Tag Archives: infrastructure spending

Infrastructure Funding and Financing: Another Trumpian Disaster in the Making

Let’s start with the ASCE’s report card on Nevada’s infrastructure.  The last report card on our kitchen table gives us an overall average C-.  Nevada’s two lowest grades (both D’s) are in categories for schools and dams. The claims from the current White House administration would imply that Nevada will see marvelous levels of investment in Job Creating Infrastructure Projects.  Not. So. Fast.

There are some questions related to projected infrastructure legislation which Nevada elected officials may want to consider very carefully.

#1. Does the infrastructure legislation address Nevada’s greatest needs?  The answer at present is “maybe not.” The commentary coming from the White House, and from members of Congress imply that most of the infrastructure plans are part of the Transportation budget.  [Hill] Again, roads and bridges are important, so are airports, but the greatest needs in this state are for projects and funding for upgrading schools and dams.

This past February a dam failed in Elko county, flooding farmland, homes, and stopping traffic on the Union Pacific RR. Obviously dams must eventually get their due. First, we should notice that the state of Nevada doesn’t keep a ranking of hazardous dams, most of which fall into the “earthen” category.  Secondly, it should be noted that a high hazard dam refers to the damage possible should the dam fail, not to the actual condition of the dams themselves.  Third, many dams in this state are privately owned.  About one third of our 650+ dams are constructed for flood control, another third for mining operations, and the remaining third fall into the amorphous category “anything else.” The state has been relying on 11 engineers to keep track of the 650+ dams, and Governor Sandoval’s budget proposal calls for three additional engineers in the Water Division for the next fiscal term. [LVRJ]

School facility upgrades and construction generally lie outside the common understanding of ‘infrastructure’ expenditures, being the province of local school districts, and based on the shifting sands of bond issues. Nothing signaled by the administration thus far would suggest expansion of federal interest in this category of infrastructure investment.

#2.  Will the legislation address Nevada’s needs for the construction and maintenance of roads and highways?  Maybe not.   The situation at present:

“The Nevada Department of Transportation maintains 5,300 miles of state highways, which includes many rural roadways within Nevada. Without an increase in the gas tax since 1992, the state funding levels have stagnated and Federal funding has remained at a similar level the past 5 years. Hence, the maintenance of the existing highway system has fallen behind and the state will need approximately $285 million annually for the next decade to catch up on the current backlog of highway maintenance. The current funding levels provide only 60% to 70% of the required funding to maintain the state highways. This has resulted in an increase in the number of lane miles requiring either an overlay or full rehabilitation from 28% two years ago to 38% currently.” [ASCE]

New construction is great, no one should argue against it where it’s needed to improve the flow and traffic and attendant commerce, however, when nearly 40% of the current roadways need overlays or full rehabilitation, the problem is focused on maintaining what we have at present not necessarily on new construction projects.

#3. Does the administration’s plan differentiate between financing and funding?  This is important.  A definition is in order:

“Infrastructure funding and financing are different concerns. Funding specifies how resources will be collected to pay for infrastructure construction, operations and maintenance, and repairs. Financing generally concerns how to raise the large upfront costs needed to build the infrastructure.” [EPI]

So, the administration has spoken of “a trillion dollars in infrastructure investment,” what does this mean?  For the administration is apparently means “leveraging private dollars.” Again, some translation is necessary.  What the administration is talking about is the financing of construction projects. And, we’re back to the difference between funding and financing — if states are facing the same questions posed back in 2015, when Republicans proposed that HTF projects be limited to the revenue accumulated from gasoline and diesel taxation, then many projects, especially of the improvement and maintenance variety will be put on hold. [BondBuyer] Infrastructure funding will be a function of how the administration budget addresses the issue of raising the money necessary to construct, operate, and maintain.  However, if the administration is speaking of “leveraging private funds,” then we should assume that the White House is referring to new construction.  And, now we enter the land of the P3.

A P3 is: “Public-private partnerships (P3s) are contractual agreements formed between a public agency and a private sector entity that allow for greater private sector participation in the delivery and financing of transportation projects.” [DOT]

Let’s put this question of infrastructure investment in purely financial terms:  Who benefits from P3 structuring?  Hint: It isn’t necessarily the state and local governments because bond yields for such things as school construction, road construction, and other large projects have been dropping since their “highs” around 1982 (13+%) to the current rates (3.5+%). [MuniBond]

Bluntly stated, it’s not the financing that’s a problem for state and local governments, they’re paying almost historic low yields (interest) on the bonds they’ve issued for major projects.  The administration is approaching the infrastructure investment issue from the wrong end of the stick — focusing on the financing and not the funding.

