Trump’s Budget Is a Disaster for Transit, and His Infrastructure Plan Is a Gift to Wall Street

Photo: Gage Skidmore/Flickr
Photo: Gage Skidmore/Flickr

The Trump administration’s fiscal year 2018 budget, released yesterday, includes severe cuts to federal transit funding. Next stop: Congress, which will consider the president’s proposal before it passes a budget over the summer.

As with the White House budget blueprint released in March, the only cabinet-level departments that would get funding increases are Defense and Veterans Affairs. Every other agency gets cuts, including U.S. DOT, which would see next year’s budget drop by $2.4 billion, or 12.7 percent [PDF].

The White House wants to dramatically shrink the Highway Trust Fund, which pays for roads but also transit and bicycling and walking projects. Congress has recently come up with patches and gimmicks to replenish the fund instead of raising the gas tax, which for decades was the primary source of revenue. Trump wants to rely only on gas tax revenue, cutting an estimated $95 billion from the fund over 20 years.

Transit, bicycling, and walking will face the biggest threat. Transit agencies serving cities around the nation rely on federal funds for their capital budgets. If those funds can’t be counted on, it will threaten their core infrastructure and existing service.

Capital grants for transit expansion projects, known as New Starts, would also be hit especially hard, with a cut of $928 million, or 43 percent, compared to what Congress has allocated for the current fiscal year. The Trump administration says it will support projects that have already signed funding agreements with the federal government, but wants to eventually eliminate New Starts completely.

That would force cities and states to raise additional funds or cancel their projects entirely, and the pipeline for future expansion projects would also dry up.

Perversely, the Trump administration says it is cutting federal support for transit because cities like Denver, Los Angeles, and Seattle have raised funds locally, often through ballot initiatives that increase taxes, to expand transit. While the Trump administration says this shows that federal support is not needed, those projects in fact rely on matching federal funds.

Trump’s budget also eliminates the TIGER program, which received $499 million this fiscal year and has funded a range of freight, transit, bicycle, and pedestrian projects around the nation. It also cuts $630 million in aid for long-distance Amtrak routes.

Amid this looming austerity, Trump wants to insert his infrastructure plan [PDF], which would cover not just transportation but also drinking water, electricity, and other projects. It’s billed as a $1 trillion plan but only $200 billion of that is federal spending. (There’s also just $5 billion allocated for the plan in the coming year — not nearly enough, Democrats say, to make up for Trump’s cuts.)

The other $800 billion would come in the form of private finance, which is suited for building toll roads (if they’re profitable) but not transit infrastructure. Wall Street may benefit from a bonanza of infrastructure financing, but America won’t be building the transit lines and safe streets it needs under this plan.

Congress must now come up with a final budget plan to go to the president’s desk before the fiscal year starts on October 1.

  • Larry Littlefield

    So are roads and airports cut proportionately?

    The best option for those in favor of other transit modes might be a federal transportation role of zero.

    Consider freight. How much federal money goes to railroads? Their infrastructure is in fact taxed.

  • Jesse

    Is there any possibility of a silver lining?
    For instance:
    1.) If private investors are interested in projects that have the potential to be profitable, does that mean that mean they are more eager to fund projects in more densely populated areas? I.e., infrastructure in cities has more users so there’s more potential for profit and the cost per capita is lower.
    2.) If road projects have to be profitable, will that start to internalize the cost of driving a little more?
    3.) If private funds are used on the East River bridges will they impose tolls on those bridges?
    4.) If private auto travel really is the most expensive form of transportation (and I have no reason to believe that it isn’t), then isn’t it harder to turn a profit with road projects? Couldn’t that mean that private investors might be attracted to transit projects? Weren’t subways and street cars originally for-profit operations? My understanding was that they failed not because it was an inherently bad business model, but because they couldn’t compete with private autos in cities which were receiving vastly more in subsidies (both in terms of dollars and in terms of rights of way). Is it at all possible, for instance, that Alta or some other investor might invest in expanding bike-share and in improving the bike lane networks, with the knowledge that bike-share, as a form of transportation has relatively low capital and maintenance costs?
    I realize that to be this optimistic about a Republican transportation plan means I must be naïve. But I’ve always believed that our over-built car transportation network is so inefficient that it could only exist to the extent that it does because of massive government subsidies and only with the understanding that it could never be profitable. To the extent that a chunk of that subsidy is disappearing and being replaced by private interests, shouldn’t that mean building and maintaining a transportation system that is closer to reflecting its true cost? Sure, private auto travel is still receiving the bulk of the subsidies and the funding for transit is all but gone, but the overall transportation subsidy will be lower and the incentive for a more efficient and profitable transportation system will be stronger.
    One problem I can see with this plan is that it simply won’t play out that way in the real world. Congress won’t actually make drastic cuts to highway infrastructure funding but it will leave in the huge cuts to transit. At the same time, they will still end up entering into private contracts for construction and maintenance (but without risking much private capital) and private actors will make money on this.

