Trump: The United States Can Get $1 Trillion in New Roads For Free

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Inside two weeks before Election Day, Donald Trump has released a plan to pump $1 trillion of new infrastructure spending into the U.S. economy.

He says it won’t cost taxpayers a dime.

Trump’s economic advisers have embraced a modified version of a theory some liberal economists have been pushing for years: that at a time of very low interest rates, increased federal spending on roads and bridges would actually pay for itself.

The idea is straightforward enough. Trump would push Congress to authorize $137 billion in tax credits for construction companies looking to build new toll roads, toll bridges or any other sort of infrastructure project that has a revenue stream attached to it. (The revenue is critical, in that it generates a return to the private builder of the project.)

The advisers behind the plan, Wilbur Ross and Peter Navarro, calculate that the tax credits would leverage $167 billion in investment by the companies that receive them, who would in turn borrow money on the private market to finance up to $1 trillion in total spending. That spending, then, would create jobs, with wages that would be taxed, and corporate profits, which also would be taxed.

Ross and Navarro calculate the added tax revenue would be enough to pay for the total cost of the tax credits, which means the overall cost to the government would be … nothing. They contrast that to Democrat Hillary Clinton’s infrastructure plan, which is funded in part by business tax increases.

They also acknowledge that their argument, in a way, mirrors that of liberal economists, such as Brad DeLong and Larry Summers, who have argued for years that with interest rates near zero, increased infrastructure spending could generate enough economic activity to pay for itself.

“It’s Keynesian in one sense that it’s more spending into the economy, but unlike (Clinton’s) thing, it’s spending without a tax increase,” Ross said in an interview last week. “It creates its own tax flow. Now, that is going to be a wildly controversial concept, because people never think about, well, if I build infrastructure, I will get tax revenue from it . . . but it’s a fact. It does take workmen to build infrastructure, they will pay tax.”

Navarro predicted the proposal “will revolutionize how infrastructure is financed.”

Alan Cole, an economist at the independent Tax Foundation, said the proposal likely overrates the amount of tax revenue that would be generated by the private spending, partly because it appears to assume that every worker on the infrastructure projects was not working – or paying income taxes – previously.

Still, he said, “this is not unusually out of the mainstream, particularly for a Trump proposal.”

(c) 2016, The Washington Post ยท Jim Tankersley

{Matzav.com}

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