No Progress on Infrastructure Plan at Camp David Meeting

January 8, 2018

Just three weeks from President Trump's State of the Union Address, it is clear that this past weekend's GOP leadership meeting with the President at Camp David did not focus on getting Congressional support for a plan to build new U.S. economic infrastructure. Instead, foolish ideas are being surfaced which smack of desperation.

The only thing confirmed by White House officials is that the President, once again, told the Congressional leaders he does not believe that public-private partnerships (PPPs) work for important new infrastructure projects. But at the same time, the Washington Post reported that advisor, National Economic Council Director Gary Cohn gave an all-PPP presentation to the Congressional leaders on Saturday. A Washington Examiner report holds that Cohn promoted underground high-speed rail lines which "won't cost the taxpayers anything" because the private sector will build them — likely referring to Elon Musk, whom Cohn might want to call Little Tunnel Man. Sen. Rand Paul said he was going to introduce a bill to divert the foreign aid being withheld by Trump from Pakistan, to "building bridges and railroads." This is, at most, $2 billion. Senator Paul was not at the Camp David meeting, but Trump tweeted, "Good idea, Rand!"

Rep. Rodney Frelinghuysen (R-NJ), Chairman of the House Appropriations Committee, on Jan. 4 came strongly to the defense of Amtrak's Northeast Corridor Gateway Project, saying "it will be the Committee's responsibility to see that such national priorities are met." The Department of Transportation recently disowned a "50-50" agreement for the Gateway Project's $29 billion estimated cost, calling it "a project of 90% local significance" only.

How might Franklin Roosevelt's Reconstruction Finance Corporation have handled this? It might have extended a 20-year, 2% loan of $30 billion to the Metropolitan Transportation Authority, effectively doubling the MTA's capital budget so that it could build the new Hudson Tunnels and bridges and repair Hurricane Sandy's seawater damage which is ruining the old ones, among other improvements. The MTA, which is assigned $5.5 billion/year in special tax revenue, has already allocated $2.7 billion over five years to pay interest on a Gateway Project loan. It would have to increase that only slightly to pay the Federal loan interest, while increased economic activity from improvement of the Amtrak Northeast Corridor through the nation's largest metropolitan area, would enable the states of New York, New Jersey and Connecticut to repay the loan principal over 20 years rather than $15 billion now.

Just as a Reconstruction Finance Corporation — borrowing with Treasury guarantee for a targeted capital budget — could do this, so could an infrastructure bank capitalized from the Treasury holdings of U.S. commercial banks, savers, and foreign holders particularly China and Japan. Tax backing for large-scale credits is necessary, and thus advisor Gary Cohn's sometimes repeated proposal to raise the Federal gasoline tax to fund infrastructure, is important. But there is no indication whether Cohn repeated this at Camp David.