Donald Trump’s promise to spend hundreds of billions of dollars rebuilding U.S. infrastructure may create unusual political dynamics on Capitol Hill. Some Democrats are reportedly eager to cooperate with the administration, either to advance their own priorities or to splinter the Republican coalition; others are likely to become deficit hawks overnight on Inauguration Day.
Republicans are also torn. Paul Ryan and Mitch McConnell initially suggested that infrastructure spending would not be a Congressional priority. Senator John Thune, meanwhile, recently said that “there’s an interest among our members” in an infrastructure package, although it would likely need to be tied to tax reform. Some small-government Republicans will likely resist measures that seem wasteful or are not fully paid for.
TAI Chairman Francis Fukuyama has pointed out that “a de facto conspiracy of the two political parties” has for many years blocked productive infrastructure in the United States at the federal level. “The Republicans, for their part, do not want to pay for it, and have blocked increases in the gas tax that funds the Highway Trust Fund since the early 1990s… By contrast, the Democrats feel comfortable permitting new projects to death, increasing both their cost and the length of time needed to execute a project.”
The Trump presidency could shake up this stubborn dynamic in unprecedented ways. A populist who used the Republican Party as a vehicle to win the presidency but who himself rejects many GOP principles, Trump might not hesitate to build an unorthodox coalition for infrastructure spending with significant Democratic support. The GOP takeover of the government could ironically lead to the passage of a policy priority Republicans have resisted for years.
As with many other Trump policy proposals, we don’t know the specifics yet. Trump has released a proposal for tax incentives for private development companies, but this by itself would probably not come close to fulfilling his grand promises about rebuilding roads and bridges of America’s run-down cities and towns. There have also been reports that his advisors are mulling an infrastructure bank, according to the Hill. And the administration could well send Congress a request for a traditional 2009-style infrastructure stimulus, but likely tilted toward infrastructure projects more likely to benefit Trump supporters.
Regardless of the size and structure of the stimulus, the biggest risk is that funds will be allocated without being accompanied by reforms to environmental, permitting, and labor rules that have made past rounds of federally-funded construction surges so slow, inefficient and costly. As we wrote last week, “making America’s infrastructure great again will take more than political will and money.” It will take a major overhaul of our sprawling bureaucracy that delays projects for years, diverts funds to legal battles, and wastes money on expensive union carveouts.
Whether this happens depends on how the partisan dynamics play out on the Hill. The Democrats would be content to create a massive infrastructure boondoggle that channels money to favored interests without a regulatory reform to make the investment more efficient. Traditional conservatives would prefer that infrastructure is not on the agenda at all. The Trump Administration could triangulate in a number of ways. If it feels dependent on the Ryan wing of the party, we may end up with small-bore privatized infrastructure projects of relatively little consequence. If it bucks the establishment Republicans entirely and works with the Democrats, a boondoggle is more likely.
The best case scenario, from our perspective, would be a compromise between the fiscal conservatives and the big-government liberals brokered by the populists: A major simplification of the regulatory process in exchange for an infrastructure push. If the Trump administration can pull this off, it will not only help make the U.S. more attractive for business, it will have proven that the Trumpian earthquake can in fact break certain decades-long patterns of bipartisan paralysis.
But that is a big if.