An infrastructure plan to build profits

March 13, 2018

Trump's infrastructure plan is a not-so-thinly veiled attack on labor unions, environmental regulations and state budgets, explains Neil Loehlein.

THE TRUMP administration released a 53-page plan last month to upgrade the country's infrastructure. However, Trump's plan looks to be less of a plan to fix the U.S.'s crumbling infrastructure and more of a deregulation and privatization scheme to slash environmental regulations and hand over public institutions and facilities to for-profit companies that will make back their investment by gouging residents with tolls and user fees.

There is no question that the U.S. sorely needs upgrades to its infrastructure. In its 2017 Infrastructure Report Card, the American Society of Civil Engineers gave the U.S. an overall grade of D+ and estimated $4.6 trillion is needed over 10 years to fix the country's deteriorating infrastructure.

Can Trump's plan address the infrastructure crisis? Don't hold your breath.

For one, the plan is underfunded, placing the burden of funding on state and local governments. The plan's goal to identify $1.5 trillion in funding spread over 10 years is well below what is needed, and it relies on a paltry $100 billion in federal grants, loans and bonds and $100 billion to incentivize state, local and private investment.

A bridge over the Mississippi River in Minneapolis collapsed in 2007, killing 13 people.
A bridge over the Mississippi River in Minneapolis collapsed in 2007, killing 13 people.

What's worse, $200 billion of the proposed funds would be the result of cuts to federal spending in next year's budget. According to Hunter Blair of the Economic Policy Institute, Trump aims to raise federal money for the infrastructure plan with cuts of hundreds of billions of dollars to programs such as food stamps, Medicare and Medicaid. So, the Trump plan will balance the costs of infrastructure by slashing desperately needed services for the poor and working class.

The proposed cuts in Trump's budget would also undermine the infrastructure plan itself. According to economist Paul Krugman, "The budget proposal...doesn't just impose savage cuts on the poor, it includes sharp cuts for the Department of Transportation, the Department of Energy and other agencies that would be crucially involved in any real infrastructure plan." Trump's budget actually cuts $280 billion in funding to infrastructure support, resulting in a net loss to infrastructure spending.

Moreover, the plan only allows 20 percent of federal funding for each project, leaving the remaining 80 percent to be made up by state or municipal governments, possibly in cooperation with the private sector. This funding split requires a lower proportion of federal dollars relative to state and local funding than previous federal transportation programs, such as TIGER and New Starts, programs that the Trump administration's last budget slashes or eliminates entirely.

THE TAX cut bill passed in late 2017 also contributes to the problem by making infrastructure financing more expensive for local and state governments.

Given the reality that nearly half of states in the U.S. faced revenue shortfalls in 2017 and that local governments are experiencing a contraction in revenue after some years of post-recession growth, compelling them to bear the burden of the $1.3 trillion in non-federal funding sounds utterly utopian.

Labor historian Joseph McCartin explains the implications of this:

The lack of funding commitments from governments will in turn open the door to the increasing privatization of public resources, including even highways, bridges, and the nation's air traffic control system. Indeed, the plan appears more intent on shoring up the privatization movement than shoring up our crumbling infrastructure.

But this is only one reason to think that Trump's infrastructure plan is just a massive privatization scheme. A new report released by In the Public Interest points out:

The plan would make it easier to privatize existing federal assets by allowing the federal government to take assets directly to market, instead of allowing state and local governments to buy the property at discounted rates, as it has traditionally done, suggesting that the administration really intends for these assets to be sold off to private investors.

As candidates for this sell-off of public assets, Trump's plan explicitly names Ronald Reagan Washington National Airport, the Dulles International Airport, electrical transmission assets like the Bonneville Power Administration and the Tennessee Valley Authority, as well as highways like the George Washington and Baltimore-Washington Parkways.

Trump's infrastructure plan also promotes privatization through the establishment of "public-private partnerships" (PPPs) by offering tax-exempt bond financing. PPPs attract private investors to a project by offering them various lucrative incentives, such as tax breaks, a level of control over the completed infrastructure (privatization), and the ability to reap profits off it into the future.

PPPs give big business a larger role in shaping government agendas while reducing the influence of the public on the process.

As David Harvey explains in his book A Brief History of Neoliberalism, PPPs emerged with the rise of neoliberalism as a way of structurally integrating state decision-making into the dynamics of market capitalism--to the detriment of democratic accountability.

Through PPPs, the profit motive of business interests can influence public policy, determining what projects get approved based on the money that they will likely generate for private investors, often with little to no public oversight.

PRIVATE COMPANIES ruthlessly seek to maximize their bottom line, so cost cutting and lower wages for workers are standard practice with PPPs. Furthermore, projects that won't yield a large profit for investors won't get built, leaving working-class and low-income communities behind. Will the residents of Flint, Michigan, or other residents in depressed communities with aging or dangerous water facilities get a new water system under Trump's plan? Not likely.

PPPs don't have the greatest track record, either. It's worth looking at the PPPs established during Vice President Mike Pence's governorship of the state of Indiana. According to the International Business Times, the Interstate 69 highway privatization scheme championed by Pence "collapsed after months-long construction delays, allegations of financial mismanagement and a surge in traffic accidents." The highway was taken back under state control in August 2017.

