November 21, 2016 | Issue Brief on Budget and Spending
President-elect Donald Trump has stated that infrastructure will be one of his top priorities upon taking office, and many in Congress have signaled a willingness to act on infrastructure. However, the Trump Administration and Congress should evaluate the needs of the nation and make structurally sound reforms rather than rushing to pass an infrastructure package focused on politically motivated short-term spending.
When crafting an agenda for addressing the nation’s infrastructure, the Trump Administration and Congress should:
Consider real infrastructure needs, not hyperbolic rhetoric. The notion that America’s infrastructure is “crumbling” and in uniquely poor condition is not supported by data. The percentage of the nation’s bridges deemed “structurally deficient” (not necessarily unsafe, but requiring extensive maintenance) has declined annually since 1990 and now sits at under 10 percent, well under half of what it was 25 years ago. Similarly, analyses of highway pavement quality conclude that the nation’s major roads have been steadily improving in quality and are likely in their best shape ever. Our airports and airways safely move more people and goods than those of any other nation. Overall, the U.S. ranks near the top of G-7 nations for infrastructure quality.
This is not to say that improvements are not needed or that they should not be made, but America’s real infrastructure needs are not monolithic and would be best addressed using a targeted approach at local levels of government and by the private sector. Congress recently passed a 5-year, $305 billion highway bill that contained many questionable investments and relied on dubious gimmicks for funding. Another top-down federal spending program created to address a nonexistent crisis will not serve the country’s needs and could prove to be counterproductive.
The Trump Administration and Congress should not:
Pursue massive stimulus spending. Studies reviewing fiscal stimulus packages conclude that their results are a mixed bag at best, and often have negative effects. Promises of job creation from infrastructure spending are rarely fulfilled because federal spending on infrastructure is especially ill suited to create new jobs quickly. Planning, permitting, and review processes bog down infrastructure projects for years before construction can be started. Furthermore, unemployment across the economy is low, especially for the highly skilled construction workers required for infrastructure projects. Indeed, the Associated General Contractors report that more than two-thirds of contractors are having trouble hiring skilled workers. Thus, new spending would do very little to spur employment in the current environment.
Instead, stimulus spending directed by the federal government can be detrimental because it would likely shift resources to politically favored projects and locales rather than those that actually require investment. With national debt nearing $20 trillion, tacking on hundreds of billions of dollars in new debt with little justification would be an affront to fiscal responsibility. The Administration should unequivocally oppose any calls for infrastructure stimulus and instead focus on reversing the government-imposed barriers holding the economy back.
Create new tax expenditures or subsidies. Providing federal tax credits for infrastructure projects has often been proposed as an alternative to federal spending. Supporters tout tax credits as a deficit-neutral way to finance infrastructure projects by making use of private capital. However, infrastructure tax credits would add to the billions already provided in tax expenditures every year and would not proactively solve any real problem. Tax credits for infrastructure projects would require investments to generate cash profits, a stipulation that is not well suited to the basic maintenance and expansion work that is needed. Creating the few kinds of new infrastructure ventures that are profitable in the current environment is already achievable without such credits and more can be spurred by systemic reforms. Indeed, tax subsidies would instead put taxpayers on the hook by incentivizing companies to pursue otherwise inviable projects such as high-speed rail or toll roads to nowhere. Taxpayers should not be made to pay for any more Solyndra-like boondoggles through federal tax subsidies.
Infrastructure tax credits are also highly unlikely to be deficit-neutral. Negating the cost of providing the credits would require that all investments generate a positive rate of return (unlikely in current infrastructure environment) and that all workers engaged in new construction to have been previously unemployed—an optimistic assumption, as discussed previously. Furthermore, if these credits are provided to private firms such as railroads and broadband companies that are already investing billions into their networks, they would simply amount to crony subsidies provided at the expense of taxpayers. The Administration can spur this private investment by focusing on fostering privatization and PPPs through deregulation and the aforementioned funding reforms.
