Tuesday, November 22, 2016

Critical looks at Trump's proposed infrastructure program

The infrastructure plan that President-elect Trump and his team are discussing the outlines of their promised infrastructure plan. So far, it looks like it's shaping up to be to a large extent, a scam.

Krugman warns that it will be weak tea for actual infrastructure but big bucks for crony capitalists (Build He Won’t New York Times 11/21/2016):

To understand what’s going on, it may be helpful to start with what we should be doing. The federal government can indeed borrow very cheaply; meanwhile, we really need to spend money on everything from sewage treatment to transit. The indicated course of action, then, is simple: borrow at those low, low rates, and use the funds raised to fix what needs fixing.

But that’s not what the Trump team is proposing. Instead, it’s calling for huge tax credits: billions of dollars in checks written to private companies that invest in approved projects, which they would end up owning. For example, imagine a private consortium building a toll road for $1 billion. Under the Trump plan, the consortium might borrow $800 million while putting up $200 million in equity — but it would get a tax credit of 82 percent of that sum, so that its actual outlays would only be $36 million. And any future revenue from tolls would go to the people who put up that $36 million.

He also notes that the so-called public-private partnership approach will also skew the program toward projects that offer the highest profit to the investors and against less potentially profitable projects that are nevertheless critical infrastructure.

Jared Bernstein notes that the so-called public-private partnership approach will also skew the program toward projects that offer the highest profit to the investors and against less potentially profitable projects that are nevertheless critical infrastructure in Trump’s Misguided Flirtation with Keynesianism Politico 11/21/2016:

Team Trump has proposed a complicated and misguided infrastructure plan, one that almost surely would not support the projects most needed—including lead-leaching water systems, deteriorating mass transit systems, public schools, and lots of roads and bridges off the beaten path—or provide much in the way of jobs.

Instead of just allocating the needed resources as in the traditional approach, they propose to “offer some $137 billion in tax breaks to private investors who want to finance toll roads, toll bridges, or other projects that generate their own revenue streams.”

Since the plan depends on private investors, it can only fund projects that spin off user fees and are profitable. Rural roads, water systems, and public schools don’t fall into that category. Neither does public transit, which fails on the profitable criterion (it depends on public subsidies).
Bernstein is following the emerging Trump Administration economic policies at his On The Economy blog. Including this recent post: Trump and the Dollar: They’re just not that into each other 11/18/2016.

I hope Democrats follow through on this:


The Democrats need to be willing to make a big fight over issues like this, even when they look sure to lose, in order to establishing a progressive Democratic framing on these issues.

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