#4. Is the use of the P3 structure based on the needs and capacities of the states and municipalities or the desires of private investment?  Some attention is required because:

“In theory, they can(P3)  be effective—but they provide no free lunches. Funding must still be found for the projects—and ordinary households will end up paying the costs through taxes or user fees. In addition, the details of contract construction and oversight are daunting and require a competent, democratically accountable government to manage them. In short, P3s do not allow for simple outsourcing because they do not bypass the need to fund infrastructure or the need for competent public management.” [EPI]

Or, P3s don’t replace the more traditional methods of financing — local and state taxation is still required for paying project costs. There’s nothing ‘simple’ about these arrangements, and they require extensive oversight and management.  Before leaping into a P3 it should be revealed that these generally allow governments and investors to ignore the requirement of Davis-Bacon Act ‘prevailing wages.’ This may ‘create jobs’ but it doesn’t create ‘good paying jobs’ in the construction sector.

#5. Does the administration plan specify financing and funding of infrastructure projects or is it simply a “tax credit” giveaway to investors?  It certainly sounds like it at this point, but the administration, as is becoming more obvious every day, seems to be short on specifics, and the only solid at the moment is the “tax credit” portion of the pronouncements.  If this is a tax credit for projects already in the planning stage, then it’s hard to characterize this as a bright and shiny new proposal.

#6. Location, Location, Location?  Granted that Nevada is an urban state, with most of the population located in two counties, but the roads, bridges, and dams are aligned through predominantly rural areas. Investors, in P3 or other financing schemes, can clearly see the benefits of construction in urban areas (toll roads, toll bridges, etc.) Rural areas, not so much. Nor does the financing strategy address other infrastructure issues in urban areas — how, for example, does Clark County improve its public transportation facilities and components? Washoe County? Or, Douglas, Lyon counties, and Carson City?  How will investment be directed to poorer areas, or areas under served by current transportation systems? Stated more generally:

“The other problem is that Trump’s approach makes it less likely he’ll actually create new jobs. If the customer base can afford it, and they really need the infrastructure, then the project is almost certainly already profitable and private firms are already willing to do it. The tax credit just sweetens the deal on the margins. Where there’s demand, the private market can already create jobs. The less you’re willing to redistribute, the fewer new jobs you can create.” [TheWeek]

This is another point at which the magic hand of the Market fails on one side and succeeds on the other — where there is demand (and the capacity to meet that demand, the tax credits are minimally useful (except to investors) — where there is great need but little capacity to meet the demand, then the tax credits aren’t an inducement to job creation.

We need to take some care to observe whether the “infrastructure” plan is (1) truly about infrastructure needs in Nevada? (2) truly a job creating plan and not merely a way to get tax credit benefits to the investor class, or ignore the Davis Bacon Act requirements for American workers, (3) about getting the infrastructure investments where it is actually needed.

Caveat Emptor.

 

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Filed under Economy, Federal budget, Infrastructure, Nevada highways, Nevada politics, Politics, public transportation

Want Something To Be Afraid Of? Here are a few really scary things

Something Afraid Of

Remember the time honored line from childhood, “If you don’t stop crying I’ll give you something to cry about?”  Combine that with the line from the Republicans – We can’t spend any money – Federal Spending is Out of Control—Think of the Children!  Okay, let’s think about the children and what we’re leaving them. That’s scary.

What’s NOT Scary?

