Category: Finance

» Donald Trump wants to make a big splash by supporting a huge new infrastructure bill. But we don’t want to end up with the construction of massive new highways from coast to coast.

After six years of proposals for significant new transportation funding being proposed by President Obama, and then being shot down immediately by intransigent Republican Congresspeople, infrastructure is suddenly the talk of Washington. Both Donald Trump and Hillary Clinton proposed major infrastructure packages during the campaign, and the Trump transition team includes a proposal for transportation investment as one of its top priorities. As I’ll describe below, this proposal would likely primarily fund transportation projects that exacerbate climate change and encourage exurban sprawl.

The nascent administration has offered few details other than a 10-page fact sheet released by a consultant in October. This proposal would release $137 billion in tax credits over ten years to private companies spending on infrastructure; in exchange, those companies would be expected to raise $167 billion in total equity, supporting a potential $1 trillion in total new construction, amounting to the largest U.S. infrastructure binge since the construction of the Interstate Highway System. In contrast to the vast majority of public works in the U.S. today, projects would have to raise user fees to pay back initial loans and corporate equity contributions.

This proposal, though not fully developed, has been widely critiqued.

Most importantly, perhaps, Ben Fried contends in Streetsblog that supporting any Trump Administration proposal is suspect; “There is no moral basis for collaboration on Trump’s infrastructure agenda—because enabling any aspect of the Trump policy platform will grease the skids for enacting the entire Trump worldview. No piece of infrastructure is worth that risk.” Whatever the benefits of new infrastructure, Fried suggests, the Trump Administration is so problematic that we must fight any of its initiatives.

From a financial perspective, the tax credits would do nothing to support projects that don’t make money, meaning all hope is lost for fixing Flint’s lead-in-water problem through this legislation, for example. The plan would provide automatic 10 percent pretax profits to contractors, just as a matter of general policy. Credits could be distributed even to projects that were already planned, meaning that there is no guarantee that the investment would actually increase investment or produce new jobs. Meanwhile, the proposal provides no source to actually pay for those tax credits, meaning they could be “weaponized” to “justify future cuts in health care, education and social programs,” as Ronald Klein has put it.

Writing in The New York Times, Paul Krugman focuses on the proposal’s secondary effect, which would be shifting infrastructure from public to private hands. This is “not a plan to borrow $1 trillion and spend it on much-needed projects,” he writes. “It is, instead, supposed to involve having private investors do the work both of raising money and building the projects—with the aid of a huge tax credit that gives them back 82 percent of the equity they put in.” Krugman’s point is that the proposed tax credits are, in reality, giveaways to companies that will then own and operate infrastructure permanently at little to no costs to themselves. The plan, in this way, is privatizing future public assets.

These are, undoubtedly, important concerns that put into question not only Mr. Trump’s motivations on the development of this infrastructure bill, but also his policy agenda on several fronts.

Beyond the financial mechanisms and the question of whether to invest in public or private construction, though, the issue of what a new infrastructure bill might fund has been little mentioned in the press. And the reality is that, for the future of the transportation system, the types of projects funded may ultimately have more of an impact than the way they’re funded.

At the heart of the infrastructure proposal is the requirement that new projects built should be self-funding in some form. All the loans that government equity-through-tax-credits are supposed to support will have to be paid back through some sort of user fee. What consequence will this have?

For one, as noted above, many of the projects funded will probably have already been planned, meaning that government funding will replace private-sector investments that would have occurred anyway. Two, this package will massively preference projects that are designed to be profitable—not projects that may serve the greater good. In such, it wouldn’t be particularly surprising for the primary beneficiaries of this legislation to be oil and gas pipelines.

In the transportation space, as many have noted, profit-motivated investments will mean, overwhelmingly, toll highways. Given that the vast majority of transit lines—perhaps all of them in the U.S.—are deficitary, and the fact that it is inconceivable to imagine developing pedestrian and biking projects that charge customers to use them, a transportation investment structured on these lines seems likely to be very auto-oriented, at least compared to current federal transportation expenditures, which are distributed 1-to-4 transit-to-highways.

