By Joan Lowy and David A. Lieb, AP
WASHINGTON — U.S. President Donald Trump has promised to revitalize America’s aging roads, bridges, railways and airports, but a plan put forward by his economic advisers relies on a transportation financing scheme that hasn’t been tried before and comes with significant risks.
The plan was set out just before the election by billionaire leveraged buy-out specialist Wilbur Ross, Trump’s pick for commerce secretary, and conservative economics professor Peter Navarro, whom Trump has tapped to head his National Trade Council. They recommended the government allocate US$137 billion in tax credits for private investors who underwrite infrastructure projects.
Ross and Navarro estimate that over 10 years the credits could spur US$1 trillion in investment. That’s how much Trump promised to spend on infrastructure — a key part of his job-creation plan.
Trump hasn’t yet said whether he will try to carry out the Ross-Navarro plan or seek an alternative, although the administration’s preference for addressing the problem with private dollars is clear. Transportation Secretary Elaine Chao emphasized at her confirmation hearing that the administration wants to “unleash the potential” of private investors and come up with creative ways to tap their capital.
But there’s skepticism even among free-market oriented Republicans that the Ross-Navarro plan could work on a massive scale. Infrastructure projects like roads and bridges are attractive to investors only if they have tolls or some other way of generating revenue. There are relatively few projects in the U.S. that meet those conditions. Tax credits offer additional incentive, but economists and transportation experts warn the government could end up rewarding investors in projects that would have been built even without credits.
“I don’t think that is a model that is going be viewed as successful or that you can use it for all of the infrastructure needs that the U.S. has,” said Douglas Holtz-Eakin, a former head of the Congressional Budget Office and economic adviser to John McCain’s 2008 presidential campaign.
Business and labor executives told a House transportation committee hearing last week that private investment won’t provide nearly enough to address America’s infrastructure woes. While public-private partnerships can help, “what needs to happen is to increase the gasoline and diesel taxes” to pay for more direct federal spending, said FedEx CEO Fred Smith.
The White House and Navarro declined requests for comment.