No easy or cheap fix for America’s infrastructure

Earlier this month, the American Society of Civil Engineers’ “2017 Infrastructure Report Card,” which looks at 16 categories of infrastructure from schools to airports to dams, gave the nation an overall grade of D+. Creative approaches can be used to finance some of the needed improvements, but others will need to be paid for the old-fashioned way.

The report is yet another in a series of reports making the case that America has under invested in infrastructure for decades. Such chronicles of wretched conditions are a national sport that is nearly as popular as the Kardashians. But although much of the material is familiar, infrastructure is a gift that keeps on giving; there always seems to be something new to chew on.

The report card projects that $4.59 trillion will be required to bring America’s infrastructure to a grade of B. That is more than the nation’s annual budget of about $4 trillion.

Americans can quibble about the actual size of these projections, just as maritime historians quibble about the size of the iceberg that sank the Titanic. But it scarcely matters whether the estimates are off by 5 or 10 percent (give or take). What matters are the general proportions of these needs and the risks for the U.S. economy if they are not addressed. The longer we wait, the bigger the problem becomes.

Most who deal with this issue agree that the country’s infrastructure is in a bad way, but there is much partisan disagreement over how to pay for the fix.

Using public-private partnerships to invest in infrastructure was one of President Trump’s major campaign promises, but fiscal conservatives in Congress are reluctant to back massive spending that exacerbates the federal budget deficit and skyrocketing federal debt.

Democrats, on the other hand, are for more direct federal spending. By reducing taxes on overseas profits, they believe some of the estimated $2-$3 trillion companies have kept outside the U.S. could be repatriated. The result is that the political hills come alive with the sound of heated debates over proposals to address the infrastructure gap.

The permanent political aristocracy’s failure to deal with infrastructure reflects the simple fact that talking about balancing the budget is easy, but doing the things you have to do to balance it is hard. By the very nature of the process, politicians are focused on the very near term.

Upcoming elections, like hangings, have a way of focusing the mind on the here and now. That is why the federal gasoline tax of 18.4 cents per gallon and the diesel tax of 24.4 cents per gallon, the most important sources of federal transportation funding, have not risen since 1993. During that time, they have lost about 40 percent of their purchasing power due to inflation. Fuel tax revenues can no longer keep pace with needs.

This is not just a problem with politicians, it’s also a problem with voters, who say the deficit is a major concern, yet favor lower taxes, more benefits and fixing our infrastructure. Put simply, they don’t want to pay for the government they want.

It’s time to get real. Nothing works without a funding source and we will need hard cash to correct our under-investment in infrastructure. The feds, state and local governments, and the private sector have plenty of access to capital markets to finance infrastructure; the real issue is identifying revenue sources such as user fees or taxes to repay the debt.

A partial solution is to minimize the need for scarce government dollars by recruiting private firms as partners to help start, fund, and run infrastructure projects that have predictable revenue streams, like toll roads. But a larger universe of projects such as schools, dams, and local roads, for example, cannot be monetized.

Infrastructure’s biggest challenge is funding. In the real world, that comes down to a choice between taxes and user fees. There is no free lunch.

originally published: April 1, 2017

Healthy pork: Earmarks may help solve transportation problems

The American Society of Civil Engineers recently estimated that traffic bottlenecks will cause a $1 trillion loss in sales over the next eight years. The report makes the point that America can no longer put off dealing with the growing backlog of transportation projects whose costs have long outstripped the dollars the existing transportation funding mechanism generates.

It should be noted that these are the same people who published the 2013 report card that gave America’s infrastructure a grade of D+. They obviously have never heard of grade inflation.

With the current highway bill set to run out of money by May 31, the current report comes as federal lawmakers are debating a new transportation funding bill. Congress has struggled to come up with a transportation funding bill that funds needs beyond those that can be addressed with revenue from the 18.4-cent-per-gallon federal fuel tax, which has not been increased since 1993.

While the infrastructure community is holding its collective breath for Congress to agree on a bipartisan solution, perhaps it is time to revisit the use of limited earmarks to lubricate the legislative process.

Earmarks are congressional directives that money be spent on specific projects, which are often derided as “pork barrel” projects. They basically ended in 2011 after the public outcry about a $223 million earmark to fund the construction of a “bridge to nowhere” in Alaska.

Critics argue that earmarks are basically used to buy votes, curry favor with special interests and help politicians get re-elected by showing constituents they are bringing home the bacon even when America is broke. For sure, there are plenty of people who say that earmarks are pork and the money is being wasted.

To further add to the demonization, they claim it’s ad hoc policymaking at best and illegal graft at worst. For them, earmarks are like a four-letter word and are reflective of congressional corruption, even if they help legislators overcome ideological differences and pass major legislation by earmarking money to buy key votes from recalcitrant colleagues.

Like it or not, earmarks and horse trading are part of the human condition and for ages were part of the legislative process at every level of government. Trading for votes in Congress, not to mention lubricating the process with funding for special projects that the legislators in question consider important, has always been an essential element of American democracy. Since when has the average politician made a virtue out of surrendering his or her career for putting the country’s interest first?

Let’s not get hung up on appealing to the better angels of human nature. Legislators put pragmatism over principle. As that prolific writer Anonymous said: They understand that when you have to choose between voting for the people or the special interests, stick with the special interests. They remember; the people forget.

Stained-glass, Pollyanna-ish types may cringe and complain that this is little more than bribery, the distribution of taxpayer dollars based on political considerations rather than merit. If the use of such a pejorative term makes them feel nobler, so be it. You get merit in the afterlife; here in the present you get politics. As former House Speaker Tip O’Neil once quipped, “I’m against any deal I’m not in on.”

Far from being ashamed of earmarks, proponents argue that lawmakers are a better judge of what benefits their districts than unelected bureaucrats. They ask if we really believe that the bureaucrats responsible for fiascos like the Veterans Affairs scandal and the screwed-up Obamacare rollout should control allocating taxpayer dollars.

Would it really be a mortal sin to reintroduce some limited bribery to grease the legislative process and smooth over differences that preclude in this case the transportation funding shortfall? In the current environment of gridlock, it may be exactly what the country needs. 

originally published: March 14, 2015