But I’ll take a step further. What if, somehow, the infrastructure bill were focused on transportation and required that investments followed a similar modal ratio as they do today? If the bill guaranteed $200 billion in transit investments and $800 billion in highway spending over ten years,* would it be worth it?

I am skeptical. We must remember that the primary goal of transit advocates should not be to simply get projects built. It should be to create more livable, less carbon-intensive cities by shifting the country’s transportation system away from personal automobiles.

At the heart of the issue is that fact that new transit infrastructure is typically only moderately successful in encouraging people to get out of their cars, while new highway infrastructure is usually very good at getting people into their cars. In other words, the net effect of a tripling of the nation’s expenditures on transportation—even if those expenditures were spent in similar proportion as today—would be not a reaffirming of the status quo; it would represent a dramatic incentive to get many more people driving.

Why am I convinced that a massive increase in overall transportation expenditures would do more than just reinforce existing trends? For one, the reality is that exurban or interurban highways are simply much cheaper to build than urban transit. Take Texas’ SH 130, a four-lane toll highway that was extended by 40 miles in 2012 for a cost of a bit more than $1.3 billion.—that’s about $33 million a mile. For comparison, Denver’s 12.1-mile West light rail line, which opened in 2013, cost $707 million, or about $60 million a mile. Minneapolis’ 9.5-mile Green Line light rail, which opened in 2014, cost $957 million, or about $100 million a mile.

In other words, for the same transportation dollar, an investment in new highways can produce dozens of miles of multi-lane, grade-separated highways in rural areas while an investment in urban transit can mean relatively little new capacity.

Two, given the fact that a Trump transportation bill requires projects to contribute user fees, it seems very unlikely to contribute to the reconstruction of the Interstate System, since political and public support for the tolling of existing roads is basically nonexistent. This means funds will go to new projects, not renovations.

What would be the direct consequences of thousands of new miles of grade-separated highways? Massive incentives for increased sprawling, unwalkable development, destruction of greenfield and agricultural land, and disincentives for investment in urban infill. Significantly more vehicular travel generated through induced demand. Massive new carbon emissions.

What would be the direct consequences of hundreds of new miles of new transit investments, funded through the same mechanisms? Potentially significant additional transit ridership—but maybe not; what is more likely in most cases is a redirection of riders from buses to trains. New transit-oriented development might surround many new lines, but given that most public investment is being directed to suburban highways, and the simultaneous political resistance to increased density, there likely wouldn’t be much new development from a relative perspective.**

Where does this leave us? For the good of our environment and for the good of our cities, doing nothing would likely be better than supporting this infrastructure package—even if we ignore the potentially disastrous political and financial concerns about this infrastructure bill noted by others. More transit investment simply isn’t worth it in the context of far more massive new highway spending that would overwhelm any potential benefits being derived from transit projects. Indeed, no new investment of any sort would likely encourage better use of existing infrastructure, thereby improving the performance of existing transit lines and supporting infill development rather than greenfield construction.

Ironically, losing out on the massive stream of potential federal funding doesn’t mean that new transit projects have to grind to a halt. Indeed, the results of local referenda this election reinforced the notion that when presented with a generous transit plan, voters in many cities will jump at the opportunity to tax themselves to pay for it. Indeed, the large majorities that came out to support better transit—and pay for it—in Atlanta, the Bay Area, Indianapolis, Los Angeles, Raleigh, and Seattle*** were voting for more livable, less car-dominated communities. Even though each of those plans rely on federal funding to support full implementation, even without support from Washington, much of what they propose can be completed.

Transit agencies will make the reasonable argument that they need funding to bring their systems back to a state of good repair. But this infrastructure bill won’t be of much use to address that problem, since it focuses on expansion projects. And new highways that suck ridership out of the transit system won’t help much, either.