First, let’s take on the Republican mantra about spending our grandchildren’s money – it’s hokum, and always has been.  The GOP had, as we remember, no problems conducting the war in Iraq on the national credit card, nor did they have any problems when they put the Medicare Part D into effect without any funding.  Hypocrisy aside,  there are these  inconvenient facts for the GOP:

“Federal outlays over the past three years grew at their slowest pace since 1953-56, when Dwight D. Eisenhower was president. Expenditures as a share of the economy sank last year to 22.8 percent, their lowest level since 2008, according to Congressional Budget Office data. That’s down from 24.1 percent in 2011 and a 64-year high of 25.2 percent in 2009, when Obama pushed through an $831 billion stimulus package.” [BloombergNews]

And then there’s this:

“The deficit probably will fall to $500 billion, or just below 3 percent of GDP, by 2015, as businesses and consumers step up their spending after bringing their own debts down, said Jan Hatzius, chief economist at Goldman Sachs Group Inc. The improving economy will increase tax receipts while lowering government expenditures for benefits including food stamps and unemployment compensation.” [BloombergNews]

So, thus much for the GOP and Faux News talking point, endlessly repeated for effect if not edification.

What IS Scary?

The Infrastructure Nightmare. We are leaving our children and grandchildren one horrific bill for the maintenance and improvement of our national infrastructure.  We keep getting report cards from the ASCE and we keep ignoring them.

“Over two hundred million trips are taken daily across deficient bridges in the nation’s 102 largest metropolitan regions. In total, one in nine of the nation’s bridges are rated as structurally deficient, while the average age of the nation’s 607,380 bridges is currently 42 years. The Federal Highway Administration (FHWA) estimates that to eliminate the nation’s bridge deficient backlog by 2028, we would need to invest $20.5 billion annually, while only $12.8 billion is being spent currently. The challenge for federal, state, and local governments is to increase bridge investments by $8 billion annually to address the identified $76 billion in needs for deficient bridges across the United States.”  [ASCE]

We’re currently spending only a bit more than half of what we need to spend to eliminate the backlog – note that’s not speaking to NEW construction.  Congratulations kids! We’re saving you from the practically non-existent “National Debt” problem – while we are leaving you with the bill for a deteriorating bridge system.  You know, those bridges that are used by commuters, travelers, and truckers…. What could possibly go wrong? Can anyone say I-35 Minneapolis bridge collapse?  Bridges are scary… so are airports:

“Despite the effects of the recent recession, commercial enplanements were about 33 million higher in number in 2011 than in 2000, stretching the system’s ability to meet the needs of the nation’s economy. The Federal Aviation Administration (FAA) estimates that the national cost of airport congestion and delays was almost $22 billion in 2012. If current federal funding levels are maintained, the FAA anticipates that the cost of congestion and delays to the economy will rise from $34 billion in 2020 to $63 billion by 2040.”  [ASCE]

That’s right kids, while we’re saving you from that horrible nasty national debt that is neither horrible, nor nasty, we are leaving you holding the tab for an airline transportation system the cost of which will balloon up to $63 billion, billion with a big B, by 2040.   But, but, but, we’ve saved your “inheritance?” What inheritance? You’ll be spending your tax dollars on things we should have taken care of 25 years earlier.

In case this is giving our children and grandchildren headaches – there’s the problem of real headaches and other medical issues.

The Medical Research Issue.    The Republicans were only too pleased to launch one of their patented panic attacks about the Ebola infections, but that subsided with the election, and we still don’t have a Surgeon General, nor do we have any significant increases in funding for medical research. Remember kids – we’re saving your “inheritance.” Research America tracks funding for medical and pharmaceutical research and reports:

“Federal spending also contributed to the overall increase in the R&D spending reported for FY12, but the apparent increase in this category is misleading. The increase is largely due to changes in the classification of existing spending within the National Science Foundation and the Food and Drug Administration ($315 million at NSF and $152 million at FDA) rather than to an actual increase in dollars.”

So, while we’re skimping on funding medical research in this country, we still have mortality rates which differentiate by ethnicity – the average life expectancy of a white male is 76.5 years, a black male 71.8 years, and a Hispanic male 78.7 years.   While the elders march along, on different paths, we could spend a few moments thinking about those infants who are going to be footing our bills.  We have NOT succeeded in bringing down the number of fetal deaths since 2005, and those fetal mortality rates are higher for African American, Native American, and Alaskan Native women than they are for non-Hispanic white women. [CDC]  If the infant makes it into the world there are still problems, for every 1,000 infants born in this country 6 of them will die during their first year of life from a serious birth defect, or being low birth weight, or from being a victim of Sudden Infant Death syndrome, or from the effects of maternal complications of surgery. [CDC]

We do have a Healthy Start program, launched in 2007, to address some of these issues, and then we cut the funding!  So, we still have differentiated life expectancies, a serious problem with fetal mortality among ethnic minorities, a continuing problem with sustaining infants beyond their first year – and we cut the funding – Dear Grandchild, if you are fortunate enough to be alive to read this, please know we love you and hope you don’t mind that we “saved” you from the Nasty National Debt…. You can pay for the research to keep your own children alive, we could have helped but you know how it is.

