President Obama's New Infrastructure Plan:
Right Idea, Wrong Play Call
When the Super Bowl champions visit the White House this spring, President Obama will no doubt shake Patriots coach Bill Belichick's hand and congratulate him on a job well done.
But with the release of his proposed budget and infrastructure plan on Monday, Obama might want to give a call to Seattle coach Pete Carroll -- to talk about how he can move forward after calling the wrong play.
That's because, while there's a lot to love in the proposal, the president's plan suffers from the same problem that doomed the Seahawks' offense on that final, fateful drive: It's good at knowing where it needs to go, but it overthinks how it's supposed to get there.
Like any presidential budget, Obama's plan for fiscal year 2016 is, above all else, a wish list.
Little surprise, then, that on matters related to transportation and infrastructure, it calls for nearly across-the-board spending increases, reflecting the president's strong commitment (rhetorically, at least) to fixing the dilapidated public works that plague the United States.
Still, it's hardly a kneejerk proposal. While there are the usual increases in federal highway spending and the continuation of many existing programs, the vision that the president lays out for the future of U.S. infrastructure policy is, in some respects, far bolder and more nuanced than some might have expected.
Nowhere is this more the case than with urban infrastructure policy. In Obama's plan, the Department of Transportation would oversee the creation of several promising new programs aimed at encouraging smart investments in mass transit.
Through a new Bus Rapid Transit Corridor Program, for example, the DOT would use discretionary funds to help local governments build what transportation experts have long known to be one of the most efficient and cost-effective forms of mass transit. In doing so, the department might undo some of the damage caused by years of awarding grant money to transit projects of more questionable utility, such as the numerous streetcar lines that have opened thanks in part to federal funding.
In addition, a Metropolitan Transportation Planning Program would incentivize cities and suburbs to cooperate on transportation issues of regional importance, and a new Transportation Alternatives Program would award grants to projects focused on "quality of life improvements."
New Ways to Finance
The president's plan would also begin to address one of the less-discussed problems with U.S. infrastructure policy: the recent decline of traditional municipal financing.
Historically, many of our most important public works were financed through issuance of municipal bonds, which, thanks to their tax-exempt status, are able to compete on the bond markets with higher-interest private debt. And today, historically low interest rates mean that governments can borrow for infrastructure essentially for free, as Matthew Yglesias noted recently in Vox.
But instead of taking advantage of the moment to raise money for new projects, governments have instead used the opportunity to refund existing debt at lower rates. Despite our need for increased infrastructure spending, "new capital" municipal issuance in 2014 was nearly $40 billion less in real terms than in 1996, according to the Securities Industry and Financial Markets Association.
The Obama infrastructure plan would tackle this issue on two fronts. At the national level, new bond programs would issue federal debt for the sole purpose of infrastructure investment. Locally, the administration proposes to remove the tax exemption for bonds that go toward building stadiums and arenas -- a pet peeve of progressives and fiscal conservatives alike -- with the idea of directing more money toward infrastructure projects that benefit the general public rather than a professional sports franchise.
If Obama's infrastructure plan succeeds in envisioning victory, however, it fails at the play call.
What should underpin any new initiative, of course, is a commitment from the Obama administration to fight for a more reliable source of infrastructure funding.
New revenue sources could include a tax on vehicle miles traveled, which would account for the increasing fuel efficiency of new cars. Or, the administration could put forward a truly progressive proposal and call for General Fund spending on infrastructure (as the Eno Center for Transportation has suggested) backed by a more progressive income tax.
The easiest permanent solution, however, might just be the one that's worked before: replenishing the Highway Trust Fund by raising the federal gas tax, which has been stuck at 18.4 cents per gallon since 1993.
But in the final drive of his presidency, Obama calls the wrong play. Instead of the easy fix of raising the gas tax, the plan proposes a temporary six-year spending increase of about $45 billion per year, paid for by a one-time tax on overseas corporate profits.
This idea met with incredulity from the editorial board of the Washington Post on Tuesday, and for good reason. Infrastructure projects are by their nature multi-year endeavors, often backed by a significant federal commitment. The more certain that commitment, the better the project, as governments and builders can borrow money, hire labor, and purchase material more cheaply if they can be sure that Washington will have the funds to honor its word throughout the course of construction.
To propose more than doubling infrastructure spending through 2021 -- with no plan for 2022 -- is not just irresponsible, it fundamentally misunderstands how good infrastructure policy is supposed to work.
To be sure, the proposed infrastructure programs in the Obama budget are worth fighting for, but they are the end goal, not the means to get there. In terms of funding the plan, Obama is opting for some end-zone trickery with the game on the line.
And we all know how that one ends.
Jacob Anbinder is a policy associate at the Century Foundation, the New York-based think tank, where he writes about transportation, infrastructure, and urban policy.