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What Does Trump Mean When He Says 'Infrastructure'?

Maybe the president-elect is talking about subsidizing profitable real-estate projects that would get built anyway.

The developer-in-chief walks through the construction site of D.C.'s Trump International Hotel. (Jim Bourg/Reuters)

What Donald Trump’s famous $1 trillion infrastructure build-out will look like—and whether Congress will let any of it happen—is currently a matter of great speculation. Key among the questions waiting to be answered is a very basic one: What is Trump talking about when he talks about “infrastructure”? Is it the state highways and municipal water pipes you’re imagining? Or could it also be the kind that’s attached to the kind of projects a golf course developer/casino magnate would know best: real estate?

Trump has said some traditionally infrastructure-y words when he talks about this. “We’re talking about a very large-scale infrastructure bill,” the president-elect said in a long-ranging interview with the New York Times published Wednesday. “… [a]nd we’re going to make sure it is spent on infrastructure and roads and highways.” A proposal to privatize infrastructure projects released by Trump’s economic advisors describes the complex network of airports, bridges, highways, ports, tunnels, and waterways” that underpins private sector growth.

But neither that paper, nor Trump, has clearly specified what kinds of projects would be applicable under that privatization scheme, which would incentivize private companies to bankroll, construct, and own infrastructure assets by handing them tax credits worth 82 percent of their original down payments. All told, the advisors (who did not return request for comment; nor did Trump’s transition team) claim the plan would stimulate $1 trillion in infrastructure spending, with $0 billed to taxpayers—because the original federal tax credits would be eventually offset by tax revenue from associated wages and business profits.

The projects that would likely get built under such a scheme would not necessarily be the ones that best serve the public interest. Water pipe reconstruction in Flint, for example, could be unlikely to get private investors excited, since such a project might not prove lucrative over time. On the other hand, projects that would generate returns—say, a toll road in a very congested area—could lure investors. But even then, it’s very hard to imagine that enough attractive highway projects exist to add up to $1 trillion in infrastructure investment—or enough tax revenue from profits and wages for the feds to break even.

Unless! Unless the projects Trump’s team is talking about are not necessarily about “rebuilding” “infrastructure” in the regular sense—but rather, major new property developments. Could an industrial park primed to have a major, even transformative, economic impact on a region be considered infrastructure? Perhaps. And Donald Trump sure knows about developing apartments. Could new housing be considered infrastructure? What about all the sewers and utilities required to support new residential development? Think of the construction booms happening on, say, Roosevelt Island in New York City or Hunters Point in San Francisco. Developers often pay out of pocket through impact fees for water, power, and roads that accompany those kinds of lucrative developments. But perhaps under a Trumpian infrastructure scheme they’d be eligible for a whopping 82 percent tax credit.

This would be wrong, on several levels. First, even without an expansive definition of “infrastructure,” there is little reason to believe that Trump’s scheme would actually generate new investment. Paul Krugman pointed out in the New York Times that it could wind up privatizing projects that would have been built anyway with regular federal support—in other words, removing assets from the public’s control, and for giveaway prices. If Trumpified infrastructure includes certain types of profitable real estate projects, then the federal government would be subsidizing ventures that private companies would want in on anyway. The government would be controlling the market, and effectively lining the pockets of those private stakeholders—while footing the public with the bill. Krugman offers an example of how this would work:

[I]magine a private consortium building a toll road for $1 billion. Under the Trump plan, the consortium might borrow $800 million while putting up $200 million in equity—but it would get a tax credit of 82 percent of that sum, so that its actual outlays would only be $36 million. And any future revenue from tolls would go to the people who put up that $36 million.

Or let’s say this technique is used for a profitable new logistics center. Taxpayers would be paying for a project that the private market would have built even without the incentive. The companies that construct and run the center get big checks. This is the definition of corporate welfare. And it could breed corruption on a very grand scale.

Prominent members of Congress, including Democrats, have said that they would work with the president-elect on his infrastructure bill (several have now dialed back a bit). First they should pin down exactly what he means by infrastructure, because there is no legal definition. The infrastructure in Donald Trump’s mind might not be the infrastructure in yours or mine. As previous inquiries into the president-elect’s mental state suggest, it’s probably not the only thing he sees differently.

About the Author

  • Laura Bliss
    Laura Bliss is a staff writer at CityLab. She writes about the environment, infrastructure, and cartography, among other topics.