Oh, and that Ebola thing?  We’d have made more progress on the vaccine but we didn’t want to spend “your inheritance.” [Time] And, the nasal version of the vaccine – that might not happen either because of funding cuts. [Pharma]  Even better – there is a proposal from the Republican to cut funding for the CDC budget – the one that in conjunction with the NIH will be working on drug resistant virus strains.  If the kids want more research on new bacterial and virus related illnesses, they can pay for it themselves?

Gun Violence.  While we were busy protecting your right to bear arms, and we clung to the notion that having a gun in the home will make those little future taxpayers safer.  We did all this while still knowing that a gun in the home makes it 22 times more likely to kill or injure someone (maybe you) in the house than that it will ever be used for self defense.  And, we knew that 60% of all children (0-9) killed  by guns occurred in an apartment or single family dwelling.  We also knew that two-thirds of all school shootings were done with a gun acquired in the home. [Brady]  What did we do about this?

We made it impossible for a gun manufacturer or dealer to be sued for negligence or malfeasance. We refused to enact legislation to require background checks on gun buyers.  We refused to even take an official count of gun deaths and would not allow pediatricians to ask if firearms were in the house.   Because? Maybe you’ll want a gun… if you can still afford one… and you too can be at greater risk for a homicide, suicide, or unintentional shooting. Oh, and by the way, we’re leaving the increasing costs of medical care, emergency room treatment, rehabilitation treatment, lost productivity, and judicial proceedings to you.  Because you’re “free.”

So, if you want some things to truly be afraid of these are just three areas in which we have decided that our children and grandchildren can shoulder the bills because we were too deluded, too ideological, or perhaps too ignorant to do so ourselves.

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Filed under Infrastructure, national debt, Politics

Sunrises and Tax Cuts: One Sure, the Other Not So Much

<Snark> I do hope you appreciate my efforts this morning. I got up nice and early — more a function of a miniature dachshund who had tangled himself in a sheet than an intention — and took my coffee to the deck and Bid The Sun To Rise! <snark>  OK, it wasn’t this sunrise, which is a stock graphic, and much better than this morning’s cloudy rendition.  Now to the point.   The Rolls-Royce Ticket (Romney/Ryan) has Promised an increase of 12,000,000 jobs!

Right there in the acceptance speech: “And unlike the president, I have a plan to create 12 million new jobs.” [Politicususa]  This would be lovely, except that it is roughly analogous to my claim of bidding the sun to rise; it’s probably going to happen anyway:

‘In its semi-annual long-term economic forecast released in April, Macroeconomic Advisers projected that the economy would add 11.8 million jobs from 2012 to 2016. That means Mr. Romney believes his newly announced policies would add an extra 200,000 jobs on top of what people already expected, or a jobs bonus of about 2 percent. The more jobs the better, of course, but that’s not really much to write home about.” [NYT]

And, actually the President HAS a plan to create jobs — the American Jobs Act. S. 1549 was introduced by Senator Harry Reid (D-NV) on September 13, 2011.  That it has not moved since isn’t a function of “Presidential Leadership,” but of good old fashioned Republican intransigence.

The legislation includes tax cuts and regulatory reforms for small businesses and entrepreneurs.  But, the GOP doesn’t want to move on it.

The legislation includes provisions for preventing teacher layoffs, hiring more veterans, investments in infrastructure projects, public-private projects for rehabilitating local communities.  But the GOP doesn’t want to vote in favor of these elements.

The legislation promotes work based reforms to create innovative ways to retrain, rehire, and re-employ American workers.  But the GOP doesn’t want this to come to the Senate floor.

The legislation also encourages more re-financing of homes for stressed home-owners. But the GOP doesn’t want to talk about this either.  [AJAfactsheet]

The level of Republican intransigence can be measured by the number of tax cuts they passed up in order to block this legislation:

#1. The Republicans rejected a provision which would cut the payroll tax in half to 3.1% for employers on the first $5 million in wages, providing broad tax relief to all businesses but targeting it to the 98 percent of firms with wages below this level.