President-elect Trump should not be taken in by hyperbolic rhetoric about the state of the nation’s infrastructure or lured by false promises of stimulus-induced job creation. Instead, he and his Administration should carefully consider the nation’s needs and the federal government’s role in meeting them. The best way for the new President to improve the nation’s infrastructure is to remove the federal government from the equation through deregulation and funding reforms, not to follow his predecessor down the path of more government spending.—Michael Sargent is a Research Associate in the Thomas A. Roe Institute for Economic Policy Studies, of the Institute for Economic Freedom and Opportunity, at The Heritage Foundation.
 U.S. Department of Transportation, Bureau of Transportation Statistics, National Transportation Statistics, Table 1-28: Condition of U.S. Highway Bridges, May 2015, http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_01_28.html (accessed November 15, 2016).
 David T. Hartgen, M. Gregory Fields, and Elizabeth San José, “Are Highways Crumbling? State and U.S. Highway Performance Trends, 1989–2008,” Reason Foundation Policy Study No. 407, February 2013, http://reason.org/files/us_highway_performance_20_year_trends_full_study.pdf (accessed November 18, 2016), and U.S. Department of Transportation, Bureau of Transportation Statistics, National Transportation Statistics, Table 1-27: Condition of U.S. Roadways by Functional System, May 2016, http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_01_27.html (accessed November 15, 2016).
 Michael Sargent, “End of the Runway: Rethinking the Airport Improvement Program and the Federal Role in Airport Funding,” Heritage Foundation Backgrounder, forthcoming, and U.S. Department of Transportation, Bureau of Transportation Statistics, National Transportation Statistics, Table 2-9 U.S. Air Carrier Safety Data, March 2016, http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_02_09.html (accessed November 15, 2016).
 The G-7 consists of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. United States Executive Office of the President, Economic Report of the President, February 2016, p. 259, https://www.whitehouse.gov/sites/default/files/docs/ERP_2016_Book_Complete%20JA.pdf (accessed November 18, 2016).
 Michael Sargent, “Going Nowhere FAST: Highway Bill Exacerbates Major Transportation Funding Problems,” Heritage Foundation Issue Brief No. 4494, December 3, 2015, http://www.heritage.org/research/reports/2015/12/going-nowhere-fast-highway-bill-exacerbates-major-transportation-funding-problems.
 James Sherk, “Opportunity, Parity, Choice: A Labor Agenda for the 112th Congress,” Heritage Foundation Special Report No. 96, July 14, 2011, http://www.heritage.org/research/reports/2011/07/opportunity-parity-choice-a-labor-agenda-for-the-112th-congress.
 James Sherk, “Davis–Bacon Suspension Would Fund 160,000 New Construction Jobs,” Heritage Foundation WebMemo No. 2782, January 27, 2010, http://www.heritage.org/research/reports/2010/01/davis-bacon-suspension-would-fund-160000-new-construction-jobs.
 Chris Edwards, “Infrastructure Investment: A State, Local, and Private Responsibility,” Cato Institute Tax and Budget Bulletin No. 67, January 2013, https://object.cato.org/sites/cato.org/files/pubs/pdf/tbb_067.pdf (accessed November 15, 2016).
 Nicolas D. Loris, “Energy Policy Agenda for the Next Administration and Congress,” Heritage Foundation Backgrounder No. 3048, September 10, 2015, http://www.heritage.org/research/reports/2015/09/energy-policy-agenda-for-the-next-administration-and-congress.
 Ajit Pai, “The FCC and Internet Regulation: A First-Year Report Card,” remarks at The Heritage Foundation, February 26, 2016, https://apps.fcc.gov/edocs_public/attachmatch/DOC-337930A1.pdf (accessed November 18, 2016).
 Michelle Di Ionno and Michael Mandel, “Investment Heroes 2016: Fighting Short-termism,” Progressive Policy Institute, October 2016, http://www.progressivepolicy.org/wp-content/uploads/2016/10/InvestHeroes_2016.pdf (accessed November 18, 2016).
