President Trump and Congress teamed up on a $2.3 trillion stimulus bill, the largest spending bill in American history, to combat the negative economic impacts of COVID-19 and the government-mandated shutdowns. Now, with record weekly unemployment numbers piling up, President Trump is calling for another $2 trillion stimulus bill.
Trump recently tweeted that “this is the time to do our decades long awaited Infrastructure Bill. It should be VERY BIG & BOLD, Two Trillion Dollars, and be focused solely on jobs and rebuilding the once great infrastructure of our Country!”
But, with the national debt at $24 trillion, it would be wise to ask if the stimulus spending would help the country achieve its long-term infrastructure goals.
President Trump says the nation needs to modernize its infrastructure. He’s correct. Airports and the air traffic control system are out of date. Urban highways are clogged with traffic. Many bridges are structurally deficient. And, so on.
But President Trump’s call for a $2 trillion infrastructure stimulus bill is not a strategic infrastructure plan, it’s a jobs program — and it’s an inefficient jobs program at best.
Infrastructure projects should be prioritized based on improving the mobility of people and goods, not on creating jobs for every congressional district. We’ve been down this path before. The 2009 American Recovery and Reinvestment Act (ARRA), the Obama administration’s stimulus bill, included $48 billion for transportation and $26 billion for highways. But the supposedly shovel-ready stimulus projects weren’t ready and didn’t create jobs.
One problem — road construction is a skilled trade requiring training in high-tech machinery so transportation departments can’t just go out and hire unskilled workers.
Additionally, since stimulus spending focuses on getting money out the door quickly, little attention is paid to whether or not that spending is actually improving infrastructure. Too much of the ARRA money was spent repaving roads that didn’t need it just to create work, which allowed states to meet the requirements needed to keep getting money.
A study by the Federal Reserve Bank of St.Louis reviewing the 2009 stimulus found that the “highway system saw no significant improvement” and “the number of workers on highway and bridge construction did not significantly increase, and the annual value of construction put in place for public highways barely budged.”
The author, Bill Dupor, found “that as states spent Recovery Act highway grants, many simultaneously slashed their own contributions to highway infrastructure, freeing up state dollars for other uses.”
Ultimately, transportation is a poor match for stimulus spending. Highway megaprojects are one of the nation’s biggest transportation needs, but these projects require planning, years of environmental reviews, pre-construction prep activities — such as moving utilities — and other steps before construction ever begins.
“The slowness of capital spending makes it a poor fit to counter any short-term downturn in the business cycle (and right now, it is unclear if the coronavirus-instilled part of this will be a short, sharp shock or a signal of something longer-term),” wrote Jeff Davis of Eno Transportation Weekly.
Instead of spending trillions more, a better approach would be to unleash the private sector. In the past five years, the 50 largest global infrastructure investment funds have raised $500 billion to invest in revenue-generating projects, including highways. Using long-term public-private partnerships, these private funds have been building and modernizing toll roads across the world. Most state transportation departments are looking for major investments like that. And most infrastructure funds are looking for projects to invest in. Pairing these two groups would make a perfect marriage and Congress can make it happen.
First, Congress can help increase the use of private activity bonds—tax-exempt bonds that allow private partners to get favorable borrowing terms on infrastructure projects. When Congress authorized private activity bonds in 2005, it capped the program at $15 billion. Fast forward 15 years and almost all of that has been used. Congress needs to lift the cap and clarify that the bonds can be used to finance improvements of existing roadways in addition to new construction projects.
Second, Congress can require the U.S. Department of Transportation to implement the Transportation Infrastructure Finance and Innovation Act (TIFIA) as the law requires. The program’s intent is to issue loans of up to one-third of a project’s costs to any improvement project that receives an investment-grade rating. But instead of trusting investors, DOT has created red tape and a series of hoops to jump through that limit the program.
These changes would spur improvements in major highways and are the simplest way to generate smart new roadway investments. And, importantly, unlocking these financing tools does not require any new money from taxpayers.
The 2009 stimulus bill failed to create transportation jobs and didn’t modernize our infrastructure. President Trump already signed a $2.3 trillion stimulus bill of his own just a few weeks ago. It is clear that infrastructure spending is not well-suited to generate quick fiscal stimulus and Trump’s calls for another $2 trillion stimulus bill are wildly misguided.