#2. The Republicans rejected a full holiday on the 6.2% payroll tax firms pay for any growth in their payroll up to $50 million above the prior year, whether driven by new hires, increased wages or both. This is the kind of job creation measure that CBO has called the most effective of all tax cuts in supporting employment.

#3. The Republicans rejected a proposal for 100 percent expensing, the largest temporary investment incentive in history, allowing all firms – large and small – to take an immediate deduction on investments in new plants and equipment.

#4. The Republicans rejected the Returning Heroes Tax Credit of up to $5,600 for hiring unemployed veterans who have been looking for a job for more than six months, and a Wounded Warriors Tax Credit of up to $9,600 for hiring unemployed workers with service-connected disabilities who have been looking for a job for more than six months, while creating a new task force to maximize career readiness of service members.

#5. The Republicans rejected the AJA including the plan to expand the payroll tax cut passed last December by cutting workers payroll taxes in half next year. This provision will provide a tax cut of $1,500 to the typical family earning $50,000 a year. As with the payroll tax cut passed in December 2010, the American Jobs Act will specify that Social Security will still receive every dollar it would have gotten otherwise, through a transfer from the General Fund into the Social Security Trust Fund.

The Mornings After

Gee, and here we thought that the sun will rise in the east every morning, and Republicans will always favor tax cuts.  Yes, the President had, and still has, a specific plan to increase employment in the good old United States of America — but as of October 14, 2011 the plan ground to a halt in the face of Republican opposition in the Senate:

President Obama’s $447 billion jobs plan foundered in the Senate on Tuesday night, as a unified Republican caucus and a pair of Democrats joined to deny the proposal the 60 votes needed to allow it to proceed to full consideration.  [WashMonthly]

Any claims of “bipartisan rejection” of the bill can be waived because the two “no votes,” from Senators Nelson of Nebraska and Tester of Montana, wouldn’t have broken the GOP filibuster of the American Jobs Act.  The cloture motion failed on a 50-49-1 vote. [roll call 160] It takes 60 to break a filibuster and the best the Democrats in the Senate could have mustered was 53.  *Senator Reid voted ‘no’ to be on the prevailing side so he could later offer a motion to reconsider under the rules.

Yes, the bill includes tax cuts, and YES it’s paid for, and yes, the Republicans, in a “unified Republican caucus” blocked it.  Now, we get the vague sound of whining as the sun rises.

The Republicans whine, “but the President hasn’t shown leadership on jobs creation,” an interesting wail since the President presented a piece of legislation all packaged nicely with tax cuts and infrastructure investments.   It really doesn’t do for me to park my pickup across your driveway and then criticize you for not driving your children to school.

The Republicans whine, “the bills are too big and complicated,” but when parts of the legislation are offered in the Senate those are filibustered as well.  This comes perilously close to refusing to eat at the restaurant because the menu’s too long, but when offered items a la carte refusing each one.

According to GOP candidate Governor Mitt Romney:  “The President doesn’t have a plan, hasn’t proposed any new ideas to get the economy going—just the same old ideas of the past that have failed.”  [Prospect]

The Republican complaint would have far more authenticity had they worked with the Democrats in the Senate to pass the infrastructure and rehabilitation portions of the American Jobs Act; indeed, the ONLY specific  jobs proposal on the table at the moment  is the aforementioned American Jobs Act.  Governor Romney’s complaint would have far more resonance if he would offer something besides the trickle down economics of Republicans Past.  Speaking of no new ideas… in the words of the Rev. Al Sharpton, “We got the trickle, but nothing came down.”

The sun will rise tomorrow morning whether I take my coffee on the deck or not, the economy will probably create about 11.8 million jobs even if we do nothing, and the Republicans will filibuster anything from the White House whether it has a package of tax cuts in it  or not — just because it came from the Democratic side of the spectrum.

Perhaps candidates in Nevada’s Senatorial race, and in the Nevada Congressional District races should be asked whether or not they support the American Jobs Act, or even portions of it?  Perhaps it’s time we got some answers that aren’t merely more predictable-as-the-sunrise rhetoric?

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Filed under 2012 election, Economy, Filibusters, Obama, Romney, Taxation, Veterans