Paying for Infrastructure Without Soaking the Taxpayer
President-elect Trump has many difficult fiscal tasks ahead – one of which is to promote long-overdue infrastructure construction at a time when the national debt exceeds our entire economy and interest costs alone are eating us alive.
Some have said that a rebounding economy resulting from tax reform will pay for it. That may be, but it’s not guaranteed; it cannot be accurately forecast; and we’ll need any new revenues to beef up our defenses and reduce our deficit – two other critical objectives of the new administration.
Others have proposed tax credits to leverage private capital for infrastructure improvements. But tax credits reduce revenue and widen the deficit. Worse, such public-private partnerships have also proven a fertile breeding ground for corruption, crony-capitalism, waste and fraud.
And as we learned during the Obama stimulus fiasco, massive government spending might stimulate government, but it does little to stimulate the economy when it is squandered for boondoggles like subsidizing Solyndra and paying cash for clunkers.
So how do we avoid the mistakes of the past, control the deficit, protect taxpayers and yet add a trillion dollars of new infrastructure in a way that helps the economy and not merely lines the pockets of politically well-connected interests?
FIRST: Get government out of the way! Stop obstructing major infrastructure projects like the Keystone Pipeline. Keystone and many other projects like it across the country already have private capital ready to finance them. Keystone by itself would unleash an estimated $8 billion of privately financed infrastructure construction and would deliver a half million barrels a day of Canadian crude oil entering U.S. markets.
In my district alone, one abusive official at the Sacramento office of the Army Corps of Engineers single-handedly blocked tens of millions of dollars of critical infrastructure construction desperately sought by local governments in the region. Multiply that across the country, and you can see how much infrastructure is ALREADY financed but cannot move forward because of federal obstructionism.
SECOND: Streamline radical regulations that have made many infrastructure projects cost-prohibitive.
In my district, the little town of Foresthill gets its water from the Sugar Pine Reservoir, formed by a dam that has an 18-foot spillway, but no spillway gate. The town is trying to increase the reservoir’s capacity by adding the missing gate. The gate will cost $2 million. But environmental studies, environmental mitigation and U.S. Forest Service Fees have inflated that cost to at least $11 million – so this project has stalled. Multi-billion dollar expansion of Shasta Dam is stalled for the same reason. Once again, multiply this across the rest of the country.
THIRD: Use revenue bonds to finance capital-intensive projects like dams and bridges. California built its iconic Golden Gate and Bay Bridges with loans from private investors – repaid by tolls charged only to the users of the bridges. The taxpayers were never on the hook for a dime, and the loans were paid back ahead of schedule.
The famous California Water Project constructed 21 dams and more than 700 miles of canals. The revenue bonds and self-liquidating general obligation bonds that financed it were paid back not by general taxpayers, but by the users of the water and power.
FOURTH: Restore the integrity of our highway trust fund. We built the modern Interstate system with the federal excise tax paid only by highway users at the gas pump. The more you drove, the more you paid for the roads you were using. But over the decades, more and more of these funds were bled away to subsidize mass transit and other purposes unrelated to highway construction. Restoring highway taxes for highways would go a long way toward addressing the maintenance and construction backlog.
FIFTH: Repeal the outdated Davis-Bacon Act that requires federal projects to pay grossly inflated wages. Think tanks like the Heritage Foundation and the Competitive Enterprise Institute estimate that Davis-Bacon alone inflates total construction costs by roughly 10 percent. Just repealing this act alone would add one new project for every ten existing ones at no additional cost.
These are just a few ways that massive infrastructure projects can be financed at zero cost to general taxpayers. And because these reforms are actually directed at projects for which there is a demonstrated economic need, political favoritism and corruption inherent in government-directed programs can be greatly reduced.
Mr. Speaker, freedom works. And it is time we put it – and America – back to work.