A former Obama aide is calling on Democrats not to support President-elect Donald Trump's so-called infrastructure plan, saying it's a "trap" and a "mistake in policy and political judgment they will regret."
On the campaign trail, Trump promised to invest $1 trillion into repairing America's crumbling roads and bridges, creating new jobs along the way—an investment which the nation clearly needs. Over the weekend, influential Democrats like Sen. Charles Schumer of New York pointed to it as a bipartisan issue that could help unite a bitterly divided country.
But a closer look at his proposal shows the plan may just be a smokescreen for corporate tax cuts that might not build anything new at all.
Ronald A. Klain, who served as an assistant to President Barack Obama and led the team implementing the American Recovery and Renewal Act, wrote in the Washington Post last week, "I've got a simple message for Democrats who are embracing President-elect Donald Trump's infrastructure plan: Don't do it. It's a trap."
Klain, who also served as an adviser to Hillary Clinton's 2016 campaign, explained:
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.
Meanwhile, public infrastructure projects that don't appeal as much to private contractors—such as repairs to city water systems, existing roads, and non-toll bridges—"get no help from Trump's plan," he added.
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And Trump's planned tax break windfall for businesses, combined with a "10 percent pretax profit margin" included in the infrastructure plan, would add up to an $85 billion profit for contractors, after taxes, and "underwritten by the taxpayers," he continued.
Because the plan prioritizes investors and tax breaks, rather than subsidizing projects and repairing public infrastructure, "there is simply no guarantee that the plan will produce any net new hiring," Klain wrote. "Investors may simply shift capital from unsubsidized projects to subsidized ones and pocket the tax breaks on projects they would have funded anyway."
Those warnings were echoed by Nobel Prize-winning economist Paul Krugman, who writes in the New York Times on Monday, "Progressives should not associate themselves with this exercise in crony capitalism."
If you want to build infrastructure, build infrastructure. It's hard to see any reason for a roundabout, indirect method that would offer a few people extremely sweet deals, and would therefore provide both the means and the motive for large-scale corruption. Or maybe I should say, it's hard to see any reason for this scheme unless the inevitable corruption is a feature, not a bug.
Now, the Trump people could make all my suspicions look foolish by scrapping the private-investor, tax credits aspect of their proposal and offering a straightforward program of public investment. And if they were to do that, progressives should indeed work with them on that issue.
But it's not going to happen. Cronyism and self-dealing are going to be the central theme of this administration—in fact, Mr. Trump is already meeting with foreigners to promote his business interests. And people who value their own reputations should take care to avoid any kind of association with the scams ahead.
In his op-ed for the Post, Klain compared the plan to former President Ronald Reagan's disastrous tax cuts in the 1980s, which, he noted, led to massive deficits that were used to justify slashing funding to social programs.
"Thus," Klain wrote, "Democrats should know that every dollar spent on the Trump tax scheme to enrich construction investors and contractors is a dollar that will later be cut from schools, hospitals, and seniors."