Suggesting that new infrastructure funding isn’t worth it given what will be funded comes close to heretical in a political environment in which such investment has suddenly been identified by politicians on both the right and left as the solution for whatever it is that supposedly ails America. But we need to think long and hard about what kind of society we want before spending billions of dollars for new transportation projects all over the place.

* This would represent roughly a tripling of federal transportation spending, since the U.S. Department of Transportation currently distributes about $50 billion in surface transportation funding annually.
** Of course there are many benefits of investing in public transit projects, and many transit projects will in fact result in many additional riders. But maximizing the benefits of new transit projects—particularly in a short time horizon—is difficult because of the realities of land use.
*** In Atlanta, Los Angeles, and the Bay Area, more than 70 percents of voters expressed themselves in favor of the referenda.

» The Republican Party, despite its claims about the importance of infrastructure—and big promises from Donald Trump—pushes a more limited federal role. Democrats, in line with Hillary Clinton, advocate large new investments.

During an election year where trade and terrorism have taken center stage, it’s hardly surprising issues related to transportation have played a limited role in the national discussion about how to move the U.S. forward. Some have noted that urban policy has largely been ignored, despite the fact that many American cities continue to face considerable problems related to public investment, poverty, and economic growth.

Yet the reality is that the Democratic and Republican parties and their respective candidates for the presidency, Hillary Clinton and Donald Trump, have laid out positions on the future of the nation’s transportation system through party platforms, candidate issue memos, and public statements. The approval of the two parties’ platforms over the past two weeks motivated me to provide a detailed summary of the differences between the platforms.

On issues related to the funding, mass transit, biking, and the environment, the two parties have staked out dramatically different views about how they envision the future of the nation’s transportation system. Democrats are proposing an expansive increase in federal support for transportation investment, with a focus on building access to opportunity, bolstering access to non-automobile modes, reducing the impacts of climate change, and maintaining the role of unions.

Republicans, on the other hand, propose no increase in federal spending (though Mr. Trump may disagree), an elimination of the federal role in funding non-automotive transportation, an emphasis on pollution-spewing modes and energy sources, and a reduction in the role of unions.

A summary of the proposals

	Democratic Party and Hillary Clinton	Republican Party and Donald Trump
Federal role in transportation	Expand to emphasize multimodalism; encourage connections between transportation, cities, climate, and social equity	Reduce to only encompass highways (GOP); or fund all types of transportation (Trump)
Funding for transportation	Roughly double overall spending using business tax reform, create infrastructure bank	Do not adjust funding to inflation (GOP); or expand massively through unknown means (Trump)
Transit and intercity rail	Increase support to build social equity and combat climate change	Eliminate federal role (GOP); or improve (Trump)
Non-motorized modes	Improve funding for biking and walking projects	Eliminate federal role
Climate change	Orient transportation investments toward responding to climate change	Do nothing to address climate change; invest in coal
Project management	Support union requirements	Eliminate union requirements

Here are the resources for your own evaluation:

• Democratic platform
• Republican platform
• Hillary Clinton’s infrastructure plan (Update, 28 July: This fact sheet, linked on the previous page, provides many of the details and text that are noted in this post)
• Donald Trump has not provided any details about his infrastructure plans or policy.

Before I delve into the details of the differences between the two parties’ policy proposals, it is vital to emphasize that party platforms and the positions of presidential candidates hardly guarantee the enactment of policy; there is a big difference between agreeing on a proposal and actually legislating change. In many ways, the Democratic and Republican platforms in 2016 are quite similar to those in 2012, and much of the suggestions then have not even been discussed in the halls of Congress, let alone been implemented. For change to occur, presidents need support from members of the House and Senate, who may come from other the other party or who may simply not care about the same issues.

Nevertheless, understanding how the parties and their candidates differ is essential to understanding the dynamics of this election and can help us evaluate how to vote this fall.

The role of the federal government

The Republican platform notes almost at the start of the document that “Our country’s investments in transportation and other public construction have traditionally been non-partisan. Everyone agrees on the need for clean water and safe roads, rail, bridges, ports, and airports.”

