John Faso: Trump’s Opportunity On Infrastructure

May 8, 2019

Last week, President Trump met with Democratic Congressional leaders concerning infrastructure. Sen. Chuck Schumer and Speaker Nancy Pelosi left the meeting saying that they had a good discussion with Mr. Trump and agreed that a $2 Trillion program – likely over 10 years – would be needed.  In three weeks’ time, the President is supposed to present a plan on how to pay for such a program.

We’ve been down this road before, so the odds on an agreement are not high; but the needs for road, bridge and transit improvements – as well as other major projects – are significant. 

In his campaign, candidate Trump proposed the creation of a $1 trillion infrastructure fund, leveraging $200 billion in federal funding, to pay for transportation, water and communications projects in an effort to spur the U.S. economy. Those efforts went nowhere in Congress amid bipartisan concern over the type of projects which would be eligible and the lack of federal dollars to fund existing transportation commitments in the states.

Indeed, the most important source of transportation funding, the federal Highway Trust Fund (HTF) allocates nearly $60 billion each year. The HTF is supported by an 18.3 cent per gallon federal gas tax, last raised in 1993. Today, in an era of fuel efficient cars, the gas tax produces only about 40% of the inflation adjusted revenue as it did back in 1993. Moreover, electric vehicle owners don’t contribute anything to the trust fund and with forecasts projecting millions of electric vehicles in coming years, gas taxes aren’t a long-term solution.

Meanwhile, neither the Trump administration nor Congress have been able to muster the political fortitude to level with the public regarding infrastructure finance. Raising gas taxes – likely 10-15 cents per gallon – is a political non-starter for most elected officials in Washington. 

By 2023, the HTF is projected to be $120 billion in the red and annually requires almost $20 billion in deficit funding to meet current obligations. With over 50,000 deficient bridges and crumbling road and transit infrastructure across the nation, an alternative funding structure is badly needed.

At the same time, the issue of climate change has risen to the fore. Both green advocates and free market economists propose a carbon tax, refundable each month to every household in America, as an efficient way to bring price discipline reflecting the true cost of fossil fuel use and its impact on the climate.

Unfortunately, the refund program creates winners and losers as it doesn’t mirror fossil fuel use per household. The rural truck driver or suburban commuter will invariably use more fuel each month than the urban subway or bus rider and there is no administrative mechanism to fairly address such disparities.

However, a modest carbon tax imposed at the producer level – together with a repeal of the existing federal gas tax – would provide a reliable revenue source to fulfill HTF obligations, fund major new infrastructure projects and lower federal deficits. According to the Congressional Budget Office, a carbon fee of $25 per metric ton would generate $100 billion each year.  At this level, the carbon levy, combined with repeal of federal gas taxes, would not hamper economic growth and would provide a steady stream of revenue to reduce road congestion and transportation sector CO2 emissions.

While climate activists and many Democrats pursue the so-called “Green New Deal”, with enormous power vested in government, a market-based carbon tax could provide a stable funding source for an infrastructure plan which the Administration and a majority in Congress might support. 

With an assured revenue source for road, bridge and transit infrastructure, the Trump Administration would fulfill a 2016 campaign promise, while at the same time lower deficits and create new revenues to pay for major projects, and also harden climate-impacted infrastructure across the nation. 

Mr. Trump has fashioned himself as a builder, but so far he has done little to deserve that reputation as president.  He still has time to get this done if he seizes the opportunity in front of him.

Former Representative John Faso of Kinderhook represented New York's 19th House district in the 115th Congress.

The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.