(Bloomberg) -- President Donald Trump’s infrastructure plan is designed to change the way roads and bridges are built and maintained across the U.S. by providing "seed money" to stimulate additional investment, Transportation Secretary Elaine Chao said at the first Senate hearing on the proposal.
"A key element of the proposal is to empower decision making at the state and local level, who know best the infrastructure needs of their communities," Chao said Thursday at a hearing by the Senate Environment and Public Works Committee.
In addition to roads and bridges, the plan would aid projects for drinking and wastewater, energy, broadband and veterans’ hospitals, Chao said.
Trump’s infrastructure proposal, released Feb. 12, is a 53-page document meant as an outline for legislation. It calls for allocating at least $200 billion in federal funds over a decade, mostly to spur states, localities and the private sector to spend $1.5 trillion, and reducing the time for issuing permits for projects to two years.
While administration officials have said they’re open to changes, there’s no consensus about how to pay for the plan. Top Republican senators have questioned whether there’s time to enact a bill this year before lawmakers face mid-term elections in November that will determine control of Congress.
Representative Bill Shuster, a Pennsylvania Republican who is chairman of the House Transportation and Infrastructure Committee, has said a lame-duck session after the election may be required, even though Trump wants Congress to act quickly.
Republicans including Senator John Barrasso of Wyoming, the chairman of the environment panel, have mostly applauded Trump’s proposals to streamline environmental reviews and permits for projects, but they haven’t talked much about the funding.
“Only in Washington is two years considered a quick turnaround,” Barrasso said in his opening statement, referring to the process of granting permits.
Democrats have complained that much more than $200 billion is needed for what the American Society of Civil Engineers has estimated to be a $2 trillion funding gap to upgrade U.S. infrastructure.
Senator Tom Carper of Delaware, the committee’s top Democrat, said the focus should be on implementing provisions to speed the permit process that Congress have approved but haven’t yet been put in place. He also questioned how the administration plan would generate $1.5 trillion in spending -- more than the $1 trillion Trump promised during the 2016 campaign -- with $200 billion in federal money.
“The administration’s math just doesn’t add up,” Carper said in his opening statement.
Carper cited a study issued Feb. 9 by the Penn Wharton Budget Model that estimated the Trump infrastructure plan would increase total new investment by $20 billion to $230 billion.
Studies have shown that federal funding doesn’t encourage states and cities to generate new money they otherwise wouldn’t produce, said Kent Smetters, a professor at the University of Pennsylvania and faculty director of the economic-modeling group.
Administration officials said that conclusion doesn’t take into account that Trump’s plan would cap federal support at 20 percent and award funding only if applicants generate their own money. Federal lending programs can get as much as $40 of outside funding for each federal dollar, officials said.
“Obviously, we disagree,” Chao said at the hearing. “It actually takes people with real-life business experience to know how it works.”
Carper also said the administration plan didn’t identify a way to pay for the $200 billion. Trump offered support for a 25-cent increase in the federal gas tax during a private meeting Feb. 14, said lawmakers who attended, but he hasn’t publicly endorsed it and key Republicans have rejected the idea. Barrasso told reporters Wednesday that raising the gas tax is “a non-starter” for him.
“This has to be presidential leadership,” Shuster said at a conference Wednesday in Washington. “The president has to be out there on a weekly basis, talking about it.”
Trump’s plan is based on the principle that state and local entities that own most infrastructure should make their own decisions about projects, and that the federal government should give them an incentive to raise their own funds while helping pay for work in rural areas that can’t.
Many Democratic and Republican governors recognize the federal government can’t keep spending more money, especially after Congress enacted a $1.5 trillion tax-cut plan in December, said Colorado Governor John Hickenlooper, a two-term Democrat. But the politics are difficult, he said.
“To a certain extent, they’re asking a lot of Republican governors to go home and ask for tax increases,” Hickenlooper said in an interview Monday while attending the National Governors Association’s annual winter meeting in Washington.
Governors and officials in states that have already raised their own gas taxes or other revenue are also concerned about getting penalized. The administration’s plan includes a “look back” provision to credit states and localities for past action to raise revenue.
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