This sentiment—that transportation is a bipartisan or apolitical issue—is often repeated by proponents of investment in the nation’s infrastructure as an argument for making it a priority and getting representatives to work together across the aisle. Yet the divergence in goals for the nation’s transportation programs between the Democratic and Republican parties this year show that transportation is quite a political issue, one that is subject to debate and which elicits quite different policy prescriptions.

That’s a good thing! It means that our electoral process can influence how the future of our transportation system looks, and that questions about what transportation is right are subject to public debate, not bureaucratic, expert-driven, and hidden policy making.

The difference between how Democrats and Republicans think about transportation is a reflection of the two parties’ respective views of the federal government’s role.

Republicans use their platform to express a limited view of Washington’s contribution to the infrastructure system, and define the government’s role strictly. “We propose to remove from the Highway Trust Fund programs that should not be the business of the federal government,” the platform states. For Republicans, this has a specific meaning: The federal government should only spend transportation money on automobile commuters (I document the specifics below).

Indeed, the Republican mentality on transportation investment can perhaps best be summarized in its assessment of President Obama’s policies:

“The current Administration has a different approach. It subordinates civil engineering to social engineering as it pursues an exclusively urban vision of dense housing and government transit. Its ill-named Livability Initiative is meant to ‘coerce people out of their cars.'”

This argument, perhaps, is founded on the idea that highways travel between states and that the road network, especially the Interstate one (originally funded by Republican President Dwight Eisenhower), goes between states and therefore needs a federal role. Anything other than that is removed from discussion.

Democrats, on the other hand, have a far broader view of how the federal government should act. The party platform notes that “We need major federal investments to rebuild our crumbling infrastructure and put millions of Americans back to work… we will dramatically increase federal infrastructure funding for our cities—making significant new investments in roads and bridges, public transit…” Ms. Clinton’s policy on transit is diametrically opposed to that of the Republicans; her campaign’s mentality can be summarized in the following statement:

“This underinvestment is particularly costly for many low-income communities and communities of color, as a dearth of reliable and efficient public transportation options often creates a huge barrier to Americans attempting to build better lives. Clinton will prioritize and increase investments in public transit to connect Americans to jobs, spur economic growth, and improve quality of life in our communities…”

The Democratic platform explicitly connects the need to rebuild and expand the nation’s multimodal transportation system as an effort not only to improve mobility, but also to add jobs, “expand the middle class,” address “the climate emergency,” and improve quality of life in the nation’s cities and suburbs. In other words, for Democrats, the federal role should not only grow in size, but also in breadth, encompassing the role transportation plays in realms of life that are affected by transportation, beyond transportation infrastructure investment itself.

Funding

The Democratic Party’s position on funding the national transportation system is easier to explain than the Republican one because Ms. Clinton and her party appear to be largely on the same page. The party’s platform, as noted above, suggests an expanded federal and more federal funding, and so does Ms. Clinton. In fact, her policy prescription is a $275 billion boost in funding over five years, of which $250 billion would go directly to public infrastructure investment. This program is similar to the funding proposals President Obama has put forward over the past eight years and it would roughly double funding allocations for transportation in the U.S. Like previous Obama Administration proposals, the plan would be fully funded through business tax reform, not (historically more typical) user fees such as an increase in the gas tax. I am not qualified to judge whether this funding proposal is realistic or not.

Both the party platform and Ms. Clinton would reauthorize the Build American Bond program and the platform notes that the party would “continue to support the interest tax exemption on municipal bonds,” both of which would allow local governments to fund more transportation investment at the local level.

Ms. Clinton also emphasizes potential expansion of the TIGER grant and TIFIA loan programs, which have been boons for cities across the country investing in local projects from the Cincinnati Streetcar to the Chicago Riverwalk. In addition, she points to a potentially revolutionary change by suggesting the “launch [of] a pilot program to explore new ways of getting formula funding, including formula highway funds, directly into the hands of local governments.” This would allow cities and counties to receive their transportation funding allocations from Washington without getting the funds passed through from the states first.

