What's So Magic About $1 Trillion


News reports say that the Trump Administration is going to propose a $1 trillion infrastructure plan to “boost the economy.” One writer says it will not only promote recovery but also help the environment.

Since Trump promised a $1 trillion infrastructure plan when he was running for president in 2016, it may seem like it is about time that he kept that campaign promise. But those who thought he was crazy to make that promise in the first place may wonder just where he found enough infrastructure to spend $1 trillion. Part of the answer, it turns out, is a little bit of trickery in the proposal.

Infrastructure, of course, includes airports, highways, pipelines, ports, power plants, railroads, telecommunications, transit lines, water & sewage facilities, and more. A lot of this is private, including pipelines, railroads, and telecommunications. Most of the remainder, including highways, ports, transit, and water & sewage facilities, is owned by state or local governments. Really, aside from roads and other structures on federal lands, the only infrastructure facilities owned by the federal government are some hydroelectric dams.

That hasn’t stopped the federal government from providing “grants” to state and local government for just about every other kind of infrastructure. The biggest ticket, however, is the federal highway and transit program, which distributed $44 billion in gasoline, tire, and other vehicle excise taxes in 2018 as well as roughly $20 billion per year in deficit spending, mostly for transit.

Authorization for this program expires on September 30 of this year and Congress normally renews it in five- to six-year increments. The last reauthorization, the FAST Act of 2015, cost $305 billion, about $250 billion of which came from highway user fees and the rest from deficit spending. House Transportation & Infrastructure Committee Chair Peter DeFazio has proposed a new five-year bill that would spend $494 billion, requiring a huge boost in deficit spending.

Even $494 billion doesn’t come close to a trillion, so how will the Trump Administration’s proposal spend that much? Easy: instead of a five-year bill, the administration will propose a ten-year bill. Under the bill, highway & transit spending would total $810 billion, or $81 billion per year. That’s less per year than DeFazio’s bill, but still a lot more than incoming revenues.

Revenues to the Highway Trust Fund were under $44 billion in 2018. They increase when people drive more, but not very fast when people buy more fuel-efficient cars. Considering the pandemic, they will probably drop around 30 to 40 percent in 2020 and then take a few years to recover. So Trump’s proposal is likely to require $50 billion in deficit spending per year — almost as much as the entire five-year deficit from the FAST Act.

If I could have just two things out of the next highway & transit bill, it would be an end to the New Starts transit capital grants program (which is entirely from deficit spending) and a requirement that total spending be no more than actual highway revenues. The administration’s proposal would grant me my first wish, ending New Starts, but obviously expands deficit spending.

Unfortunately, even as it would kill New Starts, a draft of the Trump plan proposed to create an entirely new intercity rail capital grants program. Since transit carries 0.9 percent of passenger travel and intercity passenger trains carry just 0.1 percent, we need an intercity capital grants program even less than a transit program. That problem would be further compounded by a ten-year reauthorization bill: considering how Congress works, there would be no opportunity to correct any mistakes in the legislation for the entire ten years.

In any case, to reach the magic $1 trillion, the administration plans adds some non-transportation programs such as rural high-speed internet, 5G networks, clean water, and similar programs. The Antiplanner lives in a rural area and suffers through annoyingly slow internet — I don’t live in cell phone range, but when I get in cell phone range my smart phone enjoys speeds that are more than 20 times faster than my home internet. However, that’s one of the trade-offs I accepted when I moved here. I don’t think the federal government should subsidize my high-speed internet.

If Trump has to have a $1 trillion bill, how about a 25-year bill that would spend gas taxes and other highway user fees but no more. Over the 25 years, those revenues are likely to average at least $40 billion a year, bringing the total to $1 trillion. The funds could be distributed to the states according to some formula that takes into account how much they put in along with a few other variables such as land area. The battles over whether the money would be spent on highways or transit could be fought at the local level.

Whatever Trump proposes, of course, will be DOA when it reaches Capitol Hill. Other than a short-term extension of the current bill, Congress isn’t going to pass a bill during an election year. No matter who wins the November election, everything will be up for grabs in 2021. But it’s too bad that Trump made the $1 trillion promise in 2016, forcing his administration to propose all kinds of unnecessary deficit spending to reach that amount in 2020.

This piece first appeared on The Anti-Planner.

Randal O’Toole is a senior fellow with the Cato Institute specializing in land use and transportation policy. He has written several books demonstrating the futility of government planning. Prior to working for Cato, he taught environmental economics at Yale, UC Berkeley, and Utah State University.

Photo credit: Joshua Davis via Flickr under CC 2.0 License.