Trump official admits Americans will have to pay for his infrastructure projects

n his first address before Congress last week, President Trump promised that during his presidency, “Crumbling infrastructure will be replaced with new roads, bridges, tunnels, airports, and railways gleaming across our very, very beautiful land.”

“To launch our national rebuilding, I will be asking Congress to approve legislation that produces a $1 trillion investment in infrastructure of the United States — financed through both public and private capital — creating millions of new jobs,” he added.

What he didn’t mention is that under the current design of his proposal, Americans will be directly paying for these projects. But that was later made clear by his Transportation Secretary.

In an interview with Fox News’s Sean Hannity, Elaine Chao explained that the projects will necessitate higher tolls and fees levied on the people who use them.

“The federal government cannot assume the cost for all of it,” she said. Therefore, she added, “Public private partnerships are a very important part of a new way of financing our roads and bridges.”

Any private firm that invests in infrastructure, however, will only do so if there’s a source of profit — the ability to charge people for using it — even if the government helps with financing.

When Hannity asked Chao directly if this will mean new tolls on roads and bridges, she responded “that is certainly one example of how that would work.”

“I have to say that there are some people who may not support toll roads, but we have to take a look at all of these financing mechanisms,” she said, “because once again, the needs of our infrastructure are so great that the federal government cannot and should not be the only source of funding to repair our bridges, our roads, and our energy grids.”

While Trump hasn’t put forward any infrastructure proposals or legislation since assuming office, his campaign did release a paper outlining how to make his pledges to upgrade the country’s roads, bridges, and energy grids into reality. The plan would have the government give private investors tax credits to fund projects, and those investors would then raise the rest of the money they need and recoup all the costs through profits on the other end.

That would mean either new tolls where they didn’t exist before to use these public goods or higher ones where they already exist. Without any safeguards in place, private firms can jack up rates as high as they need. As one example, Chicago privatized its parking meters in 2008 and rates subsequently more than doubled within five years.

That means money funneled from Americans into the pockets of the kinds of firms that can make these investments, such as investment banks or private equity.

This kind of plan also means that some critical projects wouldn’t be feasible and would therefore miss out on upgrades. School buildings and facilities, rail projects, levees, or water systems in places where residents can’t be squeezed for higher rates would all be left out. Even roads and bridges in more rural areas that have less traffic might not get any attention.

It’s unlikely that this kind of plan can generate the economic boost that Trump has promised from investing in infrastructure. The campaign paper argued the government’s cost would be fully covered by new taxes generated by businesses and newly employed workers paying more. But that would require firms undertaking new projects that wouldn’t have happened without the government funding, with labor provided by previously unemployed workers. What’s more likely is that projects that are already underway or feasible will simply move forward with federal tax credits.

The other model for infrastructure upgrades is for federal or state governments to spend money directly — for the federal government, taking advantage of incredibly low interest rates to borrow funds — on the most critical needs. This spending has fallen off a cliff over the last decade. That’s the kind of $1 trillion-plan Democratic Senators introduced in January.


This was reposted from Think Progress.