The Republican platform essentially takes the opposite tack. The document notes that “with most of the states increasing their own funding for transportation, we oppose a further increase in the federal gas tax.” While the platform does recognize the importance of infrastructure, it suggests that the federal government should not be paying for any more of it, rather focusing on “remov[ing] legal roadblocks to public-private partnership agreements” to “expand the carrying capacity of roads and bridges.”

Mr. Trump has expressed a very different view of the federal role on transportation infrastructure investment. During a debate, he noted that the U.S. should have spent the money it used on wars on infrastructure; “if we could’ve spent that $4 trillion in the United States to fix our roads, our bridges and all of the other problems… we would’ve been a lot better off.” According to an article by Eric Levitz in New York, Trump has described a “trillion-dollar rebuilding plan… one of the biggest projects this country has ever undertaken.” He has spoken positively of the New Deal, which was a vast federal program that runs contrary to Republican orthodoxy.

Unlike Ms. Clinton, though, Mr. Trump has provided no details on his infrastructure funding plans. He has provided no information on exactly how much funding he would actually provide, how that money would be allocated, and how the money would be raised. It is difficult to take the ideas he has noted in speeches seriously, particularly since his colleagues in the House and Senate would be working off the party’s anti-federal-investment platform.

Public transportation and intercity rail

Mr. Trump has similarly articulated views contrary to the rest of his party with respect to transit and intercity rail. He has expressed excitement by the speed of Chinese high-speed trains, while American ones “go chug… chug… chug,” according to him. And he has noted that “we have to spend money on mass transit… we have to spend a lot of money.”

The Republican platform, on the other hand, argues strongly against funding transit, noting that “we propose to phase out the federal transit program.” The argument is that “mass transit [is] an inherently local affair that serves only a small portion of the population, concentrated in six big cities.” This is an exaggeration (the top ten transit cities account for 47 percent of U.S. transit commuters), but it is worth noting that Republicans have in recent years received few votes in cities, which are dominates by Democratic voters, which provides one explanation for their reluctance to invest in transit.

Intercity rail is similarly held in contempt; the platform notes that taxpayers “must subsidize every [Amtrak] ticket” and that “we reaffirm our intention to end federal support for boondoggles like California’s high-speed train to nowhere.” The Republican policy is to “allow private ventures to provide passenger service in the northeast corridor” (which is the one place where Amtrak is profitable). The platform does not explicitly suggest defunding the public rail agency, however.

Ms. Clinton’s campaign, on the other hand, suggests “buil[ding] a faster, safer, and higher-capacity passenger rail system… to meet rapidly growing demand and build a more mobile America.” While in Florida, she affirmed her support for that state’s canceled project; “we’re going to do more to fight climate change by getting more cars off the road and more passengers into high-speed rail.”

She has also noted significant support for transit. Her campaign notes that “Hillary will increase investments in public transit to connect Americans to jobs, spur economic growth, and improve quality of life in our communities.” She has made no such commitment to investing in highways or roadway infrastructure.

Non-motorized modes

Rarely discussed and even more rarely funded are non-motorized transportation modes like biking and walking, which nonetheless could play a growing role in the national transportation system if political actors made an effort to emphasize them in planning and funding. Between 20 and 40 percent of all trips in European countries are conducted by cycle or by foot, and this is a model a federal transportation policy could emulate if the political conditions were right.

In the Republican Party platform, however, these modes are dismissed as outside of the federal purpose. The document recommends that “bike-share programs, sidewalks, recreational trails, landscaping…” be no longer funded through the federal transportation program. The document notes that “these worthwhile enterprises should be funded through other sources,” which, based on the platform’s overall tone, suggests that the states should take up the cause.

Ms. Clinton’s campaign policy presents an entirely different message, noting that “she will also support bicycle and pedestrian infrastructure—reducing carbon emissions, improving public health and safety, and further providing Americans with affordable transportation options.” Given Ms. Clinton’s overall campaign message supporting a continuation of Barack Obama’s presidency, it seems likely that this could come in the form of TIGER grants and an emphasis on multimodalism in other grants.

