Senator Charles E. Schumer and the Senate Democrats unveiled an infrastructure plan last week that draws a sharp contrast to the press releases issued by the Trump White House. The president’s infrastructure plan makes very little new investment, in that it involves almost no increase in federal spending: most of the new money is supposed to come from the private sector or state and local governments. In contrast, Schumer’s plan calls for $1 trillion of new federal spending over the next ten years. More than a quarter of the spending focuses on repairs to roads, bridges, and the highway system. The plan designates $115 billion a year for modernizing water and sewer systems, and a similar amount is focused on public transportation. Smaller amounts are designated for the energy grid, rail and air travel infrastructure, rebuilding schools, and increasing public access to speedy internet connections.
The Schumer plan combines additional funding with existing federal spending programs such as the Highway Trust Fund, more funding for programs that provide grants to state and local governments, and some entirely new initiatives. One of these would make $50 billion available to rebuild decaying public schools across the nation.
Another significant point of difference is that the Schumer plan is paid for by reversing parts of the Republican tax bill that aggressively favor big corporations and the wealthy. The political point could not be clearer: use the money that the recent tax bill had directed to the rich to instead benefit everyone, and rural Americans perhaps most of all, by fixing decaying bridges, modernizing airports, and making fast broadband access available nationwide.
But while the Schumer proposal is vastly better than what the Republicans are offering on infrastructure, reframing it to include the big picture would make it stronger and more compelling. Its current focus on component improvements to existing assets—“We will give you this for sewers, this for airport modernization, and this for rural broadband”—reads like a laundry list, and does not do enough to seize the opportunity that an infrastructure-centered economic development strategy could provide.
For one thing, we must take into consideration how much repairing and rebuilding our nation’s infrastructure will truly cost. While $1 trillion sounds like a lot of money, it is only $100 billion per year; and the American Society of Civil Engineers, who provide an annual report card on infrastructure spending, estimate that we need to increase spending on infrastructure from 2.5 percent to 3.5 percent of GDP per year. Since GDP is currently around $19 trillion, a 1-percent increase would look more like $190 billion this year, and substantially more by 2028. These data are sobering. While Trump’s plan gets us nowhere, the Schumer plan gets us only about halfway to the goal.
The problem, of course, is the prevailing belief, among policymakers and beyond them, that infrastructure is a kind of luxury that we can afford only when times are good. The reality is that infrastructure spending has become central to our economic prosperity. In the last few decades, we have reached a point of diminishing returns on the individualized consumption of transportation, communications, and even housing. For an average family, there is no improvement in living standards to move from two cars to three cars: the last car is likely to sit in the garage and get very little use. However, there are big improvements in well-being that come from having a shorter commute, spending less time stuck in traffic, slowing global climate change, and having access to good-quality mass transit alternatives. But all of these improvements are dependent on infrastructure investments.
We have seen the same issue of individualized consumption reaching its limits with information technology, in particular the personal computer, the internet, and smartphones. The improvements in connectivity and the convenience of online shopping that these technologies enjoy represent major benefits to consumers, but those improvements were dependent on very large investments in infrastructure—the fiber-optic backbone of the internet and the system of cell towers that connect wireless phones. And, as the Schumer proposal emphasizes, these investments have not been made yet in many rural areas of the country, leaving the people who live in them disconnected from economic opportunities.
The urgency of infrastructure investments has also been reinforced by this century’s mounting series of natural disasters—Hurricane Katrina in 2005, Superstorm Sandy in 2012, and Harvey, Irma, and Maria in 2017. People’s survival depends on new infrastructure spending to make our communities both safer and more resilient. The same is true for the vital health infrastructure that is our protection from the next deadly epidemic or antibiotic-resistant bacteria.
At the same time, the dynamism of our economy—the capacity to produce new and better goods and services—increasingly depends on infrastructure investments. For example, we are not going to be able to engineer the necessary transition to a transportation system based on electricity-driven cars and trucks without building out an infrastructure of charging stations. Similarly, creating the smart homes of the future requires big investments in creating a bi-directional electrical grid.
