Trump's State of the Union's Infrastructure Aspirations Lofty but Details Scant

In his first State of the Union address, President Donald Trump proclaimed a "new American moment" and urged Congress to pass major infrastructure legislation this year.

"I am asking both parties to come together to give us the safe, fast, reliable, and modern infrastructure our economy needs and our people deserve," Trump said.

Calling today "a time to rebuild," the president called for legislation that would generate "at least $1.5 trillion" in infrastructure investment. Previously, he had set the target at $1 trillion for the package with $200 billion of that in direct federal spending.

Trump Raises Fiscal Bar for Infrastructure

In recent days, the president and other administration officials had begun referencing a higher amount. In a possible reference to the chronic problems with the gas tax-funded Highway Trust Fund, Trump also said that new legislation should "permanently fix the infrastructure deficit." The president's speech raises the fiscal bar for a Congress struggling to enact this year's final budget and facing looming midterm elections this fall.

While the speech's aspirations for infrastructure were lofty, details were scant.

Trump noted that any federal spending should be "leveraged by partnering with State and local governments and, where appropriate, tapping into private sector investment." The other policy component noted was "streamlining the permitting and approval process."

These elements were also reflected in a draft of the administration's infrastructure plan widely reported in the media. According to that document, the current thinking in the White House is that 50 percent of new federal grant funding would be based on dedicated local, state or private funding.

The traditional highway funding ratio of 80 percent federal and 20 percent state would be flipped, with federal support through the grants topping out at a 20 percent maximum. These incentive grants would be joined with a separate pool of funding for rural areas and major "transformative" projects. The plan also calls for significant expansions of existing federal financing funds, like TIFIA, and generating private investment by boosting Private Activity Bonds and adding tolling flexibility.

Issues Facing Congress

The State of the Union remarks and the leaked draft plan raise several important questions that Congress will have to answer to strike a deal.

How much of the plan will be direct federal funding?

A major point of contention will be how much of the package is direct spending. Early discussions suggested $200 billion as the target, but there appears to be some bipartisan momentum to push that number higher. The higher target of $1.5 trillion may also mean a higher baseline for federal funding.

But, the debate over the funding level will certainly be connected to the larger budget. Finding offsets would be challenging. The question of "how to pay for it" is always the hard bit of any infrastructure debate and this one will be no different.

What will be the corresponding impact on other infrastructure and domestic programs in the budget?

In last year's budget, the administration proposed massive cuts and program eliminations for many existing infrastructure programs. Many advocates fear that funding for any new infrastructure package would have to be offset by cuts to existing programs. There will likely be even more pressure on the appropriations process this year given the deficit impact of tax reform, the cost of disaster relief, and the desire for additional defense spending.

How much of the funding burden can local governments bear?

The shift to great reliance on local funding will be tricky.

There will be hard questions to answer about the right ratio of local to federal funding, as well as the ratio of public to private investment. Early drafts suggested incorporating a "lookback" period so that states and localities that recently raised infrastructure funding and levies would get some credit.

Additionally, many communities are concerned about new costs imposed as a result of the recently enacted tax reform legislation.

What is the right mix of non-direct funding revenue sources?

Another key flashpoint in the coming debate will be the appropriate role of private sector funding and, just as important, how to generate that investment.

How can places and projects that can't attract or raise separate funding be supported?

Expect to hear a lot about how to generate funding for projects that would be hard to fund through private investment, particularly rural projects and transit. There will likely be some separate funding sources identified and new flexibilities around how private funds are used, such as asset recycling and tolling.

What Happens Next

Key points for Democrats on Capitol Hill will certainly be the overall level of new funding and the scope of any regulatory reform. Meanwhile, expect to hear some GOP pushback over any new funding that increases the deficit. It will be a tough political needle to thread for infrastructure supporters. Still, leaders of key congressional committees sounded an optimistic note.

There will be a more detailed discussion of the plan during the GOP congressional retreat that begins today. Transportation Secretary Elaine Chao and White House economic advisor Gary Cohn are slated to join Hill leaders to talk about the details and next steps.

The White House has promised to release a detailed policy outline as early as next week with a budget expected shortly thereafter.

Congress faces a tough but important challenge in crafting infrastructure legislation this year. In the State of the Union, the bar was raised but the details were few with the need still urgent.

The focus and now-familiar plea for infrastructure is welcome. Still, specific policies will be critical in determining what can be done and whether it will advance the goals of real, sustainable funding driven by effective planning.

Infrastructure legislation can be part of "building a safe, strong, and proud America," but the hard work lies ahead.

Other Planning Issues in the Address

Infrastructure wasn't the only planning issue on APA's radar raised in the president's speech.

The address kicked off with a discussion of the major natural disasters of 2017. Trump focused on the human bravery and compassion witnessed and pledged support for rebuilding efforts. No mention was made of the policy changes needed to protect communities from future disasters.

Resiliency and mitigation were not mentioned but are critical. Reauthorization of the National Flood Insurance Program provides one important opportunity in 2018 to advance those priorities.

Top image: President Donald Trump delivers the 2018 State of the Union address to Congress. photo.

About the Author
Jason Jordan is APA's director of policy.

January 31, 2018

By Jason Jordan