$1.5 trillion infrastructure plan touted by Trump with no clear way to pay for it

One year after he first promised to make America’s highways great again, President Donald Trump again is touting what at first glance appears to be a bold $1.5 trillion infrastructure program. And once again, he makes no concrete way of paying for it.

In his State of the Union address last night, Trump asked Congress to produce a bill that generates at least $1.5 trillion “for the new infrastructure investment we need.” But such a deal likely will be paid for by cash-strapped state, local and private entities—not the federal government.

Even fellow Republicans immediately questioned the worth of such a promise without a concrete way to pay for more concrete and asphalt. John Cornyn, R-Texas, a member of the Senate leadership, told the Wall Street Journal right after the speech, “The question is how are you going to pay for it? You tell me how we can pay for it and I'll tell you what we can do.”

Sen. Angus King, I-Maine, a senator who usually caucuses with Democrats, echoed Cornyn’s call for specfics, telling Business Insider: ““There was no comment about where the money would come from. That's what worries me.”

Freight interests immediately hailed the initiative. The Coalition for America’s Gateways and Trade Corridors (CAGTC) urged an emphasis on multimodal freight infrastructure. In his address, Trump predicted that 2017’s tax reform law will yield increased economic activity – but without sufficient federal investment in goods-moving infrastructure, these positive returns may not fully be realized.

“For years, federal freight infrastructure investment has lagged while our population and national economy grow,” CAGTC President Leslie Blakey said. “This financial burden cannot be shouldered by states, localities and the private sector alone, and we welcome President Trump’s commitment to driving an investment plan at the federal level.” said.

Blakey said “existing programs are oversubscribed.” She and others are encouraging the administration to commit “significant resources” above current funding levels and dedicate a minimum of $2 billion annually to freight projects. 

The freight system moves 55 million tons of goods daily, worth more than $49 billion. That’s roughly 63 tons per person annually; meanwhile, the U.S. population is expected to increase by 70 million by 2045. To capitalize on this growing consumer base, our infrastructure network must be up for the task, freight interests said.

“Infrastructure investment is a bipartisan issue at its core,” said CAGTC Chairman Tim Lovain, of Crossroads Strategies. “I commend the administration and Congress for prioritizing infrastructure in 2018. Freight movement across all modes is expected to grow nearly 42 percent by 2040.”

Michael Burke, Chairman and Chief Executive Officer of AECOM and Chair of the Business Roundtable Infrastructure Committee, said he was “encouraged” President Trump is making infrastructure renewal a priority, but added: “Now the Administration and Congress must act with urgency to fix America’s roads, bridges and other important arteries of American commerce. The cost of inaction is too high.”

Meanwhile, the American Trucking Associations is urging lawmakers to back its Build America Fund plan, which it calls a “bold solution to fund the modernization of our deteriorating network” of roads and bridges.

“Roads are not a partisan issue – they’re driven on by Republicans and Democrats alike,” ATA President Chris Spear said. “As both sides of Capitol Hill know, modernizing our infrastructure will require a substantial investment – actual, real revenue. America cannot be rebuilt with funding gimmicks and finance schemes.”

In a major change, ATA is publicly backing a nickel a gallon increase per year over four years to help pay for the Build America Fund. The fee would be indexed to both inflation and improvements in fuel efficiency, with a 5 percent annual cap. ATA estimates the Build America Fund would generate $340 billion in new revenue over the first 10 years.

Trucking executives, led by FedEx Corp. founding chairman and CEO Fred Smith, have long called for an increase in the federal gasoline and diesel fuel tax as the best way to prop up the sagging Highway Trust Fund. The federal government has bailed out the HTF to the tune of more than $60 billion over the past 17 years.

“Tax reform has reignited the American economy, and it is paramount that this new economic growth is supported by a strong national infrastructure,” ATA President and CEO Chris Spear said in a statement. “A 21st century transportation network cannot be sustained with financial tricks and finance schemes. It requires real and substantial investment.”