 See U.S. Department of Transportation, Federal Automated Vehicles Policy, December 2016, pp. 71–75, https://www.transportation.gov/sites/dot.gov/files/docs/AV%20policy%20guidance%20PDF.pdf (accessed November 18, 2016).
 See Jason Snead and John-Michael Seibler, “The Dangers of Drones Were Regulated Before the FAA Noticed Them,” Heritage Foundation Issue Brief No. 4534, March 31, 2016, http://www.heritage.org/research/reports/2016/03/the-dangers-of-drones-were-regulated-before-the-faa-noticed-them.
 Paul Winfree et al., Blueprint for Reform: A Comprehensive Policy Agenda for a New Administration in 2017 (Washington: The Heritage Foundation, 2016), http://thf_media.s3.amazonaws.com/2016/BlueprintforReform.pdf.
 Ronald D. Utt, “‘Turn Back’ Transportation to the States,” Heritage Foundation Backgrounder No. 2651, February 6, 2012, http://thf_media.s3.amazonaws.com/2012/pdf/bg2651.pdf.
 Sargent, “End of the Runway.”
 See Robert W. Poole, Jr., “The Urgent Need to Reform the FAA’s Air Traffic Control System,” Heritage Foundation Backgrounder No. 2007, February 20, 2007, http://www.heritage.org/research/reports/2007/02/the-urgent-need-to-reform-the-faas-air-traffic-control-system.
 Antony Davies, Bruce Yandle, Derek Thieme, and Robert Sarvis, “The U.S. Experience With Fiscal Stimulus: A Historical and Statistical Analysis of U.S. Fiscal Stimulus Activity, 1953–2011,” Mercatus Working Paper, April 5, 2012, https://www.mercatus.org/publication/us-experience-fiscal-stimulus (accessed November 18, 2016), and Ronald D. Utt, “More Transportation Spending: False Promises of Prosperity and Job Creation,” Heritage Foundation Backgrounder No. 2121, April 2, 2008, http://www.heritage.org/Research/Reports/2008/04/More-Transportation-Spending-False-Promises-of-Prosperity-and-Job-Creation.
 Associated General Contractors of America, “Two-Thirds of Contractors Have a Hard Time Finding Qualified Craft Workers to Hire Amid Growing Construction Demand, National Survey Finds,” August 31, 2016, https://www.agc.org/news/2016/08/31/two-thirds-contractors-have-hard-time-finding-qualified-craft-workers-hire-amid (accessed November 18, 2016).
 Edward L. Glaeser, “If You Build It…: Myths and Realities about America’s Infrastructure Spending,” City Journal (Summer 2016), http://www.city-journal.org/html/if-you-build-it-14606.html (accessed November 18, 2016).
 Curtis S. Dubay and Michael Sargent, “Congress Should Not Use International Tax Reform to Delay Highway Trust Fund Insolvency,” Heritage Foundation Issue Brief No. 4461, September 11, 2015, http://www.heritage.org/research/reports/2015/09/congress-should-not-use-international-tax-reform-to-delay-highway-trust-fund-insolvency.
 See Build America Bonds, 26 U.S. Code § 54AA, and Wilbur Ross and Peter Navarro, “Trump Versus Clinton on Infrastructure,” October 27, 2016, http://peternavarro.com/sitebuildercontent/sitebuilderfiles/infrastructurereport.pdf (accessed November 18, 2016).
 The eligibility for a TIFIA loan has been watered down considerably to include projects that cost just $10 million. Most projects of this size are unlikely to be of true national significance. Michael Sargent, “Going Nowhere FAST.”
 Norbert J. Michel and John Ligon, “Five Guiding Principles for Housing Finance Policy: A Free-Market Vision,” Heritage Foundation Issue Brief No. 4259, August 11, 2014, http://www.heritage.org/research/reports/2014/08/five-guiding-principles-for-housing-finance-policy-a-free-market-vision.