Tuesday, March 28, 2017


It's been reported for a while that the Trump administration has put off its infrastructure push until next year, which means it may never happen at all. But Axios's Jonathan Swan says that infrastructure may happen next -- in conjunction with an effort to change the tax code:
The Trump administration is looking at driving tax reform and infrastructure concurrently, according to a White House source with direct knowledge.

It's a major strategic shift - infrastructure was likely going to be parked until next year - and is only possible because of last week's healthcare debacle.

President Trump feels burned by the ultra conservative House Freedom Caucus and is ready to deal with Democrats. Dangling infrastructure spending is an obvious way to buy the support of potentially dozens of Dems, meaning he wouldn't have to bargain with the hardliners....

Trump needs fast victories and infrastructure is something that's big, flashy, and potentially bipartisan.
Yes, this is potentially bipartisan. But should Democrats cooperate with Trump on anything at all? And could a bill that's actually good get through a Republican Congress and be signed by a Republican president?

I've accepted the notion that Democrats, as a rule, shouldn't cooperate with Trump, even on infrastructure. The decision on infrastructure is made easier by the fact that the Trump administration's proposal seems terrible, as Ron Klain noted in November:
First, Trump’s plan is not really an infrastructure plan. It’s a tax-cut plan for utility-industry and construction-sector investors, and a massive corporate welfare plan for contractors. The Trump plan doesn’t directly fund new roads, bridges, water systems or airports, as did Hillary Clinton’s 2016 infrastructure proposal. Instead, Trump’s plan provides tax breaks to private-sector investors who back profitable construction projects. These projects (such as electrical grid modernization or energy pipeline expansion) might already be planned or even underway. There’s no requirement that the tax breaks be used for incremental or otherwise expanded construction efforts; they could all go just to fatten the pockets of investors in previously planned projects.

Moreover, as others have noted, desperately needed infrastructure projects that are not attractive to private investors — municipal water-system overhauls, repairs of existing roads, replacement of bridges that do not charge tolls — get no help from Trump’s plan. And contractors? Well, they get a “10 percent pretax profit margin,” according to the plan. Combined with Trump’s sweeping business tax break, this would represent a stunning $85 billion after-tax profit for contractors — underwritten by the taxpayers.

Second, as a result of the above, Trump’s plan isn’t really a jobs plan, either. Because the plan subsidizes investors, not projects; because it funds tax breaks, not bridges; because there’s no requirement that the projects be otherwise unfunded, there is simply no guarantee that the plan will produce any net new hiring. Investors may simply shift capital from unsubsidized projects to subsidized ones and pocket the tax breaks on projects they would have funded anyway.
But what if Trump is so desperate for a win that he'd jettison this plan and go along with a real infrastructure plan? Some Senate Democrats released one in January:
A group of senior Senate Democrats on Tuesday unveiled their own $1 trillion plan to revamp the nation’s airports, bridges, roads and seaports, urging President Trump to back their proposal, which they say would create 15 million jobs over 10 years.

The Democrats said their infrastructure plan would rely on ­direct federal spending and would span a range of projects including not only roads and bridges, but also the nation’s broadband network, hospitals run by the Department of Veterans Affairs and schools....

Democrats said they would pay for their program by closing tax loopholes, an oft-stated pledge by both Democrats and Republicans. They did not specify which tax loopholes would be used.
There's the rub. Both Republicans and Democrats support closing tax loopholes in theory, but in practice, Republicans are much more concerned about giving more and more tax breaks to the rich. They're not going to close a loophole used by corporations or the rich unless they're also providing a comparable (or even more generous) tax cut.

(A 2015 Democratic infrastructure budget amendment would have paid for $487 billion in infrastructure "by closing a number of corporate tax breaks that allow some major companies to escape paying taxes or stash profits overseas." It was, of course, killed in the Senate by Republicans.)

I'm not sure I believe the Axios story -- remember, this might be a rumor floated by one White House faction even though other factions aren't on board. That happens all the time in Trump World. But if the Trump administration really does shift its attention to infrastructure, I think Democrats should remind everyone that they have an infrastructure plan without seeming desperate to meet with Trump about it. I don't think they should support a bill that's overwhelmingly like the Trump proposal -- but I'm not sure it's the worst idea to fight for a bill that sticks to their principles.

My guess is that congressional Republicans would bottle up any bill that seemed like a win for Chuck Schumer, out of fear of primary challenges in 2018. So it would probably be moot in any case.

It also seems to me, judging from this Axios report, that the Trump team is planning to entangle infrastructure in the rewriting of the tax code. The tax portion of this will be extremely difficult for the Trumpers because the reported savings in the health care bill were supposed to pay for massive tax breaks to the rich and corporations. The plan was to pass a tax bill through reconciliation, which means it would need only Republican votes (Democrats couldn't filibuster it in the Senate) -- but now the giveaways to the swells will have to be smaller.

Unless the Trumpers think Democrats will agree to huge tax breakls for the wealthy in return for infrastructure. That's a terrible deal, and I'm sure they wouldn't go for it.

If the Axios story is right, I suspect we'll either get the bad Trump infrastructure bill, which Democrats shouldn't support, or we'll get some consideration of a Democratic proposal, but it will get entangled in the politics of taxation. So maybe it wouldn't be a bad thing for Democrats to talk to Trump -- on their terms, promoting their proposal. Yes, you don't want to give Trump a win. But Democrats are highly unlikely to get Trump and congressional Republicans to support a good deal. So as long as they resist bad deals -- and they seem inclined to resist -- then a little openness to dialogue might not be a terrible thing. Put the Democratic proposal out there, articulate Democratic principles, watch them get rejected -- then run on that.

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