The Build America Fund is “the most efficient – and conservative – way to generate infrastructure investment and adheres to the bedrock principal that users only pay for what they use,” Spear added.

ATA says that although trucks account for 14 percent of vehicle miles traveled on the nation’s roads, the trucking industry currently covers approximately 45 percent of the Highway Trust Fund through the commercial truck diesel and gas tax and other trucking-specific excise taxes.

“The trucking industry is putting our money where our foot is,” Spear said. “Trucking already pays half the nation’s highway funding tab, and we are ready to pay more. Through the Build America Fund, the trucking industry would invest upwards of an additional $112 billion into our nation’s roads and bridges over the next decade. Solving a challenge of this size requires big and bold solutions, and we call on Washington to step up with us.”

Spear ripped other “so-called ‘creative financing’ tools” as a “road to nowhere” because they fail to generate enough revenue or are inefficient such as tolling.

“Study after study shows the shortfalls of tolling and the unintended consequences that tolls impose on motorists and surrounding communities,” he said. “There is nothing ‘conservative’ about tolling.”

Studies by the Transportation Research Board of the National Academy of Sciences show as much as 12 percent of tolling revenue is wasted to administrative, collection and enforcement costs. In contrast, 99 percent of revenue collected through a fuel user fee is allocated to its intended purpose of maintaining infrastructure.

The U.S. Chamber of Commerce, which is pushing a nickel-a-gallon hike in the fuel tax over the next five years to help pay for a major infrastructure upgrade says it’s time to stop thinking about infrastructure as a problem, but as an opportunity for the country’s brightest minds and bipartisan government officials to think innovatively. That means innovative business minds, government, and nonprofits groups rolling up their sleeves to create the infrastructure of tomorrow.

The Chamber has laid out its vision for the country’s infrastructure four after business leaders told them it’s time to modernize and creating a forward-looking infrastructure system that not only solves some of society’s and the business world’s problems of today while creating the environment for a better tomorrow.

Rich Funk, Associate Director Product Supply, Purchases, Global eCommerce Logistics, Strategy, Sustainability for Procter & Gamble, is quoted on the Chamber web site as saying the future of all transportation has greater automation, override safety features and systems with smart learning artificial intelligence.

“The only thing missing is really infrastructure that we don’t have right now,” Funk says.  “And it’s going to slow down the movement and investment that’s happening in the industry.”

Whether its sensors allowing semi-autonomous platooning, Wi-Fi enabled roads and railways, or database smart traffic allowances, the nation needs to first fix its choke points, and second, invest in ongoing technology that allows for continued improvements to put us as best-in-class worldwide. Choke points include Chicago and St Louis — that choke off the flow of P&G products into the north and Northwest and the West — and California.

“We overcome those choke points, and we can invest more in our products sitting in warehouses waiting for inefficient transportation. That's cash tied up inefficiently versus us investing in R&D,” Funk told the Chamber.

There are a lot of reasons why improved U.S. infrastructure is important and will have a direct impact on productivity.

Bill Goodwin, AirMap general counsel, told the Chamber at a recent infrastructure event that one of the key things for unlocking the power of the drone economy is to build the digital infrastructure. That will enable transformative technologies to come to market.

“There is no area if the emerging economy that needs a change in infrastructure and can help change infrastructure more than drones,” Goodwin says.

After hurricanes Harvey and Irma, Americans saw use of drones emerge. Where a lot of regulatory barriers were washed away essentially the country had drones providing incredibly valuable assistance. Not to just search and rescue and identifying people at lower altitudes that couldn't be seen by helicopter, but targeting areas that had been flooded and identifying infrastructure harm to get resources targeting and prioritizing those areas.

“There is a gap between what drones can do and what they are allowed to do,” Goodwin said. “Digital infrastructure is the medium where we can solve some of the problems that some folks have with drones that are holding back the widespread adoption and the high volume commercial cases that we want to see unlocked.”