Commentators have broadly agreed Trump’s infrastructure proposal is not nearly enough. Here’s a blueprint for how to do better.
The coverage of President Donald Trump’s recent infrastructure plan has harped on one point: there’s not enough funding. The plan, touted as a $1.5 trillion infrastructure stimulus, in actuality only dedicates $200 billion in federal funds over the next ten years for what Trump envisions as “gleaming new roads, bridges, highways, railways, and waterways across our land”. For the rest, it relies on state, local, and private investment. The American Society of Civil Engineers gave American infrastructure a D+ rating on its 2017 Infrastructure Report Card and estimates that it will take $4.6 trillion over ten years to get American infrastructure where it needs to be. While this number may be somewhat exaggerated, it’s clear that $200 billion and a shrug to state and local governments is not nearly enough to get the job done. The plan needs to be tweaked.
While critical of the plan, few commentators have proposed solutions to make American infrastructure work. The plan is in need of more dedicated federal dollars, and states and cities need to raise lots of money for their own part, but where will this money come from?
To raise the revenue necessary for a real infrastructure overhaul, the United States needs to think big and small. While the national government needs to take radical measures to raise big chunks of money for infrastructure, state and local governments must take a number of smaller actions that together will chip away at the funding gap.
Trump has hinted at his openness to creating large new streams of revenue. Last week, the President reportedly suggested a 25-cent gas tax increase to drum up more funding for the infrastructure bill. This measure could raise nearly $400 billion over the next 10 years, potentially tripling federal funding for infrastructure if added to the $200 billion Trump proposed.
But with gas prices down, miles per gallon up, and hybrids and electronic cars becoming more prominent, increasing the gas tax may not be a viable long-term strategy. Looking to the future, it may make more sense to tax vehicle miles traveled (VMTs) rather than gas. According to the Brookings Institution, a modest VMT tax could raise $550 billion over the next ten years. In an impending world of autonomous electric vehicles, such a change will be a practical necessity.
The federal government should do more than simply raise more revenue. It should invest in processes for cultivating forward-looking infrastructure policies, by creating an agency like a policy lab.
Policy labs are scientific-minded organizations that design and rigorously test initiatives before they’re deployed—Washington D.C.’s Lab @ DC has tested everything from using police body cameras to reduce problematic citizen-police interactions and posting signage on garbage cans to improve recycling rates. While still in its infancy, the team has tested dozens of interventions and submitted recommendations to city agencies.
A similar federal mobility policy lab could determine what programs aren’t working and divert funding to infrastructure projects and repairs—moving money from antiquated or flashy projects that have little influence on quality of life to simpler much-needed patches to roads, bridges, and public transit systems. This lab could also test innovative transportation policies such as congestion pricing, New York City’s proposal for raising revenue while reducing strain on popular roads. Testing these types of policies at the federal level could produce new funding and make existing infrastructure more efficient and durable.
Trump’s current plan also proposes a few measures to help state and local governments raise their own money, by increasing incentives for private companies to invest in infrastructure. But even with a significant increase in federal funding, these measures alone wouldn’t be sufficient to fill the gap. Private capital would benefit money-making projects in prosperous areas, but it would likely fail to address the most critical infrastructure problems in underserved areas, where companies have little incentive to invest.
Regardless of what, if any, federal infrastructure plan passes Congress, states and cities will need to do more to build on these measures by finding new revenue streams to fund their own investments. One potential moneymaker is asset recycling: essentially leasing government-owned assets to private companies. The Trump plan calls for selling off airports, a version of an effort I tried as mayor of Indianapolis. By privatizing management of the airport, we were able to raise revenue and improve service. Even mid-sized cities could make more than $500 million each by leasing their airports and ports, which adds up when you consider that there are hundreds of major airports across the country.
Innovative tax policies can also help on the state and local level, leveraging revenue from new transportation trends like transportation network companies (TNCs) including Uber and Lyft. In 2017, the City of Chicago increased its tax on Uber by 15 percent, diverting all of the revenue to transit projects. The increase and additional planned future increases are expected to raise nearly $300 million over the next decade. Uber operates in 257 cities around the country, and there are countless other players in the rideshare market—from Lyft to Sidecar to Via. In Chicago, a part of that revenue is intended to make up for other losses in public transit. But current ridership trends in some cities suggest that TNC taxes could create many billions of dollars in infrastructure funding at the local level.
There’s no doubt that the Trump administration’s infrastructure plan is only a starting point toward Trump’s campaign pledge to “build the greatest infrastructure on earth.” There needs to be much more funding at all levels of government. Old taxes and outdated procedures need to change to match a world of new mobility. A few simple forward-looking policies could create new revenue and make better use of existing systems, taking at least some of the pressure off governments to find sources for new investment.
Chris Bousquet, a research assistant and writer at Harvard Kennedy School, contributed to this column.