The Trump administration's plan to pay for rebuilding America's aging infrastructure comes up short by more than $1 trillion, according to a new analysis.
The administration proposes having the federal government put up about $200 billion over the next 10 years in grants and other incentives to attract at total of some $1.5 trillion.
Each new dollar of federal spending could actually reduce spending by state and local governments, according to analysts at the University of Pennsylvania's Wharton School.
The Trump administration's plan to rebuild and improve America's aging infrastructure would fall far short of the investment it needs, according to a new analysis.
More than $1 trillion short, in fact, say analysts at the University of Pennsylvania's Wharton School.
President Donald Trump's proposal, unveiled earlier this month, calls for heavy reliance on additional funding from state and local governments and from private investors. The idea is to have the federal government put up about $200 billion over the next 10 years in grants and other incentives to attract an overall investment of at least $1.5 trillion.
"We will build gleaming new roads, bridges, highways, railways, and waterways all across our land," Trump said in announcing the plan. "And we will do it with American heart, and American hands, and American grit."
The program, he said, would produce "the biggest and boldest infrastructure investment in American history."
But a review of the plan by analysts at the Wharton School – Trump's alma mater – found that most of the incentives would fail to attract anything close to the $1.5 trillion goal.
"Investment across all levels of government would increase between $20 billion to $230 billion, including the $200 billion federal investment." -Penn Wharton analysis of Trump infrastructure proposal
In fact, each new dollar of federal spending could actually reduce spending by state and local governments because they often already qualify for the proposed new grant money within their existing infrastructure programs, the analysts said.
As a result, the Penn Wharton analysis found, "investment across all levels of government would increase between $20 billion to $230 billion, including the $200 billion federal investment."
At those spending levels, they estimated, the plan would have "little to no impact" on gross domestic product.
While there's widespread agreement that trillions of dollars are needed to repair American roads, bridges, water facilities, power plants, airports and schools, there's little consensus about how to come up with the money.
Since the 1960s, when the federal government began winding down construction of the interstate highway system, federal spending for public projects has steadily fallen as a percent of GDP.
Last year, the American Society of Civil Engineers gave the nation's infrastructure a D+ grade in its latest annual report.
After years of underfunding, it will take trillions of dollars to make the needed repairs. The cost of doing nothing would be even higher, according to the group's analysis. By 2025, the impact of lost business, higher transportation costs and other economic headwinds would wipe out about $4 trillion in GDP, and approximately 2.5 million jobs.
Faced with rising pension costs and tax-weary voters, state governments have also been cutting infrastructure spending as a share of the economy. Over the past half decade, state and local government spending on capital projects dropped from its high of 3 percent of GDP to less than 2 percent in 2015, according a report last year from the Center on Budget and Policy Priorities.
Some states have decided they can no longer wait for Washington to come up with a solution. In the last two years, a handful of states have moved to raise gasoline taxes to fund transportation repairs and upgrades.
The Trump administration also has suggested that some of the funding could come from private investment, which has financed several dozen public projects in the past two decades. But the idea has had only mixed success.
In the last 25 years, for example, there have been three dozen privately financed road projects either completed or under construction, according to a 2014 report from the Congressional Budget Office. Of the 14 that had been completed, three of them had declared bankruptcy and one required a public buyout of private partners, the report said.
But even when those public-private projects are financially viable, they represent just a tiny fraction of the funding needed to maintain and upgrade existing roadways and bridges. Those 36 projects generated total investment of just $32 billion, or less than 1 percent of the roughly $4 trillion in highway spending during that period, the CBO found.
One reason is that much of the spending represents repair of existing facilities, an investment that doesn't generate a return for potential investors. Across the 50 states, the rising costs of operating and maintaining infrastructure – as opposed to constructing new bridges, roads and airports – are consuming a larger and larger share of overall spending.
That's just for highways. Much of the required infrastructure repair will involve public schools, water systems, power grids and other systems that underpin the U.S. economy.