Despite earlier promises that an infrastructure bill would follow tax reform, it looks like the White House and Congress may push infrastructure for entitlement reform.
What changed at the White House? Last month, President Trump stated that he had lost faith that public-private partnerships (P3s) could be the basis for investment for the infrastructure package. P3s can be part of the plan, but don’t have the potential he once thought. This means Congress must find another funding source.
A second change is the previously undeclared White House priority on entitlement reform. At the same time that Washington is debating a tax reform bill that will increase the deficit, Congress is preparing to bust the budget caps on this year’s budget (which also raises the deficit) to increase spending on discretionary programs. In order to increase funding on infrastructure, defense and other discretionary programs, changes to mandatory funding/entitlements will be necessary.
What’s happening in Congress? Congressional leadership has not been as bullish on infrastructure as the White House- and the evidence is in the tax bill.
The tax bill does not address the Highway Trust Fund (HTF) shortfalls. And the ten-year budget resolution caps transportation funding at HTF revenue.
For years, transportation stakeholders had been advocating for Congress to use taxes on repatriated funds (business revenue held overseas) for transportation investment. The tax bill directs those funds to other uses.
The House tax bill eliminates private activity bonds. These bonds offer an incentive for private investment in infrastructure.
Congressional efforts to promote infrastructure The key committees and caucuses that care about infrastructure are pushing to keep infrastructure on the agenda. The House Transportation & Infrastructure Committee and the Senate Environment and Public Works Committee are both working on bills.
In addition, the bipartisan Problem Solvers Caucus and a recently formed Infrastructure Caucus are developing proposals and hope to promote discussion.
The biggest obstacle to infrastructure remains- a lack of sustainable funding.
For the last decade the best hope for sustainable funding was through comprehensive tax reform. Tax reform offered an opportunity to increase revenue for the HTF in a mix of popular tax cuts and revenue raisers. As the tax reform debate comes to a close this month- we may be even further from a solution.