Trump's Infrastructure Plan Is Bigly Biased Against Cities
You’d think the president was from rural Nebraska the way this plan is tilted in favor of rural America. High-speed rail, new Hudson River tunnel? Fuggedaboutit
President Trump's infrastructure plan, released Monday, is more of a defiance of fiscal logic than it is a rational outline. One obvious shortcoming is that the plan doesn't offer states and cities federal money as much as invite them to spend their own, which, of course, they could already do.
Perhaps the biggest drawback, though, is that the plan pits urban and rural areas against each other when it comes to the small amount of money it does offer. All of America needs investment, but the plan's blatant prejudice against cities would only widen the nation's political and cultural animosities.
Trump has disappointed in many ways, but this failure is an acute letdown. In the mid-1980s, Trump scored one of his early p.r. coups with a modest New York City infrastructure triumph, finishing a Central Park skating rink after the city had failed. In 2016, he ran heavily on the issue – and implied that he'd apply his supposed building expertise to his hometown. “We have the old Long Island Rail Road,” he said at one fundraiser, “like we're a third-world country. They have trains that go 250 mph, we have old stuff,” he continued, referring to China. “That's not going to happen anymore with me.”
Yet the proposal Trump announced does nothing to advance real high-speed rail in dense corridors where it could work well. London is about to launch a train service to Amsterdam, covering 222 miles in three hours. Here, it still takes nearly four hours to get from New York to Boston, about the same distance.
Real high-speed rail is a multi-billion-dollar, long-term investment. Yet Trump's infrastructure proposal offers just $200 billion over a decade to all infrastructure. That's just 20 percent more than what the nation is already spending under an Obama-era law, and it is supposed to cover roads, highways, passenger rail, ports, airports, drinking water, flood control, and wastewater, and “transformative” projects, across 50 states as well as U.S. territories.
Never mind world-class rail, then. Trump's infrastructure proposal makes it more difficult to build an element needed just to keep existing rail service: a new tunnel under the Hudson River between Manhattan and New Jersey, so that the century-old one, which serves both Amtrak and Jersey commuters, can be closed and rehabbed. Whereas the Obama administration had offered to split the $14 billion or so cost with New York and New Jersey, the Trump administration dismisses it as a “local” project.
And the infrastructure proposal says exactly how much the administration cares about such “local” projects. Of the $100 billion the proposal proffers to traditional infrastructure, it caps the contribution to any one state at $10 billion. That means a state like New York might receive $5 billion for its portion the Hudson tunnel. But after that, it would have only $5 billion for other projects – when the state-run Metropolitan Transportation Authority alone was expecting $7.6 billion from federal sources for projects ranging from Phase 2 of the Second Avenue Subway to modernizing its signal systems.
This miserliness would be one thing if it applied uniformly across the country. Yet of the $200 billion, a full $50 billion – 25 percent – goes to less populous areas.
It calls on Congress to establish a “rural infrastructure program.” (The remaining $50 billion goes toward “transformative” experiments, which looks suspiciously like it was tailored for self-styled tunnel visionary Elon Musk, as well as other, less ambitious programs.)
Under the new “rural infrastructure program,” the definition of infrastructure is broader than the overall definition. It includes high-speed internet and government-owned electrical infrastructure, whereas elsewhere in the plan, Trump wants to sell such infrastructure to the private sector.
Rural America won't have to provide the same matching funds that president wants Congress to create for the rest of the country. State and urban governments that want money under the more general program must secure and commit their own “non-federal” revenue for their projects – at least 80 percent of each project – to win funds. The rural grants require no such mandate.
Rural America needs money – but not this much. Only 19.3 percent of the population lives in rural areas – meaning a 25 percent allocation out of a $200 billion infrastructure program gives such residents 30 percent more than their fair share. Moreover, rural projects are far less complex and costly than urban ones. It costs $2 to $3 million per mile to build a two-lane rural road; in New York, by contrast, it costs $2 billion a mile to build a new subway. The latter cost is too high, thanks to too-fancy engineering of stations and inefficient state management of the workforce. But it's never going to be competitive with building a rural road that serves far fewer people.
Building for greater density, too, even if it is more expensive, is good for the economy. Americans should of course live where they like. Yet residents of dense areas boast higher average income than rural areas, and cities such as New York and Boston, which rely on public transportation, offer more opportunities for people without high incomes.
The Trump infrastructure plan is unfair, and economically unwise, beyond money. The proposal would also cede far more control to state politicians for rural projects than for urban or suburban ones. The rural program would provide 80 percent of its $50 billion, or $40 billion, to governors, who would “have discretion to choose individual investments to respond to the unique rural needs of their states,” the proposal says.
That's a stark contrast with the larger $100 billion program for everyone else. For the bigger program, the federal government, not governors, will decide which projects to fund under a complex, likely manipulable formula involving predictions about matters such as “the incorporation of new and evolving technologies” – sometimes a good thing and sometimes not in the real world – and “economic and social returns on investment.” Yet officials in urban areas often govern more people than entire states. The mayor of New York City has 8.5 million constituents, more than each of all but 11 states.
This strategy might be forgivable in a different context. Wealthier areas of the country have long subsidized poorer ones via the federal tax code, and this program would be no different. The difference today, though, is that the new federal tax law, signed last December, makes it far more difficult for states such as New York and California, and the cities within them, to raise money on their own, if they want to improve their infrastructure despite the paucity of federal funds on offer. Limiting the ability of wealthier individuals to deduct their state and local taxes to $10,000 annually will make raising state and local tax rates, and even maintaining existing rates, much harder.
The infrastructure proposal, then, would force richer urban areas to pay for poorer rural areas' infrastructure – even as it makes it harder for them to fund their own projects. Sure, the proposal has some merits, including the streamlining of permitting. But the overall philosophy outweighs those merits.
Nicole Gelinas is a contributing editor to the Manhattan Institute's City Journal. Twitter: @nicolegelinas