Infrastructure – Time to Move It

May’s jobs report provides additional evidence the U.S. economy has downshifted under the weight of the administration's tariffs policies. This is extraordinary given the economy’s underlying momentum and the imparted energy from tax and regulatory reforms. While the establishment survey’s topline job growth of 75,000 was respectable, it was offset precisely by downward revisions to the March and April figures. President Trump is doing to the economy with tariffs what President Obama did to the economy with overly burdensome regulations. The good news is that the economy can return to strong growth – if the tariffs and threat of tariffs stop.

If you have a better idea, let’s hear it. That’s the challenge to any and all who resist moving an infrastructure package through Congress. This is a quality of life issue. Infrastructure is an economic growth and competitiveness issue, and therefore a national security issue. It is a fundamental governmental responsibility. And it has hung fire for far too long.

The term infrastructure covers a wide range of projects from roads and bridges to ports and airports, to electrical grids and water treatment plants. It involves a sometimes uneasy partnership among federal, state, and local governments. The question is which level of government should be responsible for what kinds of infrastructure?

Congress is often happy to play an all-the-above role and, seeing the cash flow, state and local governments are often happy to let Washington meddle to excess, but massive and growing federal budget deficits crimp the federal role. This creates a real need for a clearer delineation of responsibilities. The federal government must play its part, but states and localities must pay for their responsibilities.

No free lunch

We tend to take infrastructure for granted, unless it fails. Those roads you drive on, the electricity you use, the water you consume don’t magically appear. They were paid for and built, often many years ago. This means they appear to be free goods today. That’s a problem, because the illusion feeds the false belief we can just wish good roads and electricity and water in the future without paying for them.

Consider the federal fuels excise tax. Any idea what it is? Probably not, because under federal law gasoline stations are prohibited from displaying the tax at the pump. Congress banned this transparency in the hope taxpayers wouldn’t notice. It worked. Taxpayers don’t see the tax, which just reinforces the impression the roads without tolls are a freebie.

The user pays concept has long been the guiding principle justifying federal and state fuel excises. As electric cars eventually become ubiquitous, the fiscal and political viability of highway fuel taxes will surely wane, but this remains a future issue for which solutions such as a vehicle mileage tax may then be practical.

Until then, the federal fuels tax remains the logical go to source. But a chunk of the revenues raised are diverted to other spending. This divergence weakens the revenue available for highways, the fidelity to the user pays principle, and the political support for raising the tax. One reason taxpayers in many states have accepted higher state gas excises may be the confidence they as taxpayers won’t be scammed. If the user pays principle is to govern, then highway users should pay for highways and other forms of transportation should be responsible for their own costs.

The U.S. Chamber of Commerce has long supported an increase in the federal gasoline excise tax. Some conservatives instinctively oppose raising taxes. But just opposing raising the tax without proposing a better solution is irresponsible. If you’ve got a better idea, then great. If your idea can win the day, then even better. If not, and all you can do is say “no,”, then you’ve given Members of Congress no reason to listen to you, nor should they. These “voices of no” are just another tribe of the free lunch bunch conservatives often critique in other spheres.

Permitting progress

Our economy and our society require efficient, safe means of transporting goods and people. This often means roads. Roads that have to be paid for somehow. Our cities and communities have a vast backlog of badly needed projects to improve the safety and quality of our water supplies, electricity, and much more. Much of this can be financed through creative public-private partnerships. The capital is just waiting on the sidelines for clarity, the green light from Congress, and one more thing.

The federal government is best in class at creating red tape sufficient to bog down or block even the most obvious of projects. This has to stop. It shouldn’t take longer to get the necessary permits for a project than it takes to build the project. Indeed, it shouldn’t take more than a couple years, and for this we need legislation such as Title 41 of the Fixing Americans Surface Transportation Act as described by the Chamber’s Joe Johnson in congressional testimony.

Infrastructure is a government responsibility. The need is clear and undisputed. The federal government should meet its share of the responsibility and finance it in the most sensible manner it can find while reforming a permit system that looks like somebody designed it on purpose.

About the authors

J.D. Foster

Dr. J.D. Foster is the former senior vice president, Economic Policy Division, and former chief economist at the U.S. Chamber of Commerce. He explores and explains developments in the U.S. and global economies.