Opinion: How to Pay for $10 Trillion in Infrastructure Spending
By Joe Petrowski on Feb. 16, 2017FRAMINGHAM, Mass. -- The markets are very excited about President Trump’s call for massive, long-needed infrastructure spending in the United States. But from roads to airports to pipelines, just what are the specific needs, and what will be the estimated cost to finish the job in the next eight years?
Here are my thoughts on seven areas needing investment, the best way to pay for it, and how it will likely affect fuels ...
Roads and bridges
There are 4.1 million miles of roads and 600,000 bridges in the United States, with 10% deemed structurally deficient. The total eight-year cost to repair them would be $2 trillion, according to industry estimates and figures from the Federal Reserve Bank of Boston.
Railroads
There are 141,000 miles of railroad tracks, with less than 10% dedicated to high-speed trains. The total estimated eight-year cost to repair these is $750 billion.
Pipelines
The United States has 2.4 million miles of liquid and natural-gas pipelines. Many in older cities are suboptimal, cast-iron pipes. The eight-year estimated cost for repairs here is $2 trillion.
Airports
There are 5,500 airports in the United States, with 6 million miles of runways. The estimated eight-year cost to repair these is $500 billion.
Power grid
The United States has 200,000 miles of high-voltage transmission lines and a large need for smaller distribution lines and transformers. A hardening of the system from a security standpoint, as well as the development of a “smart grid,” is badly needed. The total eight-year estimated cost: $1 trillion.
Port areas
One of our greatest needs, especially if we want to increase U.S. exports, is to improve our ports. There are 150 port areas in the United States for ocean, lakes and rivers, covering 3,000 square miles. They are also also one of the largest sources of carbon-dioxide emissions. The total estimated eight-year cost for improvements is $2.5 trillion.
The total bill
Not yet mentioned are the nation’s schools, public buildings, parks, libraries and museums, which have estimated repair costs of $1.25 trillion.
That’s a total of $10 trillion over eight years. Put another way: That is $1.25 trillion per year, or $4,000 per person per year for the next eight years.
The current annual federal expenditures, meanwhile, are $4 trillion.
A to-do list
We will have to be very disciplined and creative if we are serious about accomplishing these upgrades. This includes:
- No wars
- More 30-year funding of debt. Rates are cheap, and 30-year assets should be funded with 30-year money.
- The use of private funds, usage fees and naming rights—“The Boone Pickens Pipeline” or “Bill Gates Transmission Line,” anyone?
What about taxes?
I would replace the 18.4-cent-per-gallon federal gas tax with a tax based on the weight of the vehicle and fuel. In this transition, the government can raise more money, encourage alternative and cleaner fuel, and solve the problem of how to tax gas, hydrogen and electric vehicles. Also, moving the tax to the vehicle owner rather than the retailer will improve tax collection and send the right incentives.
Another way to raise money for improvements: The government can alter the rules on master limited partnerships (MLPs) to include bridges, roads, airports and other infrastructure, which would attract private capital looking for yield and hard assets. It was the MLP structure that really solved our energy problem.
The need is great, the opportunities for business are enormous and the fiscal stimulus from an incremental $1.25 trillion of federal spending adds 2 points to the growth of gross domestic product (GDP) per year.