Pence also rejected any considerations that the privatized Indiana Toll Road be handed back to state or county control after the consortium managing the highway went bankrupt. Multiple audits of the highway showed a spike in deficiencies in the road and bridges after its privatization via PPP in 2006.

In 2008, the state had to pay $450,000 in lost toll revenue to the consortium due to the suspension of tolls to assist flood evacuees. Regardless, Pence chose to hand over private control of the Toll Road to IFM Investors, an Australian company whose lobbying firm funneled more than $116,000 in campaign contributions to him.

To add insult to injury, commuters using the Indiana Toll Road saw their tolls jump 131 percent--from $4.65 to $10.75--last spring after a state subsidy was ended, exposing drivers to the equivalent of more than a decade's worth of toll hikes in just one month under privatization. The takeaway: commuters get socked with higher tolls and deteriorating road conditions while private investors rake in the money. Indiana's woes with PPPs are just the tip of the iceberg. Across the U.S., these projects have failed to deliver for infrastructure users while delivering fat returns for private investors.

The Australian government recently began talks with the Trump administration about the possibility of funding U.S. infrastructure projects with Australian pension funds. Coincidentally enough (or not), IFM is one of the firms poised to take advantage of the infrastructure plan. With the suppression of competitive bidding associated with PPPs, Trump's and Pence's corporate friends could be handed lucrative deals at the expense of everyone else.

TRUMP'S INFRASTRUCTURE plan uses the pretext of streamlining the permitting process to effectively gut environmental regulations, thus stripping government agencies of their ability to protect fragile ecosystems and endangered species.

"This isn't an infrastructure package," said Melissa Samet, an attorney with the National Wildlife Federation. "This is an all-out attack on longstanding environmental protections."

A strict 21-month time limit to conduct environmental reviews is established by the infrastructure plan, as well as a drastic reduction in the time to legally challenge permits--from six years down to 150 days. These changes could effectively fast-track projects like oil and gas pipelines, diminishing environmental review processes to a rubber stamp, and allowing Indigenous water protectors, environmental activists, and others an infinitesimally small window within with to launch legal challenges to environmentally devastating projects.

Trump's plan would also extend pollution discharge permits under the Clean Water Act from five to 15 years, giving municipal wastewater plants and polluting industries more leeway to dump pollutants in water bodies. To top things off, the plan would grant Interior Secretary Ryan Zinke sole authority to establish natural gas pipelines in national parks.

Trump's plan is also an attack on organized labor. As The Nation's Michelle Chen explains:

The plan specifically seeks to dismantle the labor mandates, such as using union labor in these partnerships, which the administration considers an unnecessary "constraint" that "impedes the greater use of public-private and public-public partnerships,"...effectively "eliminat[ing] the program requirement that participants utilize existing union staff."

Trump has asserted that his infrastructure plan will "strengthen the economy," but it's poorly designed if the aim is truly to provide economic stimulus or create more jobs. A new forecast released by the University of Pennsylvania's Penn Wharton Budget Model casts doubt on the capacity of Trump's plan to boost the economy.

The study's authors write:

[B]ased on past evidence, much of the new federal aid would lead to state and local governments increasing total infrastructure investment by less than the value of the aid itself. We estimate that total new infrastructure investment would increase between $20 billion to $230 billion, including the $200 billion federal investment. There will be little to no impact on the economy.

Additionally, infrastructure projects that are already in the pipeline can qualify for funding under Trump's plan, meaning that a large number of previously planned infrastructure projects may take advantage of the financing incentives, leading to fewer new projects coming online and an insignificant net gain in jobs.

Japan's failure to stimulate infrastructure-led growth since the 1990s illustrates the limitations in terms of job creation and economic recovery. The highly mechanized nature of infrastructure projects means that investment in these types of projects routinely generate fewer jobs than politicians claim.

Furthermore, while public investment may bump up growth a bit, there has been very little correlation between government spending and growth in the U.S. since 2009.

"What really drives investment in modern capitalist economies, where private capital investment dominates, is the profitability of projects," according to Marxist economist Michael Roberts. "Private investment has failed to deliver because the profitability is too low."

Capitalism is in the throes of a protracted economic crisis with low growth and investment rates, and no amount of government spending will solve this for the long run.

When you look beyond the smoke and mirrors, Trump's infrastructure plan is less about infrastructure and more about massive handouts to corporations and stripping environmental and labor protections so that big business can make bank at the expense of everyone else.

What would a socially and environmentally just infrastructure plan look like? For starters, such a plan would aim to mitigate environmental devastation rather than accelerate it. A plan aimed at transition our fossil-fuel driven economy to one based on renewable energy--such as wind and solar power--would also create good-paying jobs and eliminate the need for coal and nuclear power.

Pipelines such as the Keystone XL and Dakota Access Pipeline could be decommissioned and deconstructed, freeing Indigenous land from the dangers of toxic spills. Infrastructure could be built to protect communities of color that are concentrated in areas most vulnerable to climate-driven disasters. These are just a few examples of what such a plan could look like.

But we won't get an infrastructure plan like this if Trump and the corporations he serves have their way. If we want a plan that will benefit poor and working people and not just pad the pockets of the super rich and powerful, we will need to fight Trump and his billionaires' agenda every step of the way.

Further Reading

From the archives