UPDATE: Cutting a deal on infrastructure would benefit everybody
By Peter Morici
The money must be found, and obstacles to growth must be removed
In his State of the Union, President Donald Trump laid down the gauntlet for Democrats, offering to work for bipartisan deals on infrastructure, immigration and other issues. The nation's sagging roads and bridges offer an opportunity to reach across the aisle and prove he can lead the nation in common purpose.
Most everyone agrees rebuilding would boost the economy further by increasing demand for American-made materials and capital equipment, but it would also create noticeable efficiencies for national supply chains supporting the broader private economy.
Through 2025, the American Society of Civil Engineers estimates inefficiencies imposed by outdated facilities will cost $3.9 trillion in lost output (https://www.infrastructurereportcard.org/the-impact/failure-to-act-report/) -- not to mention the terrible frustrations we endure commuting to work, running businesses, or just visiting family at the holidays.
Big cities would directly benefit a lot -- something Democrats like Sen. Chuck Schumer should love -- and the jobs created in smaller municipalities and rural communities would be substantial -- a direct boost to the Republican base.
Sadly, political stars are as much crossed as aligned. Finding the money and the penchant for the courts to arrogate policy-making authority from democratically elected legislatures has frustrated political and business leaders of all stripes.
Federal and state budgets hardly have the $1.5 trillion that Trump says is needed (https://www.whitehouse.gov/briefings-statements/president-donald-j-trumps-state-union-address/)to catch up the nation's infrastructure investment. Initially, several hundred billion was to be found by taxing U.S. corporate profits parked abroad, but that money was used to help lower the top corporate tax rate from 35% to 21%.
Some projects could be financed by raising dedicated taxes -- most notably the gas tax to fix roads and bridges -- but many in Congress and many motorists fiercely opposes that solution. Too often, highway funds are spent wastefully and on green projects such as bike paths.
Trump should seek consensus with unions to streamline work rules (https://www.mercatus.org/system/files/Miller-How-to-Fix-Roads-MOP.pdf) so that the Davis-Bacon Act, which essentially requires union workers on federally assisted projects, results in fewer workers merely leaning on shovels. In exchange, he offers more dollars for the roads and genuinely productive jobs.
A bike and tire excise tax to finance cycling projects makes sense too.
The administration is pushing hard for private financing but state experiments with private investors have often resulted in exorbitant utility bills (https://www.nytimes.com/2016/12/24/business/dealbook/private-equity-water.html), unreliable ambulance services (https://www.nytimes.com/2016/06/26/business/dealbook/when-you-dial-911-and-wall-street-answers.html)and bankrupt toll roads (https://www.wsj.com/articles/indiana-toll-road-exits-bankruptcy-protection-1432907793)-- or at least roads too expensive (https://www.wsj.com/articles/frugal-motorists-test-private-toll-roads-1458379807)for many commuters.
The basic problem is privatized facilities usually become unregulated monopolies, and private equity often loads them up with debt to create big paydays for Wall Street financial engineers.
If the administration gets its way on privatizing the nation's air-traffic-control system (https://www.nytimes.com/2017/06/05/us/politics/trump-privatize-air-traffic-control.html), for example, then the customers -- which were not adequately represented by local governments in the situations noted above -- must be at the table. The airlines -- represented by their chief financial officers -- along with federal and local officials, should have to approve financial structures, fees and standards of performance in any deal that hands the air-traffic-control system to private investors.
Finally, environmental activists have abused the courts to impose controls contrary to national and state policies established by Congress and state legislatures. For example, the Millennium Pipeline Co. (https://www.nytimes.com/2017/11/18/business/trump-wants-more-big-infrastructure-projects-the-obstacles-can-be-big-too.html)proposed to build a 7.8-mile line to an electric utility in New York that local groups managed to get a federal judge to delay on grounds that natural-gas use added to greenhouse emissions and encouraged fracking.
Such environmentalists' tactics and judicial activism are ill-conceived and mock democracy -- these amount to little more than irrational guerilla warfare to subvert majority rule.
Environmentalists should consider that gas-fired plants generally displace coal-fired generators (https://www.wsj.com/articles/power-plants-bloom-even-as-electricity-prices-wilt-1514457002)and reduce CO2 emissions. If they think the country should cap electrical generation altogether or end fracking, then Congress is the place to make that law.
It's high time that Congress looked at how judicial restraint is enforced (https://www.wsj.com/articles/two-states-consider-letting-lawmakers-overrule-certain-court-rulings-1484395201). It seems the courts are the only branch of government that can grab policy-making authority without any oversight and with impunity.
Articulating those issues -- not by tweeting but by engaging Democratic senators and governors -- is the only way for Trump to deliver on his promise to rebuild America.
If the president is the deal maker he offers himself to be, infrastructure offers his time to shine.
-Peter Morici; 415-439-6400; AskNewswires@dowjones.com
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02-05-18 0604ETCopyright (c) 2018 Dow Jones & Company, Inc.