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Robert Reich's blog today makes several criticisms of Donald Trump's much-touted "$1 trillion infrastructure plan".

  1. It's not really $1 trillion in Federal infrastructure spending; it's $200 billion in Federal infrastructure spending and $800 billion in tax breaks to private developers.

  2. It's not really a plan; it's "a page of talking points".

  3. It's "a giant public subsidy to developers and investors".

  4. The projects to be built would charge tolls to the public.

  5. The projects to be built would be "the wrong kind of infrastructure": new construction, not maintenance, and where they're most profitable, rather than where they're most needed.

#1: I don't see the distinction. In either case, it's $1 trillion of taxpayer dollars being spent on infrastructure. There's no obvious, inherent reason (but see later points) that having the Federal government do it directly is more efficient than having private developers do it and be paid by the Federal government, and no obvious, inherent reason that paying Federal developers as "contractors" is more efficient than paying them through tax breaks. Nor (Republican ideology notwithstanding) vice versa: the fact that it's being done by private industry and paid for through tax breaks doesn't inherently make it more efficient.

#2: True: the plan is pretty vague. Which on its own doesn't mean it's a good approach or a bad approach, just that it's too early to analyze it. I think this has become Trump's strategy for policy development: announce something vague, see which parts of it draw the most applause, and those parts become the actual policy, whether they work together coherently or not.

#3: The fact that private developers and investors get rich off it doesn't inherently mean it's not in the public interest (although it increases the risk of capture and rent-seeking, as developers spend a good deal of their tax breaks bribing lobbying Federal officials for more tax breaks rather than building things).

#4: True: the actual cost to taxpayers is not only the $1 trillion mentioned above but what they spend subsequently in tolls, and if the latter cost is "hidden", the plan looks more fiscally sound than it is. There are situations in which a toll bridge or road makes good economic sense: they have to get enough traffic that the tolls more-than-cover the cost of toll collection, and they have to be sufficiently better than non-toll alternatives that the toll doesn't have the effect of diverting much of that traffic onto non-toll alternatives. If these conditions aren't met, a toll bridge or road doesn't make economic sense. Which brings us to...

#5: ... what Reich calls "worst of all". The tax break dramatically reduces the cost to developers of a project, but they still won't do it unless it generates revenue, i.e. tolls. You can't put tolls on a local residential street, so local residential streets won't see a penny of the money. You can't make much on tolls in low-traffic rural areas, so low-traffic rural areas won't see much of the money. You (probably) don't earn the right to charge tolls by fixing a few potholes, only by building something big and new, so repairs and maintenance won't see much of the money. In short, projects would be picked based almost entirely on how much revenue they generate, rather than holistic cost/benefit calculations. Which has been Trump's business strategy for decades: build things for which other people pay most of the costs and you get most of the revenues.

If you want private industry to do things voluntarily that are in the public interest, you have to align their costs and benefits with the public's costs and benefits. If there's a substantial externalized benefit (say, decreased time wasted in traffic jams, or decreased air pollution), you need to estimate that and pay private industry in proportion to it. If there's a substantial externalized cost (say, the traffic-and-parking burden of a new residential or office building, or the impact on schools of a new housing development), you need to estimate that and charge private industry in proportion to it.


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