  • Jeremy

    Private investors won’t fund a project unless they can make a lot of money. The larger a project, the greater the profits. Therefore, investors are only going to want to build tollways, not bike lanes.

    Investors are also going to write into the contracts guarantees to make the project profitable. This means:

    1. Minimum user guarantees. If people avoid the tollway, the local government will have to pay the lost revenue to the investors.

    2. Veto power over competing projects. BRT or light rail will not be allowed if it will compete with the private investment.

    Look at Chicago privatizing its parking meters to see how these contracts can be a horrible deal for municipalities.

  • Southeasterner

    Look at the friggin vice president. Indiana is a perfect example of a failed private investment in a toll road. Similar to Trump who bankrupted his company multiple times and is now trusted with the U.S. economy, Pense and his cronies are pushing public-private deals that they themselves have failed to execute successfully.

  • Southeasterner

    When people see the word “infrastructure” they immediately think of roads, bridges, and airports. Trumps “infrastructure” package has nothing to do with any of these and is essentially a way to privatize our aviation system, increase subsidies for carbon intensive energy projects, and get the government to pay for improved internet connectivity to private residential and commercial developments.

    If pulled off the $1 trillion “infrastructure” package will be one of the biggest public giveaways of money to private developers and energy companies while leaving states and municipalities with an impossible task of fully funding all of their real infrastructure projects without access to any federal gas tax revenue…which will be diverted to non-transportation related projects.

    So much for user-pays GOP economics and fiscal responsibility. They are going African dictator style pay-offs, known in the rest of the world as corruption.

  • Vooch

    Agreed that this a crony capitalist wet dream. However, I believe the only way we will have a level playing field transit versus mass motoring is when toll highways become the norm.

    Therefore I advocate for privatization of all interstates

  • Jeffrey Baker

    The freight railroads are all still coasting on the momentum of the biggest federal subsidy of all time, 150 years ago.

  • david vartanoff

    More importantly, whenever some minor increase in commuter or Amtrak LD service is negotiated, the RRs exact huge sums to do the track upgrades stockholders should be paying for. As to RRs paying taxes, CSX refused to allow Amtrak to restore a second main bypass of Selkirk Yard (Albany NY) without a discount deal on their real estate taxes.

  • Larry Littlefield

    Just remember, the federal government can’t sell the roads, because it doesn’t own them.

    What it could do is guarantee the bonds. The way it did for suburban owner-occupied housing, and development in flood planes.

    Contingent liabilities such as this aren’t even counted as spending until the detonate — perfect for Generation Greed. That’s what to look out for.

  • Larry Littlefield

    I don’t believe they got that subsidy in the Northeast.

  • Southeasterner

    Unfortunately that’s not the reality. Rather than using tolls to make up for lost federal funding, states are robbing the general fund to make up the gap because there is no political appetite for more toll roads. Even TX, the epicenter of tolling, is now blocking new toll roads due to “tolling fatigue.” In states like WI you have a governor openly flaunting the transfer of funds from the general fund to roads at the expense of transit and funding for education.

    While Trump is pushing “private” funding at the national level, at the state level the mere mention of tolling can guarantee you won’t win re-election…and a Tea Party candidate will be right there to take your place.

  • Jeffrey Baker

    Perhaps not, although with the shuffling of ownership over the decades who can really tell. But I’m sure I hardly have to remind you that Conrail bailed out the Pennsylvania and New York Central railways to the tune of $4bn dollars.

  • Vooch

    Agreed that the political reality is it impossible to appropriately price highway usage.

    therefore remove the political influence entirely, fully privatize the interstates. Sell the land and improvements with zero conditions, no useless regulatory body, no price controls, no crony capitalist concession.

    Just sell the interstates – it’s the only way to get politics out of road pricing

  • Kenny Easwaran

    Fully private pricing doesn’t work for monopoly or network goods, like highways. You could regulate prices so that they must be lowered when traffic is less than maximum capacity of the road and raised when traffic is more than maximum capacity of the road. But the profit maximizing price is higher than the price at which number of vehicles per hour is maximized.

