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Parsing Out Trump's Infrastructure Plan

Monday, November 28, 2016

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Nearly three weeks into the presidential transition process, President-elect Donald Trump’s $1 trillion infrastructure plan has shown itself to be a popular idea, but perhaps not an easy one to translate into reality.

While Republicans and Democrats can agree that infrastructure has been neglected in the United States in recent years, the conflict begins when the discussion turns to how to fund improvements. What follows is a roundup of what is known and what remains unknown about the president-elect’s plan, and how members of both major parties are reacting.

Defining 'Infrastructure'

One early hurdle in putting together a major infrastructure plan may simply be deciding what “infrastructure” refers to. While it no doubt means roads, bridges, tunnels and transit, there are other issues that could fall under the umbrella as well. As the Chicago Tribune recently reported, elected officials and private companies have made cases for many investments that they consider to be critical infrastructure for the country.

President-elect Donald Trump
A. Shaker / VOA, public domain, via Wikimedia Commons

President-elect Donald Trump could use tax credits, a windfall from a one-time corporate tax on foreign holdings, an infrastructure bank, or a combination of those approaches to fund his $1 trillion infrastructure proposal.

That could include projects as diverse as oil and gas pipelines, communication networks, public street lights, drinking-water systems, public parks, and affordable housing. If the White House decides to use tax credits as a form of subsidy for private investment in infrastructure projects, it may first have to set guidelines defining exactly what counts and what doesn’t.

Public vs. Private Spending

As is typical in Washington, this is the topic of a major split, mostly down party lines. Where the money to bankroll the big plan comes from will obviously be the key question, and right now, details are scant, and some analysts say Trump’s claim that the plan will pay for itself is “dubious.”

Long-term funding for infrastructure improvements is a topic that’s been kicked down the road by Congress for years; last year’s FAST Act provided a jolt of federal dollars for highway and transit projects. Some Republicans opposed that bill because of its use of tax dollars to “bail out” the Highway Trust Fund.

SR99 construction, Seattle
WSDOT, CC BY-NC-ND 2.0, via Flickr

One funding idea is to use tax credits to encourage private investors to put their money into infrastructure upgrade projects.

"We are not going to vote for anything that increases the national debt," Rep. Raul Labrador, R-Idaho, told Fox News. "Fiscal conservatives in the House are not going to support anything that is not paid for."

Funding for Trump’s plan could come in one (or a mix) of several forms. One idea is to use tax credits to encourage private investors to put their money into infrastructure upgrade projects—essentially, a stimulus package, in which the expenditures would in theory be made back in the form of new jobs generated, and tax revenue.

Other possibilities include a one-time tax windfall from corporations with overseas assets, or an infrastructure bank, both detailed below.

One-Time Overseas Corporate Tax

One way Trump could infuse an infrastructure spending project with cash would be a one-time, 10 percent tax on the cash holdings of American corporations’ foreign subsidiaries. According to Trump’s tax reform proposal, released before the election, the administration hopes to pursue such a tax, which would be payable over 10 years.

That tax could raise $150 billion over that 10-year period, according to analysts, which could put a dent in the infrastructure plan, though there’s no guarantee a Republican-controlled Congress would agree to put that revenue into infrastructure spending, rather than into tax cuts elsewhere.

Infrastructure Bank

Canadian Prime Minister Justin Trudeau recently put into motion a plan for an infrastructure bank in that country, and while such a feature was part of Hillary Clinton’s platform during the 2016 campaign, the Trump camp has not ruled it out as part of its spending plan.

Natural gas station
Acroterion, CC BY-SA 3.0, via Wikimedia Commons

"Infrastructure" could potentially include projects as diverse as oil and gas pipelines, communication networks, public street lights, drinking-water systems, public parks, and affordable housing.

An infrastructure bank would lend out federal funds (possibly the money raised by the overseas tax) to state and local governments and public-private partnerships to bankroll infrastructure improvements. The money would eventually be paid back, though that’s one of the concerns experts have: How would the funding be repaid?

An infrastructure bank that relies on complete repayment, some say, would lead states and private entities to make their infrastructure investments into money-generators. That would likely mean the bank would be funding the construction of toll roads and bridges, and possibly moneymakers like energy plants, depending on how “infrastructure” is defined.

Canada’s infrastructure bank plan, as proposed by Trudeau’s Finance Ministry, includes two segments: $11.2 billion that would be lent for projects that would be expected to pay it back, and $14.9 billion subsidizing less lucrative projects that wouldn’t be expected to repay the government.

   

Tagged categories: Asia Pacific; EMEA (Europe, Middle East and Africa); Funding; Government; Infrastructure; Latin America; North America; Program/Project Management; Public-private partnerships (P3); Roads/Highways; Taxes

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