Wednesday, February 7, 2018

Blogger Candidate Forum: How Are Going To Pay For This?; February 2, 2018
         ; January 23, 2018

Hello Everyone:

It is a gorgeous and sunny Wednesday, which means time for the weekly edition of Blogger Candidate Forum.  Once again, Yours Truly is coming to you from an undisclosed location, thanks to a scheduled event at the usual place.  Quick reminder to American fans and followers, Mid-Term Election primaries are almost here and if you if have not registered to vote, stop reading and go to for information.  Also, if you are DACA-eligible and still need to renew, please stop reading and go to for the application and all information.  Alright, on to the next agenda item.

Blogger supposes you all have heard the new that Mr. Donald Trump wants a big French-inspired military parade.  Seriously.  No real reason for it, he just wants to waste taxpayer time and money showing off how much he loves the American military.  Blogger has a better idea on how to display your affection bordering on obsession for the military.  Instead spending all the time and money on a one-off event, how about using it toward creating state-of-the-art medical and mental health facilities for veterans.  While we are on the subject, how about establishing a programs that support military families?  Much better use of the millions or billions you want to waste on a parade.  Another suggestion for all that taxpayer money, improving the American infrastructure system, which brings us to today's subject.

One of the things Mr. Trump campaigned on was fixing American roads, bridges, electrical and plumbing systems, airports, and so forth.  Yet, it seems that his priorities are more focused on building a border wall and a big splashy military parade.  Blogger digresses.  Of course the White House has a plan for repairing infrastructure.  We start our discussion with a leaked document (if you believe the headline and the document itself), published by Axios (; Jan. 22, 2018; date accessed Feb. 7, 2018), "No numbers, no funding sources, no percentage matches, reported by Laura Bliss in her CityLab article "The White House's Leaked Infrastructure Plan Is a Road Map With Few Details."  The fact that Ms. Bliss questions the veracity of the document, tells us that either it is just a draft and not the final version or its contents are not certain.  Regardless, let us take a look at it.

Ms. Bliss writes, "President Trump has been promising a $1 trillion infrastructure plan to rebuild the nation's crumbling roads, bridges, and water pipes since will before he was elected.  A year and nearly a month on, the promise has not materialized.  Although, some sort plan in principle has emerged, calling for an infrastructure spending package of about $1.5 trillion (; Feb. 6, 2018; date accessed Feb. 7, 2018), the plan is still light on specifics

The source of the document may have been Jeff Davis, a lobbyist and senior fellow at the Eno Center for Transportation, and Reuters reporter David Shepardson, both of whom "tweeted that the document's metadata reveal it author to be a member of D.C. lobbying firm."  The administration remains tight lipped, telling Axios:

We are not going to comment on the contents of a leaked document but look forward to presenting our plan in the near future.

Despite its dubious origin, the document appears to be in concert with ideas the administration has presented in meetings with infrastructure experts.  Adie Tomer, a fellow at the Brookings Institution Metroplitan Policy Program told CityLab via email,

Everything looks exactly like what we and other were briefed on.

In essence, the leaked document presents three federal funding programs without specifying their cost.

The first and largest program is the Infrastructure Incentives Iniatitve.  Ms. Bliss writes, "This program would use 50 percent of the unstated total funding amount to encourage state, local and private investment in core infrastructure by revising incentives in the form of grants."

Projects eligible for this program include surface transportation, passenger trains, clean drinking water, hydropower projects, and a variety of similar projects.  The federal contribution would be limited to 20 percent, "a dramatic decline from the 40 percent the government currently [ays on average for transportation and water infrastructure build-outs according to the Congressional Budget Office [; March 2017; date accessed Feb. 7, 2018].  Transportation consultant and researcher Yonah Freemark tweeted, "urban transit projects often receive even more--upward 50 percent--from the feds" (; Jan. 22, 2018; date accessed Feb. 7, 2018).

The second programs is the grandly titled Transformative Projects Program which would allocate 10 percent of the total outlay to support exploratory and ground-breaking ideas in "transportation, water, energy, telecommunications, and commercial space."  As much as 80 percent of federal funds could be earmarked for capital construction costs.  Laura Bliss opines, "Perhaps Elon Musk's famous 'verbal approval' for building a Hyperloop along the northeast corridor [; Dec. 13, 2017; date accessed Feb. 7, 2018] wasn't such a joke after all."  

The third program is the Rural Infrastructure Program, which would set aside 25 percent of the funds toward transportation, water, energy, and broadband iniatives in rural communities that require federal monies to get built.  These programs were outlined in the leaked document, with no specific monies attached to them.

