Trump’s Infrastructure Mistake

[Commentary] Divining what Trumponomics will look like is guesswork at this stage, but there is one prominent exception. Late in the campaign, two of Donald Trump’s top economic advisers—Peter Navarro and Wilbur Ross, who is now the nominee for commerce secretary—offered a detailed infrastructure plan. Unsurprisingly, the program seems more about rewarding private-equity investors than about rebuilding America’s crumbling infrastructure. The Trump plan would rely more on private investors motivated by huge tax breaks. Follow the money. Peter Navarro and Wilbur Ross, who is now the nominee for commerce secretary, propose an 82 percent tax credit to attract private-equity investors into the infrastructure business. Yes, 82 percent! A $3 billion public-private “partnership,” according to their plan, could be financed like this: $2.5 billion in municipal bonds, $410 million in tax credits from the federal government, and $90 million in private equity. This means $90 million in private money winds up controlling a $3 billion asset. President-elect Trump likes leverage, but isn’t 33-to-1 a little ridiculous?

And under the Trump plan, project selection would be left to profit-seeking investors, using the same criteria they use to decide which hotels to build, for example. Ironically, Navarro and Ross criticize President Obama’s modest 2015 infrastructure proposals because, “These will not fix the 237,600 water mains that break each year. Nor will they stop the 46 billion gallons of water lost each day from pipe leaks.” Does the Trump team really think private-equity investors will swoon over repairing plumbing?

[Blinder and Krueger are professors of economics at Princeton University]