It is not that the government has to pay for the entire infrastructure itself. The private sector can do a lot, but the government has to create the framework and the incentives for the private sector to step up. But it would be a grave mistake to think that we can have economic dynamism without substantially larger investments in infrastructure. Such investments are essential for continuing economic progress.
In addition to a longer, and broader, view on innovation and development, the Schumer proposal could more heavily emphasize the role of state and local governments as leaders in shaping and helping to finance infrastructure spending. To be sure, the Schumer proposal, in contrast to Trump’s, recognizes that state and local governments are caught in a fiscal vise and simply cannot afford to make some of the most necessary infrastructure investments. But there is still too much in the Schumer plan that continues a discredited tradition of “Washington knows best” policies.
A classic instance of this ineffective top-down approach is the role that the Schumer plan designates to the Army Corps of Engineers, which the plan would provide with $25 billion in new water and harbor infrastructure projects. Before Katrina hit, the mindset of the Corps led to a series of disastrous choices in its strategies for managing the waterways around New Orleans. The lesson is obvious: infrastructure is way too important for its decisions to be made far from the public. If dollars are to be spent wisely, decisions about infrastructure need to be widely debated with a lot of public input. Otherwise, decisions that affect the lives of millions, and which therefore require a broadly based decision-making process to be made effectively, are instead made unilaterally, and often with private, instead of public, interests in mind.
Making infrastructure decisions with more democratic input means pushing decisions down to the state and local levels. Washington certainly has an important role to play in maintaining standards, enforcing Buy America and nondiscrimination rules, and setting incentives, for example, for shifts away from dependence on energy sources that exacerbate global climate change. Washington also has to police corruption, and assure that decision-making includes the voices of all citizens. But precisely because infrastructure is so important, the goal should be to give communities more voice in deciding what kinds of infrastructure they build, because those decisions will ultimately determine what their communities look like.
The goal should be to give communities more voice in deciding what kinds of infrastructure they build, because those decisions will ultimately determine what their communities look like.
So a part of that process has to be increasing the capacity of state and local governments to finance needed infrastructure. The Schumer plan does mention one key step: the creation of a national infrastructure bank—an “I bank”—that would leverage private capital to help finance needed infrastructure projects. But the plan’s writers mention this only at the end of their proposals, and it does not come across as a central element of their plan. Creating this kind of public–private infrastructure bank is a vital first step if we are to move infrastructure spending up to 3.5 percent of GDP from the current 2.5 percent and locate infrastructure decision-making closer to the people who are affected by those choices.
The infrastructure bank proposal is very different from Trump’s plan for public–private partnerships. In Trump’s model, corporations are left in control of the highways or ports or water systems that they have built. But with a public infrastructure bank, private investors would be paid interest on the bonds used to finance infrastructure, but the structures themselves would continue to belong to the public.
“Build America Bonds” are another promising mechanism to support state and local investments. These were used successfully by the Obama administration in 2009–2010. The federal government agreed to pay one-third of the interest on state and local bonds issued to finance construction projects. Demand for the bonds by investors was strong, and about $180 billion were issued in less than two years. This shows that federal dollars can be leveraged to generate a much higher level of infrastructure spending by state and local governments.
With new mechanisms to finance major infrastructure projects at the state and local level, then there would be space for state legislators and local elected officials to compete over who has the best ideas for improving the lives of their constituents. Healthy competition of this nature could help create a politics that would really connect with the concerns of voters over affordable housing, access to quality education and health care, living in resilient communities protected from climate change, and growing the number of good jobs—connectivity that neither the Trump administration’s policies, nor the the Senate Democrats’ rebuttal, adequately prizes or seeks to cultivate.
Moreover, community-led infrastructural politics also creates the potential for new inclusive political coalitions. As the Senate proposal recognizes, financing of infrastructure can be used to provide opportunities to women- and minority-owned businesses. With strong Buy America provisions, jobs can be created for both minority and white working-class communities with high unemployment. And improving mass transit and providing other amenities can help upgrade previously neglected urban neighborhoods.
As infrastructure spending has become central in shaping economic dynamism, redistributing the decision-making that directs it would give citizens and communities the possibility of regaining control over their destinies. With adequate investment, and public outreach concerning its power and importance, infrastructure investment can become the key to building stronger and more prosperous communities.