  • Kenny Easwaran

    One problems is that as long as existing interstates remain free, competing routes (whether road or transit) will always be worse investments than routes to new far-flung areas that aren’t on any interstate, where cheap real estate development opportunities exist.

  • Flakker

    Maybe if NY didn’t have a corrupt and incompetent government that sucks at virtually everything this would have been a forgotten footnote instead of a bitter tale of defeat.

  • Vooch

    interstates are not even close to a monopoly

  • Jesse

    “Therefore, investors are only going to want to build tollways, not bike lanes.”
    But Citibike is already privately run. Granted Alta has not invested in the bike lanes but I don’t see why they wouldn’t necessarily if they had some guarantee that bike lanes could be installed quickly. At least one company saw the potential for profit in a bike share system and the better the bike lane network the more profitable the bike share. The major hurdle to expanding the bike lane network in NYC isn’t money; it’s the slow political process which I wouldn’t think would be affected by the funding mechanism either way.
    As for the other points I agree with you. In PPPs now the government often makes bad deals or fails to enforce the contracts when the private actors breach. For any kind of infrastructure plan that relies primarily on private funding to work, that trend will have to be reversed.

  • Jeremy

    Bike share is not infrastructure. The cost for startup is minimal compared to construction. Local government pays the vendor to operate, plus the vendor sells advertising on the kiosks and collects from sponsorship of the system (Citibank in NYC, Blue Cross Blue Shield in Chicago, Nike in Portland).

    A tollway bike lane won’t collect as much money as a tollway road. Therefore, it won’t be part of the GOP privatized infrastructure plan. Saudi Arabia is investing $20 billion to help fund infrastructure construction. They are not investing in bike share.

    https://www.nytimes.com/2017/05/20/business/dealbook/saudi-arabia-to-invest-20-billion-in-infrastructure-mostly-in-us.html?_r=0

  • ConcernedAboutWinnipeg

    Since when are interstates a monopoly?

  • Vooch

    “..But the profit maximizing price is higher than the price at which number of vehicles per hour is maximized…”

    you act as if this is a problem

  • Kenny Easwaran

    If we’re going to build infrastructure, isn’t it better to have it fully used than pricing it higher and letting it go to waste?

  • Kenny Easwaran

    In nearly all parts of the country, there are some trips one might make where the only reasonable route takes an interstate. If you’re traveling from Los Angeles to Santa Monica, sure, there’s dozens of streets available, so I-10 isn’t a monopoly. But if you’re traveling from Los Angeles to Palm Springs, there’s really no option other than to take I-10, unless you add 20 miles of winding mountain roads to your trip.

    And even in the places where the interstate isn’t a monopoly, the competitors are very imperfect substitutes (because they’re either surface streets, or are several miles out of the way). You only get real competition when you’ve got redundant capacity. That’s how it is with networks generally – if you want more than two internet service provider options, then you need more than two cables connecting your house to the internet, and building all those cables costs money, and if you want more than two companies competing for your travel money between two locations, then you’re going to need to pave more land area.

    You can avoid these issues if at least one of the providers is highly regulated, or government-run, so that the price maximizes the social value of the network good, rather than maximizing the profit to the owner.

  • Vooch

    20 miles of highway IS a alternative route to PS

    your examples are good ones, but fail even the most cursory exam.

    Santa Monica Freeway has average speed of nil. It’s taken me 2 hours to get from DTLA to MDR (18 miles) numerous times. Cycling on surface streets is faster LOL

    price solves everything

    free ruins everything

  • Vooch

    That’s for the investors to decide.

    unless you are putting your money down, you don’t really have a voice, nor should you

  • Richard Bullington

    Wrong. Wrong. Wrong. Six railroads received state or federal land grants: the Illinois Central from the northern border of Illinois to the southern tip plus the Chicago “branch”, the Union Pacific from Council Bluffs to Ogden, the Central Pacific to Sacramento, the Southern Pacific from Sacramento to Sierra Blanca Texas, the Texas & Pacific from Fort Worth to Sierra Blanca, and the Santa Fe from Belen New Mexico to the California border at Needles.

    The entire eastern half of the country as far as St. Paul, Council Bluffs, Kansas City and Fort Worth was built out by private investors. The lines out west that grew from the land-grant trunks were aldo built using private funds.

    In addition, the land-grant railroads had to carry government freight for a penny per ton-mile in perpetuity. That law has since been repealed.

    Was there collusion between the fledgling rail companies and various state legislatures? Absolutely. But that was true of the canal companies, the toll-road builders, and river boatmen with those same legislators.

    The government got the deal of the century — literally — with the land-grant legislation.

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