Some of the hardest public policies for any democracy to adopt are those that impose present-day costs on their constituents for the sake of diffuse future benefits. There is a renewed optimism in Washington these days about passing an infrastructure bill now that tax reform and the budget have been completed. Both parties agree that the country has serious infrastructure needs. While the Democrats want to spend more public dollars on this and the Republicans fewer, there are few if any advocates for doing nothing about our decaying roads, bridges, water systems, and the like. Even so, nothing (or next to nothing) is quite possibly what we will end up with.
The large deficits created by the tax reform and recent budget bill don’t make things any easier. Even the comparatively modest $200 billion Federal government investment the Trump Administration proposes has to come from somewhere. Unless the dynamic scoring assumptions built into the recent Federal budget prove to be prophetic, a plan to fund infrastructure would likely imply cuts to other domestic programs—a prospect that will be even more unlikely if the Democrats gain control of even one Congressional chamber in 2018.
While it would be unwise to bet the family farm on any major infrastructure bill in the near future, it is worth having a discussion about it now in the event of a more politically propitious moment to come. The infrastructure problems in this country are critical and will not fix themselves. At some point, the disrepair and loss will be too great to ignore.
To the credit of the current administration, its proposal engages in some serious thinking about the how to stimulate and fund infrastructure projects. Democrats will likely reject some of these ideas on ideological grounds and question the degree to which Trump’s plan relies on state, local, and private funding as opposed to Federal money. But 35 states, including very blue California, have enacted statutes that enable so-called P3 (i.e. Public-Private Partnerships) transportation projects. California’s state government has also successfully leveraged matching funds from local and regional jurisdictions to finance much-needed local water projects in recent years.
Trump’s plan represents a paradigm shift for the U.S. Federal government. The interstate highway system and massive dam projects, such as those along the Columbia River, were built with a much heavier Federal commitment than the four-to-one match that the Trump Administration is proposing to state and local entities. The Medicaid expansion under President Obama succeeded in part because the Federal government promised to pay for 90% of it from 2020 on. While the idea of finding state and local money makes sense, it is not clear how enticing the present level of matching funds will be, particularly if the money comes with many conditions. One thing we know for certain is that local jurisdictions do not like being told what to do by state and federal governments, no matter which party is in power.
Another important question is the degree to which infrastructure design should look forward to new systems of water, energy, and transportation as opposed to restoring or replacing old infrastructure that is currently in disrepair. This question is further complicated by the challenges of climate change. Sea level rise, floods, droughts, and extreme weather events must be factored in. While the Trump proposal allocates 10% of its expenditure to a “Transformative Projects Program,” it will for obvious reasons give little guidance on coping with climate change or ways to facilitate the transformation to alternative energy infrastructure.
Relying on local initiative is no guarantee. Consider this puzzle. California’s citizens overwhelming believe that climate change is real and that the state needs to undertake adaptive measures to protect its airports, roads, power plants, and wastewater facilities along its coast and bays. Despite several state programs that mandate local governments plan adaptive measures that would protect residences, businesses, and infrastructure, California’s local communities have done little in this regard to date. The collective action problems associated with funding and implementing regional sea walls or natural capital protections have simply been too formidable so far. The catastrophic flooding that occurred in Houston could easily also happen in the San Francisco Bay Area in the near future, but there is no apparent urgency at the moment.
Unleashing local initiative will also require permitting reform. Some Democrats and environmental groups will strongly resist this suggestion. And given that the Trump Administration is pretty firmly on the side of big business, Democrats will not view them as trusted agents of regulatory change. There is a big difference between expediting the permitting process and gutting it. Moreover, a top-down approach to this issue ignores the fact the state and regional regulatory authorities must also be part of the streamlining effort. This means that permitting reform will itself have to be a collaborative effort.
Because many infrastructure projects touch on separate laws and several agencies, the process of permitting large infrastructure projects can be confusing, lengthy, expensive, and duplicative. This was fine for liberals when the issue was balancing environmental concerns against economic development. But now the problem is that large infrastructure related to utility-scale wind and solar, levees that protect against sea level rise, desalinization plants, and other projects that either mitigate or adapt to climate change also face formidable permitting processes. This pits environmental priorities against one another.
A related problem that local communities struggle with is the huge disparity in local capacity. Communities with ample resources can play the infrastructure matching grant competition game quite well as they have the necessary staff, expertise, and connections to compete successfully. The same is not true for disadvantaged communities. California achieved some success with this problem when it incentivized wealthier communities to incorporate poorer ones into their grants in order to qualify for lower matching fund requirements, but this problem is not addressed in the Trump proposal to date.
Some rural disadvantaged areas may benefit from the Trump plan’s rural block grant component, but it would be better designed if it had more explicit targets. For instance, it is hard to get specialist health care in remote rural areas, and telemedicine offers a possible alternative. Targeting broadband expansion to rural health care needs explicitly would address this critical problem more effectively.
In the end, the right solution is neither a purely top-down or bottom-up infrastructure initiative, but some mix of the two. Private-public partnerships that rely on matching grants tend to follow the money path, and that leaves some important projects and communities behind. Moreover, the multilayered and fractured public component of P3 is quite complex and likely to remain so into the future. The dream of standardizing processes across levels of government and agencies will likely hit a wall of parochial resistance. But eventually, our infrastructure needs will become so apparent that even voters and elected officials will have to respond. Hopefully, it will turn out to be a case of better late than never.