Climate change

Transportation accounts for about 20 percent of world carbon emissions from fuel, and while the U.S. has made substantial progress over the past few decades in improving the efficiency of household appliances, electronics, lighting, and power plants, the transportation industry continues to be a major polluter. The Obama Administration has required significant increases in automobile fuel economy, which is an important step, but more action is needed if the U.S. is to reach the goals it agreed to as part of last year’s Paris agreement.

The Democratic platform integrates climate change as an essential issue (the “climate challenge,” as the document calls it) throughout, and the language is particularly strong in the sections related to transportation. The party notes “we will protect communities from the impact of climate change and help them to mitigate its effects by investing in green and resilient infrastructure… We will transform American transportation by reducing oil consumption through cleaner fuels, vehicle electrification increasing the fuel efficiency of cars, boilers, ships, and trucks. We will make new investments in public transportation and build bicycle and pedestrian infrastructure across our urban and suburban areas.” The goal is to “reduc[e] greenhouse gas emissions more than 80 percent below 2005 levels by 2050.”

While the Republican Party has been resistant to acknowledge the existence of climate change at all in recent years, this year’s platform strikes a somewhat softened tone, nothing that “climate change is far from this nation’s most pressing national security issue.” While seemingly recognizing that global temperatures are rising, the platform suggests that the answer is to do nothing about it; there is no mention of the role of transportation in increasing pollution. In addition, the platform seems to encourage the further use of polluting sources for powering the increasingly electrified transportation system, noting that “the Democratic Party does not understand that coal is an abundant, clean, affordable, reliable domestic energy resource.”

Project management

Both Ms. Clinton’s policy language and the Republican platform suggest they plan to streamline permitting to reduce transportation construction costs. The Republicans specifically note that they would “reform provisions of the National Environmental Policy Act.” Neither has been particularly specific on those reforms, however.

The Republicans, who rarely sympathize with organized labor, emphasize a “repeal of the Davis-Bacon law,” which requires federally supported projects to pay workers “prevailing wages,” that are often quite a bit higher than the wages paid to non-union workers. Democrats, on the other hand, “support high labor standards… and the right to form or join a union.”

One item of note is the “Buy America” rule that most federal transportation projects include and which, in essence, requires that most components of a construction project be made in America, and which, in some cases, increases costs and may reduce quality. During his speech in support of Mr. Trump at the Republican National Convention, New Jersey Governor and Trump campaign supporter Chris Christie criticized Ms. Clinton for not supporting Buy America. It is true that Ms. Clinton and President Obama did, in fact, oppose a Buy America provision, but it is also true that, confusingly, Mr. Christie himself vetoed legislation related to Buy America. Even so, both parties have supported Buy America in the past and are likely to do so into the future.

How about the other parties?

Recent polls suggest that the candidates of the Democratic and Republican parties would collect more than 80 percent of the vote if the election were held today, and no third party has ever won a U.S. presidential election. Nevertheless, I would be remiss to ignore the Green and Libertarian parties, whose candidates could play an important role in the 2016 election.

The rather short Libertarian Party’s platform, approved in May, says nothing about transportation directly. The party “call[s] for the repeal of…all federal programs and services not required under the U.S. Constitution” and states that “governments should not incur debt.” Each of these clauses suggest that a Libertarian government would push for the elimination of all but “post roads” (which are included in the Constitution’s Article I, Section 8). Based on this, the Libertarian Party led by presidential candidate Gary Johnson would not support federal loan programs such as TIFIA or federal support for mass transit.

The Green Party platform takes a significant stand in favor of investment in mass transit and other “ecologically sound forms of transportation that minimize pollution and maximize efficiency.” The Green Party, led by presidential candidate Jill Stein, would also “place a moratorium on highway widening,” “eliminat[e] free parking,” and “make streets, neighborhoods and commercial districts more pedestrian friendly.”

Photo at top: From Flickr user Colleen P (cc).