Infrastructure plans get boost in wake of COVID-19 spending spree in Washington
If there’s any bright spot coming out of the COVID-pandemic, it’s that the nation might finally benefit from a healthy boost of infrastructure spending.
After three years of on-again, off-again infrastructure plans in Washington, President Donald Trump and Congress appear ready to spend as much as $2 trillion on badly needed infrastructure investment. Trump is calling for a “VERY BIG & BOLD” spending package (Capital letters from a presidential tweet).
Asked on March 31 how he plans to pay for it, Trump responded at a White House press conference: “We’re going to borrow it.” Trump is citing “historically low” interest rates prompted by the recent cut in prime lending rates by the Federal Reserve as the reason to finally open the spigot on federal spending.
That view is shared by top Democrats as well. In an interview with the Wall Street Journal, House Speaker Nancy Pelosi, D-Calif., quoted Federal Reserve Chairman Jerome Powell: “He said with interest rates so low, think big.”
There is little debate as to need. Logisticians, leaders of the transport and business communities have been clamoring for more spending on infrastructure since Trump took office. But election year politics has given way to a spending frenzy in Washington in wake of COVID-19.
“It’s time to take on infrastructure,” House Ways and Means Committee Chairman Richard Neal, D-Mass., told the New York Times. “We treat that as an economic investment.”
The American Society of Civil Engineers, which recently graded U.S. infrastructure as “D-plus” has estimated more than $2 trillion is needed for U.S. infrastructure by 2025 alone. The World Economic Forum this year ranked the U.S. 13th in infrastructure.
But it appears if the White House and Congress can hammer out what would be a fourth stimulus spending bill in the wake of the COVID-19 crisis, not all the money will go to highways, bridges, rail tunnels and airports. There will be a push for spending broadband, 5G internet connectivity and water projects. There are estimates that U.S. infrastructure is 30 years behind some other nations.
Of course, Trump has teased with big infrastructure plans before only to have them disappear. Remember Infrastructure Week? That was after his 2016 pledge to seek $1 trillion in infrastructure spending. His 2018 State of the Union address talked about $1.5 trillion in new investment. But the plan always hit a wall because of disagreement over how to pay for it.
Then in 2019, Trump held out a $2 trillion proposal with a major string attached – he wouldn’t take action until Democrats agreed to drop the impeachment investigations.
One thing that is not on the table is raising the federal tax on fuels – 18.4 cents on gasoline, 24.4 cents on diesel, unchanged since 1993. There is no apparent appetite in either party to raise that tax in an election year. The current highway authorization will expire at the end of September.
If spending continues at current levels with no changes in the fuel tax rate, the Congressional Research Service projects a $74.5 billion deficit over five years. And that might be optimistic.
Fuel tax revenue has fallen even more sharply since the pandemic broke. INRIX, a traffic data analytics company, estimated personal travel nationwide for the week of March 23 had decreased by 44 percent from the month before.
Trucking is also down, but only slight as businesses replenish inventory. Long haul trucking is down 3 percent and local trucking operations fell 14 percent, according to INRIX data. The overall decline in road traffic is 38 percent. Such a decline will lead to a further decline in fuel tax revenue.
Because of the declining value of fuel tax revenue in the past 27 years, since 2008 Congress has taken $144 billion from general government funding to cover Highway Trust Fund shortfalls. It appears there’s more from that came from – borrowing.
