisions in infrastructure are made by state and local governments. And the federal government plays a funding role and a permitting role, but doesn't make decisions in terms of what should be built, how it should be built, where it should be built, who should build it. The federal government is still operating under a 1956 model that was designed to build the interstates; even though the interstates are complete, we’re still operating under a very old model. And so part of the challenge was helping people understand the appropriate role for the federal government when it comes to infrastructure in the 21st century.
 
Some lawmakers say that if there's no infrastructure bill passed—or on its way to being passed—by the August recess this year, it's not going to happen, because 2020 presidential politics will kick in. Do you agree?

I think that was the case before this year started. [These] analyses are complicated by the fact that we shut down the government early on and sort of started with partisan acrimony. And at Christmas, Senator [Chuck] Schumer [D-N.Y. and minority leader] said that an infrastructure bill needs to also address climate change, and that's been repeated in the Green New Deal. Infrastructure’s really hard to do on its own. I don’t know how you have agreement on infrastructure and climate change.

To contact the editor responsible for this story: Dimitra Kessenides at dkessenides1@bloomberg.net

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