How Trump could find $1 trillion for infrastructure
President Trump, who campaigned on a promise to invest as much as $1 trillion in infrastructure, now faces Republican opposition to any plan that adds to the deficit.
“We have a country that needs new roads, new tunnels, new bridges, new airports, new schools, new hospitals,” Trump said during a September debate against Hillary Clinton, adding that U.S. airports are on par with “third world countries.”
The investment promised on his transition website — $550 billion — is a bit more than half of his trillion dollar promise, though it’s twice what Clinton proposed and is more than three times as much as was included for infrastructure in the 2009 federal stimulus package (Public Law 111-5).
To fund the push, Trump’s campaign proposed several options, which are still being explored.
His tax plan calls for a one-time, 10 percent deemed repatriation tax on about $2.6 trillion in earnings that U.S. companies hold abroad, which would generate revenue that could be used for infrastructure. Congressional Republicans, however, have been counting on using that money to fund other tax cuts.
Trump’s pick for Treasury secretary, Steve Mnuchin, told the Senate Finance Committee today that Trump believes “trillions of dollars” now offshore can be brought back to the U.S. Mnuchin has proposed an infrastructure bank, though Trump was critical of Clinton for offering a similar proposal.
Trump also proposed using tax credits for private investors. In a white paper, his advisers Peter Navarro and Commerce Secretary nominee Wilbur Ross estimated that an 82 percent credit would generate $1 trillion in investment, at a cost of $137 billion to the federal government. That cost could be recouped as new tax revenue from contractor profits and construction worker wages, according to the document.
Trump supports some existing transportation funding mechanisms. He told the U.S. Conference of Mayors in December that he wants to keep the federal tax exclusion for municipal bond interest, which helps cities and states borrow for infrastructure projects at lower rates. The exclusion, estimated to cost almost $37 billion in fiscal 2017, has been frequently identified as a source of potential cost-savings.
Trump’s campaign expressed support for Build America Bonds, a program from the 2009 stimulus package that provided federal support to help municipal governments issue bonds with higher yields. Some state and local infrastructure proponents would like to see the program resurrected.
The campaign also promised to triple funding for state revolving loan fund programs to help state and local governments upgrade drinking and waste water infrastructure. The Environmental Protection Agency allocated over $2 billion in grants through the revolving funds in fiscal 2016.
Although infrastructure improvement is a bipartisan goal, it will have to compete for congressional attention with efforts to repeal and replace the Affordable Care Act and rewrite the tax code. Having completed a five-year, $305 billion reauthorization of surface transportation programs in the December 2015 FAST Act (Public Law 114-94), additional infrastructure financing may not be a top priority for Congress.
Republican leaders have voiced concern about new federal spending on infrastructure. Senate Majority Leader Mitch McConnell has warned against a “trillion dollar stimulus,” and House Majority Leader Kevin McCarthy has said he’d oppose any plan that adds to the deficit.
Democratic leaders, however, oppose funding infrastructure through tax breaks.
“A program of tax credits isn’t going to get the job done, no matter how large,” said Senate Minority Leader Chuck Schumer. “We need significant, direct spending.”
Elaine Chao, Trump’s nominee for Transportation secretary, called for innovative funding approaches that use both federal and private dollars.
“We look forward to working with you to explore all options and to create a mix of practical solutions, both public and private, that provide the greatest cost-benefit to the public, because we all know that the government doesn’t have the resources to do it all,” Chao told the Senate Commerce, Science and Transportation Committee at her confirmation hearing.
For now, Trump has appointed real estate developers Richard LeFrak and Steven Roth to head a task force of 15-20 builders and engineers to refine the details of his plan.