But before they blindly get on board with Trump's plan, Democrats need to give it a long and hard look. The plan is nothing more than a massive giveaway to the rich. It will not meet the infrastructure needs of the country and will not create many (if any) new jobs for the economy. It's a sham that sounds good, but delivers nothing (except more money for corporate interests).
Here's some of what Bryce Covert at Think Progress has to say about Trump's infrastructure plan:
Trump’s team has already laid out exactly how it would invest in infrastructure, in a paper authored by advisers Wilbur Ross and Peter Navarro. But if Democrats were to read the details, they would quickly see there is little worth endorsing.
In short, rather than have the government raise or borrow money at incredibly low interest rates and then grant the money to state and local governments to build or maintain infrastructure, Trump’s plan would give private investors tax credits for construction projects. Those private firms would then raise the rest of the money needed for those projects, recouping the costs in profits.
Such projects would address very few of the country’s most dire infrastructure needs, end up costing some Americans a lot more money, and generate little to no economic boost. However, the plan would be a major windfall for private companies looking to boost their bottom lines.
There is a universe of infrastructure projects that the private sector could be interested in that have profit potential. Roads can be turned into tollways and those resultant fees can go to private investors. Small airports that serve private and corporate jets can charge usage fees. Private water and electrical utilities can take over systems or become partial investors and charge higher rates.
But they have to be large enough to generate high returns, come with a source of profit, and only be doable with the additional help provided by new tax credits. That all narrows it down considerably. “You have to make some pretty generous assumptions about how many new projects that were otherwise just going to sit on a shelf uncompleted are all of a sudden resurrected because of some tax credits,” said Kevin DeGood, director of infrastructure policy at the Center for American Progress. “It’s a really small little universe of potential projects.”
That universe also eclipses many of the country’s most dire needs, especially the kinds of investments that bring the highest longterm gains. Rail projects like Amtrak or public transit would be left out. School buildings and facilities won’t get much-needed upgrades, even though they need millions in investment to keep them up to date. Levees don’t come with any revenue, but a number of places along the coasts, such as Louisiana and Florida, are in desperate need of them, plus the country needs to spend $100 billion just to repair and rehabilitate the ones that already exist.
“When we think about the really big social benefits of infrastructure, we’re thinking precisely about the places that generally can’t afford it themselves and there isn’t a lot of profit,” noted Josh Bivens, research and policy director at the Economic Policy Institute. Under Trump’s plan, “Projects that are profitable will be undertaken and those without profit won’t be,” he added, which is “almost the exact reverse ordering where you get the big bang for the buck.”. . .
Ross and Navarro promise in their policy paper that Trump’s infrastructure plan won’t cost the government anything.
But Americans who use these assets are the ones generating profits for the private investors by paying higher fees and rates. “The public is paying in part through these tax credits, and partly through… turning these over to the investors,” said Paul Van de Water, senior fellow at the Center on Budget and Policy Priorities. While it’s possible for local governments to pay investors directly for upgrading infrastructure, that’s not the kind of project Navarro and Ross appear to discuss.
And these fees are regressive, acting as a consumption tax for those who use highways and water systems. If projects mostly get constructed in affluent areas it may end up being less of a problem, but the pain of the cost becomes pinpointed on certain people, rather than spread out and shared as when general government revenue is used to fund them. “If you’re somebody who happens to need to use that asset on a regular basis, then the cost to you is exorbitant,” DeGood said. “The pain of this will be very uneven.”. . .
There is also a small chance that this kind of undertaking will bring the economic rewards Trump says he is looking for. To generate more jobs, more growth, and more tax revenue for the government, the infrastructure plan has to lead to the undertaking of new projects that wouldn’t have happened in its absence.
But that’s an unlikely scenario, these economists all agreed. A lot of the projects are already underway or being planned without Trump’s tax credits. “With tax credits to incentivize behavior in any context, you end up not inducing new activity, you end up giving a windfall to people who were going to do a project anyway,” Bivens said. States that don’t want to pay for planned projects themselves, for example, can simply get a private firm to do it instead — but that’s not creating anything new.
That also means that the people who would have been employed on the projects through the government will simply be employed by a private firm, so no net new jobs get created. “The total impact to employment is almost a rounding error,” DeGood said.
And while state and local governments usually have to compensate workers according to prevailing wage laws, paying them at least certain amount, private firms usually don’t have to abide by the same rules. So if a project that was going to be government-run and employ workers at the prevailing wage is instead shifted to a private investor that can undercut wages, the workers just end up being paid less. “You’ve done nothing but lower wages,” Bivens said.
This all means the actual economic stimulus will be low to nonexistent. “It could be a really low number,” Bivens said. “Not a trillion, that’s for sure.”. . .
What it does mean is that private companies, such as those that run electric grids and water systems, can expect a tax break for some of the maintenance they already have to do. “They’re working to maintain and modernize their facilities anyway, presumably,” noted Van de Water. “It’s going to be a windfall tax break for stuff that was being done anyway.”
The other firms that stand to get tax breaks are all straight from Wall Street: investment banks, private equity firms, anyone who invests money in equity projects. “This scheme just seems like a boondoggle for business,” Van de Water added.
“It’s basically a big tax increase on middle class Americans,” DeGood noted, given that they have to pay more in fees and higher rates, “and a giant shifting of wealth upwards towards Wall Street financiers.”