Ah, I’m old enough to remember when high-speed rail was a punchline among Republicans, the paradigm example of big-government make-work boondoggles for which there isn’t much demand outside a sliver of the business class and the circle of contractors lucky enough to be hired to build it. Which is to say, I’m more than two years old.
The first phase of California’s infamous high-speed rail project could end up as much as 50 percent over budget and is already seven years behind schedule, an unsurprising turn for an initiative that’s heavy on eminent domain and involves mile after mile of construction. But it created some jobs, and that’s the important thing, I guess:
President Donald Trump pushed his White House team on Wednesday to craft a plan for $1 trillion in infrastructure spending that would pressure states to streamline local permitting, favor renovation of existing roads and highways over new construction and prioritize projects that can quickly begin construction.
“We’re not going to give the money to states unless they can prove that they can be ready, willing and able to start the project,” Mr. Trump said at a private meeting with aides and executives that The Wall Street Journal was invited to observe. “We don’t want to give them money if they’re all tied up for seven years with state bureaucracy.”
Mr. Trump said he would was inclined to give states 90 days to start projects, and asked Scott Pruitt, the new head of the Environmental Protection Agency, to provide a recommendation. He expressed interest in building new high-speed railroads, inquired about the possibility of auctioning the broadcast spectrum to wireless carriers, and asked for more details about the Hyperloop, a project envisioned by Tesla founder Elon Musk that would rapidly transport passengers in pods through low-pressure tubes.
Is that likely to be popular? Well, yeah — very, which you already know if you read last night’s post. Is it likely to produce economic growth? That depends on how the money’s spent. China and Japan each got hooked on using infrastructure development as a form of stimulus, which produced many fine roads and bridges that few people use, consequently little bang for the buck in terms of growth, and a lot of debt. Spending tailored to the most economically productive infrastructure (i.e. probably not high-speed rail) would be easier to defend, but Steve Bannon didn’t sound picky last year in discussing this:
“Like [Andrew] Jackson’s populism, we’re going to build an entirely new political movement,” he says. “It’s everything related to jobs. The conservatives are going to go crazy. I’m the guy pushing a trillion-dollar infrastructure plan. With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything. Shipyards, ironworks, get them all jacked up. We’re just going to throw it up against the wall and see if it sticks. It will be as exciting as the 1930s, greater than the Reagan revolution — conservatives, plus populists, in an economic nationalist movement.”
“We’re just going to throw it up against the wall and see if it sticks.” And he’s not kidding. Case in point, as international trade has slipped over the last few years — and is likely to slip further if Trump ignites a trade war — so has the demand for new commercial ships, but here’s Bannon flagging shipyards as worth an investment. How come? He’s admirably candid in his goals: The point first and foremost is to create jobs, whether or not those jobs are involved in projects that are especially likely to promote growth. “If we deliver,” he told the Hollywood Reporter last year, “we’ll get 60 percent of the white vote, and 40 percent of the black and Hispanic vote and we’ll govern for 50 years.” Spend a trillion bucks to give Americans jobs and watch the votes flow in. We’ll worry about whether the new infrastructure can pay for itself later.
The central mystery is where the funding will come from. Trump mentioned in his speech last week that it’ll be a combination of public and private capital, but there are plenty of projects, like rebuilding roads, that aren’t natural targets for private developers. (After California’s miserable experience, does any private investor want to shovel money into a high-speed-rail sinkhole?) You can entice them with tax breaks, but at the end of a day a project is profitable or it isn’t, and many won’t be. That’s where the public capital comes in — and although conservatives in Congress won’t like it, Team Trump has signaled before that it’s more open to direct spending on infrastructure than many Republicans are. Remember, Jared Kushner said in December that Trump is closer to Chuck Schumer’s vision on this than Mitch McConnell’s, which means more money from Uncle Sam and less from private developers. House conservatives will resist — a bit. But some of them have already started murmuring that they might accept a bill that’s only 50 percent paid for. The coming vote on the House GOP’s ObamaCare replacement will be a nice test of how far the Reaganites left in Congress might be willing to cave on other not-very-conservative Trump priorities. If they’ll bend on refundable tax credits for health insurance, will they bend on throwing things at the wall on infrastructure and seeing if they stick?
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