Trump Infrastructure Plan’s Fatal Flaw

By THE NYT EDITORIAL BOARD SEPT. 30, 2016



Hillary Clinton and Donald Trump agree that the nation’s roads, bridges and other infrastructure need an expensive overhaul. But voters should not assume that the candidates are equally capable of delivering results.

The ability of any president to carry out a plan for repairs and new projects costing hundreds of billions of dollars depends on how the plan meshes with the administration’s other tax and spending proposals. An infrastructure overhaul cannot be done in isolation.

Mrs. Clinton’s approach has a shot at doing some good; Donald Trump’s approach would be fiscally untenable.

Mrs. Clinton has called for $275 billion in spending on infrastructure over five years. Her plan is too small to meet the nation’s need on its own; the American Society of Civil Engineers estimates that needed repairs will run into the trillions of dollars. But under her proposal, the initial spending could propel future investment, because some of the money would be used to establish a federal infrastructure bank to provide start-up financing, loan guarantees and long-term loans for large-scale public projects. She also says the plan would be paid for with revenues generated through a reform of business taxes. Mrs. Clinton has yet to detail her reform proposal, but in theory her plan would avoid adding to the federal deficit, as Congress has demanded in recent years.

Donald Trump, by contrast, has said he would simply borrow several hundred billion dollars to “at least double” the amount that Mrs. Clinton proposes to spend. He’s right that borrowing to invest in infrastructure makes sense in times like these when interest rates are low. But combined with his other plans, Mr. Trump’s proposed borrowing would do severe fiscal damage.

For starters, the centerpiece of his economic plan is a huge tax cut for the wealthy. The proposed cuts would reduce revenue by $4.4 trillion to $5.9 trillion over 10 years, according to a preliminary analysis of the plan’s latest version by the Tax Foundation, a conservative group that supports lower taxes. Other gigantic tax cuts carried out during the Reagan and George W. Bush eras — driven by supply-side theories — resulted in bigger deficits and did not promote broadly shared growth. Experience indicates that combining Mr. Trump’s proposed borrowing of, say, upward of $550 billion with his proposed tax cuts would also deepen the deficit and widen inequality.

Of course, Mr. Trump claims that his tax cuts would largely pay for themselves by unleashing economic growth of 4 percent annually. That goal is well above the roughly 2 percent to 3 percent average of the past 50 years and, even under the rosiest assumptions, would be achievable only by increasing the labor force through more immigration, which Mr. Trump clearly opposes.

To avoid the large deficits that would result from the combination of tax cuts and more borrowing, Mr. Trump would have to make brutal spending cuts in other areas of the budget. Another problem is that enormous borrowing could attract foreign investors to American debt. The downside would be a stronger dollar that would make American exports less attractive, thereby increasing the trade deficit — precisely what Mr. Trump has been railing against.


So far, Mr. Trump has proposed some cuts to federal spending to partly offset the cost of the tax cuts, but his targets are poorly chosen. For example, the budget category he would cut has already been slashed to near record lows, and it comprises programs to maintain critical infrastructure, including harbors, dams and waterways. He has proposed, in effect, to cut spending on infrastructure as part of his plan to borrow for spending on infrastructure.

There’s an indisputable need for investment in America’s aging infrastructure. Only Mrs. Clinton has a realistic plan for doing anything about it.