The fractious political times in which we live are obscuring a reality, one rarely acknowledged by advocates on the left or right, that a consensus has been growing across party lines about the future of U.S. infrastructure financing. The Trump administration's infrastructure plan is really the logical extension of the Obama administration's policy of encouraging greater private investment in public infrastructure.
The recent resignation of top White House infrastructure adviser DJ Gribbin, the chief architect of the president's plan, is not likely to result in any wholesale re-thinking of the elements of Trump's proposal that reflect that emerging consensus, which was on full display at a recent Brookings Institution confab on infrastructure policy. The event was hosted by Aaron Klein of Brookings, who was a deputy assistant Treasury secretary in the Obama administration, and was keynoted by Derek Kan, the third-ranking official in the Trump Transportation Department and former general manager of Lyft. There was a congeniality and shared purpose rarely evident on cable news or Twitter.
Klein opened the session with a simple goal statement on which he believes all can agree: "Invest more wisely." The discussion continued in that vein with no mention of the truism that the Trump plan's proposed federal funding levels are woefully insufficient to address the country's infrastructure deficiencies. Instead, economists Klein and Kan see the overarching need the same way: The current U.S. infrastructure model requires change that would result in doing more with existing resources and enhancing the value of public assets.
One can interpret the lack of major funding in the Trump plan in a few different ways - perhaps, a lack of true commitment to the need, or as a fiscal and political conclusion that the till is empty after the passage of $1.5 trillion in tax cuts. But there remains another possible explanation: a policy goal of no longer expanding funding for the long-established governmental-monopoly model that dominates the financing and delivery of U.S. infrastructure.
By starving the status quo, state and local governments, which are responsible for about three-quarters of annual infrastructure spending, could be incentivized to move toward a model that increasing numbers of Washington policymakers believe would deliver greater efficiency in how existing dollars are spent. Whatever one thinks about the method, the end goal -- more infrastructure for each dollar of government investment -- is worthy of consideration.
Two examples from New York City speak to the point. A recent New York Times article documented that it can cost more than five times to build a mile of subway line in New York than it does in Paris. And New York City believes it could reduce its cost of major infrastructure projects by 6 percent on average if the state were to change its procurement laws to allow the city to utilize an increasingly common practice called design-build, which can save substantial time and money by merging a project's design and construction processes.
Such private-sector efficiencies in the provision of public infrastructure are commonplace in other western economies, such as Australia, Britain and Canada. One barrier to replicating this approach in the U.S. has been the availability of tax-exempt municipal bonds, which allow state and local governments to borrow at lower cost compared to higher-cost private-sector debt and equity.
The Trump plan smartly addresses this issue by expanding the use of "private activity bonds" that allow a similar financing tool for public-private partnerships (P3s). Making the private sector eligible for this form of tax-exempt financing would level the "cost of capital" playing field and free governors and mayors to select the most efficient delivery and operating approach for each project.
Further, if private investment is good enough for state and local governments, then the Trump plan suggests that the feds should lead by example. It identifies federal properties for potential divesture, including the Washington, D.C., region's Reagan National and Dulles airports and the transmission assets of the Tennessee Valley Authority and the Bonneville Power Administration.
There are plenty of other proposals in the Trump plan that warrant the attention of policymakers willing to look beyond current, sometimes-inefficient practices. One, for example, would address the massive shortfall in the infrastructure funding needs of our national parks by allowing the Interior Department to retain and reinvest revenues generated by expanded energy development. Another would loosen restrictions on tolling of interstate highways and commercialization of rest areas along the highways. And, to address its backlog of capital needs, the Department of Veterans Affairs would be permitted to move toward the successful P3 model used by the Defense Department for military housing.
Much of the Trump plan reflects increasingly mainstream Washington policies on how best to address today's costly and inefficient delivery, operation and maintenance of U.S. infrastructure. And while it is a fair observation that Congress will not likely address this topic anytime soon, our bet is that the core principles advanced in this plan ultimately will become the basis for a better long-term approach to our nation's infrastructure challenges.