In his maiden State of The Union speech, Mr. Trump boldly announced that he intended to turn $200 billion in federal money into $1.5 trillion dedicated to fixing America;s infrastructure by leveraging local and state tax revenue and private investment (; Feb 2, 2018; date accessed Feb. 7, 2018)  An administration spokesperson told CNNMoney that "their internal estimates found that the $200 billion could shake looks a total of between $800 billion and $1.5 trillion in other investments,...," but failed to further elaborate on the point.

Lydia DePillis wrote in her article "infrastructure plan rests on some strong assumptions," that progressives have criticized the proposed $200 billion as pitifully inadequate, "saying that states and cities are already burned by pension debt and would not be able to raise enough money to finance the 80% of the cost of major project as a leaked draft (; Jan. 22, 2018) said would be required..."

Representative Jan Schakowsky of Illinois told a press call arranged by the liberal advocacy group Progressive Change Campaign Committee,

While [Trump] just gave away trillion in tax cuts to millionaires and billionaires, he is putting a pittance on the table and expecting cash-strapped state and local governments to come up with the lion's share.

Left leaning think tanks such as the Economic Policy Institute (; date accessed Feb. 7, 2018) and the Center on Budget and Policy Priorities (; Jan. 30, 2018; date accessed Feb. 7, 2018) also expressed skepticism, "pointing out that the Trump administration has previously. Proposed large cuts to infrastructure spending by Amtrak and programs like TIGER grants [; Oct. 18, 2017; date accessed Feb. 7, 2018], an Obama-era pot of money for transportation projects awarded on a competitive basis."

Speaking to CNN, Jeff Davis, of the Eno Center for Trasnportation, said that "while it's feasible to drum up $1.5 trillion in total spending with $200 billion in federal money, the proposal relies on some dubious assumptions."

To help us better comprehend the White House's position, Mr. Davis explained the math.  "According to the leaked document, half of the $200 billion will go toward incentive grants that can only make up 20% of any given project, so that part would lead to $500 billion in total investment."  Are you following along?

Next, "Another $70 billion would go toward grants for rural areas and 'transformative' projects that are more experimental, with the Feds picking up between 30% and 100% of the tab."  Mr. Davis went on to state "that amount can leverage $20 billion, so let's be generous and round up the total to $100 billion."

According to Mr. Davis's calculations the "$170 billion from Washington has gotten us to $600 billion in total investment with $30 billion in federal spending."  This begs the question, "Where does the extra $400 billion to $900 billion come from?"

Most of it is found in the fine print of the leaked draft of the insfrastructure plan (; Jan. 22, 2018).  The additional billions would come from increased funding for the federal infrastructure credit programs (; date accessed Feb. 7, 2018) that provide lines of credit, loans and guarantees to transoportation agencies and utilities a wide variety of projects.

Lydia DePillis reports, "Recent loans through these programs have leveraged about $15 million for every $1 million of credit assistance.  If such loans were only part of a financing package, the leverage ration could get as high as 45-to-1, although Davis found in 2015 [; Dec. 15, 2015; date accessed Feb. 7, 2018] that there weren't enought projects that could qualify for assistance under the program's rules."  These projects were considered to big of a credit risk or lacked the proper permits.

Jeff Davis told CNN, These assumption may be fanciful, but they are bipartisan.  Mr. Davis pointed that Democrats have also attempted to leverage small amounts of federal capital to bring in large amounts of private and local money.

People who create private investment in public infrastructure through, for example pensions and private equity funds, believe that the administration proposal could make a lot of deals happen that would not happen otherwise.

Kent Rowey, a partner at Allen and Overy a firm specializing in public private partnerships, told CNN,

Literally dozens of these funds have raised for the purpose of investing in infrastructure,... There's more product than demand at the moment, because we haven't had the catalyst at the federal level to really kick it into high gear. ...It's a terrific idea.

Private investors can see a return through user fees like highway tolls, or dedicated revenue streams, such as sale taxes.  However, Mr. Rowey admits "that model works best in large population centers with robust tax bases, not rural areas or shrinking Rust Belt towns that could really use the help."

Further, a report issued by the Democratic staff of the Joint Economic Committee (;  date accessed Feb. 7, 2018) posited that "relying on private investment is risky and can cost more than direct taxpayer funding, since investors expect a healthy return."  The report observed that previous public-private partnerships have not been negotiated properly, shutting out competition that could have resulted in better pricing and public services.

What this all mean at the end of the day?  While it is theoretically possible to turn $200 billion in federal funding into $1.5 trillion dedicated to repairing America's crumbling infrastructure, it probably is not the smartest idea.

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