Big-Bang Solutions Won’t Fix U.S. Infrastructure

(Bloomberg Opinion) -- By all appearances, talks between President Donald Trump and Democratic leaders on a $2 trillion infrastructure plan have broken down. Their last meeting ended with Trump storming out and the speaker of the House offering prayers for the nation.

Theatrics aside, this might be for the best.

Without doubt, America needs to spend more on public works. But the country’s most pressing need isn’t big new projects. It’s humdrum maintenance work. Harbors need dredging, levees need hardening, aging power grids need repairs and upgrades. By one estimate, America’s existing highways need $420 billion in fixes and its bridges need $123 billion.

A one-time splurge of the kind being discussed is the wrong approach to these recurrent problems. Though it might forestall an imminent crisis, it would also encourage unnecessary projects, raise long-term maintenance costs, diminish the impetus for states to help themselves, and in all likelihood leave many vital-but-unglamorous needs unaddressed. By festooning the projects with federal red tape — such as “Buy American” provisions and restrictive labor rules — it will also ensure that they cost more than they should.

A better solution requires policy-makers to confront some underlying issues.

One reason for the maintenance backlog is that states have many incentives to spend on new projects and few to attend to old ones. Ribbon-cutting ceremonies will reliably get more headlines than replacing decrepit heating and ventilation systems, for instance, or shoring up structures to cope with climate change. States generally don’t need to recognize deferred maintenance as a liability for budgeting purposes, even though it is. And because new projects raise annual maintenance costs in perpetuity while reducing what’s available for current needs, the problem compounds.

The perverse result is that even as spending increases or stays flat relative to GDP, infrastructure can actually deteriorate. Between 2009 and 2017, the U.S. doled out more than $300 billion for roads, thanks to two spending bills and the federal stimulus program. Yet the percentage of roads in poor condition rose from 14% to 20%.

The latest proposed binge — which Democrats say should include, among other things, $200 billion for unspecified “transformative transportation projects” — would only worsen this dynamic, while offering no coherent rationale for its investment decisions and no plausible way to pay for them.

Both parties should walk away from these high-drama talks and turn their attention to practical reforms. Two deserve particular attention.

First, Congress should encourage states to spend more on their own, and to do so more prudently. Offering federal matching funds to state governments that address maintenance backlogs would be a step in the right direction. So would a requirement that states spend a fixed percentage of new federal grants on repairs before embarking on new construction projects. Creating a federal database of deferred maintenance needs — perhaps in a crowd-pleasing “report card” format — might help taxpayers judge if their states are investing wisely.

Next, the U.S. needs to rationalize the federal system of user fees, which are the best way to pay for recurring expenses. Take the Highway Trust Fund: It helps pay for most highway and mass transit needs by taxing gasoline at 18.4 cents per gallon. But the tax wasn’t indexed for inflation and cars are getting more efficient, so it collects less revenue every year. Raising the rate and indexing it to inflation would help keep the fund afloat. Longer-term, a tax on vehicle-miles traveled — charging drivers based on how far they drive — would offer a better way to ensure roads don’t sink into disrepair.

Such workaday reforms aren’t exactly in fashion. They should be. Unlike flashier proposals that command more attention, they’d help to alleviate this perennial headache for good.

Editorials are written by the Bloomberg Opinion editorial board.

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