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The Digital Infrastructure We Need — and How to Pay for It

State and local leaders should prod Washington for the funding that can close the digital divide, protect utilities from cyber criminals, build smart cities and shape incentives for high-tech manufacturing.

The first order of business this year has to be a dramatic infusion of federal funding to shore up and harden our digital infrastructure to protect against ransomware and malware attacks, especially those from abroad.
Until this month, the idea of congressional action to invest hundreds of billions of dollars in the nation’s digital infrastructure seemed like a long shot. But two weeks ago, after a month of Beltway bickering over “hard, tangible” vs. “soft, social” infrastructure, the Senate swiftly passed a separate, massive bill to fund and promote information technology investments in an effort to counter Chinese ascendency. House committees are now deliberating that package, and there is talk about piecemeal counterproposals.

Meanwhile, a bipartisan group of senators has crafted a spending proposal for conventional hard infrastructure, but the partisans are haggling over how to pay for it. A smaller bipartisan cadre is pitching a bill to close the digital divide. In the background, liberal Democrats are preparing a “kitchen sink” budget reconciliation package that would include their coveted soft infrastructure and social spending, seeking a party-line vote on an omnibus bill later this year. Still unknown is whether centrist Democratic Sen. Joe Manchin of West Virginia will resist that maneuver until the new fiscal year in October.

As a result of these shifting congressional dynamics, state and local government leaders now have several shots on goal for prodding Congress to approve infotech funding that transforms smart cities, digital literacy, cybersecurity at municipal utilities and the landscape for tax incentives for high-tech manufacturing. Not all of these initiatives are likely to pass both houses in a single bill, but odds have greatly improved for multidimensional funding for digital infrastructure. As the potentially cleanest form of pork-barrel politics, with widespread local benefits, it’s the sleeper issue in municipal finance that now requires savvy and targeted advocacy.

To compete globally and optimize our nation’s productivity, America needs to invest quickly in its digital future by spending the money needed for public access to — and technical leadership in — the digital world. State and local governments will be the ones that deliver most of that capability, so a federalist partnership is needed, with substantial congressional dollars behind it. In this case, private businesses and employers nationwide will ultimately benefit, so they should have a key role to play in the debates over funding.

Here are some fundamental components that should be included in federal funding bills to put America back in the leadership position in the global race to high-tech digital competitiveness, security and leadership that benefits all workers and not just the Silicon Valley and Seattle elites:

● Cybersecurity. The first order of business this year has to be a dramatic infusion of federal funding to shore up and harden our digital infrastructure to protect against ransomware and malware attacks, especially those from abroad. Although private businesses are scrambling already to build out their cybersecurity functions and staffing, municipal governments and utilities are sitting ducks. Many of them lack the resources and skills necessary to harden their protective shields, train employees and assure backup capabilities. We cannot afford to let water and sewerage systems, airports, municipal electric and gas utilities, and voting equipment fail by evil design. Federal block grants for the states to distribute to vulnerable agencies and municipal utility departments must be Job One. Congress can incentivize software companies that sell firewalls and anti-phishing alerts by making qualifying profits from those tools tax-exempt for several years when sold to public agencies, hospitals and energy conveyors for a modest cost-plus price.

● Digital access and literacy. Similar to FDR’s national rural electrification program, we need to extend affordable broadband universally. But broadband access isn’t all that’s needed. High schools must equip all students with the basic computer skills that today’s jobs require. All high school grads need to know the basics of common software systems, including installation, upkeep and cyber hygiene. A new corps of teachers must be trained, and disadvantaged students equipped with basic devices. All this will require corporate sponsors as well as federal funding.

● Smart cities. Targeted grants should support demonstration programs rather than funding 10,000 local governments reinventing the technology wheel in their efforts to put data and digital technologies to work for the benefit of their residents. Experts from the National League of Cities and the International City/County Management Association can advise federal officials in project selection.

● Federal aid to colleges. Community colleges and public universities will need new funding for research and to create relevant curricula for advanced digital and cyber skills instruction. Tuition reimbursement should be provided to college-level students who take qualifying infotech classes that relate directly to national productivity and competitiveness. Vo-tech school courses that train workers to install and repair digital hardware or troubleshoot software should be fully funded by Uncle Sam, as should world-class cyber, robotics and artificial intelligence research.

● Vehicular micro-tolls. Electric and other zero-carbon vehicles never visit the gas pump, where fossil fuel taxes are collected, so their owners pay little for local roads and bridges. By 2023, expanding telecom networks coupled with transmitters on most 5G-connected vehicles will make it possible to capture their precise locations at a granular level so that cities and counties can set up micro-toll networks. Eventually we all should be paying a few pennies to drive to work, haul kids to school or visit the shopping mall. Reimburse auto dealers for retrofitting older all-electric vehicles at federal expense. Congress must pave the way to a digital revenue system by underwriting this transformative conversion.

● A federal tax-break equalizer for new high-tech plants. In the face of a global microchip shortage, there is keen competition among states and localities for new fabricating plants. If Congress ultimately awards subsidies or strategic income tax credits for new plant construction, those incentives must come with a string attached: offsets that reduce federal subsidies and tax credits by the amount of the tax breaks and abatements also received from states and localities, unless exempted by the president and a congressional oversight committee. This will level the competitive playing field for plant locations to focus on regional amenities, labor markets and fundamental economic advantages that should actually be the competitive focus instead of site-specific tax windfalls.

A federal tax on digital advertising or digital services would readily cover the cost of these national investments. More broadly, a minuscule digital financial transactions tax on online stock, options, futures and bond trading alone could pay for every hard, soft and digital infrastructure proposal now on the table. But politically, those novel revenues may be a bridge too far to secure quick action, so any of a half-dozen more conventional funding sources for infrastructure would suffice.

The competing bills to which these transformative initiatives can be attached have become a three-ring congressional circus. The task for state and local leaders and their Big Seven policy organizations now is to present their case for digital infrastructure funding clearly and quickly at every opportunity and to help their congressional delegations navigate the paths of least resistance into law. Unlike concrete bridges to nowhere, this can be clean pork and a national economic engine that rises above petty provincial politics.

Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.
Girard Miller is the finance columnist for Governing. He can be reached at
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