The $1.5 trillion number is just made up; he’s only proposing federal spending of $200 billion, which is somehow supposed to magically induce a vastly bigger overall increase in infrastructure investment, mainly paid for either by state and local governments (which are not exactly rolling in cash, but whatever) or by the private sector.
.. And even the $200 billion is essentially fraudulent: The budget proposal announced the same day doesn’t just impose savage cuts on the poor, it includes sharp cuts for the Department of Transportation, the Department of Energy and other agencies that would be crucially involved in any real infrastructure plan. Realistically, Trump’s offer on infrastructure is this: nothing.
.. That’s not to say that the plan is completely vacuous. One section says that it would “authorize federal divestiture of assets that would be better managed by state, local or private entities.” Translation: We’re going to privatize whatever we can
.. Despite a modest rise in interest rates, the federal government can still borrow very cheaply: The interest rate on inflation-protected long-term bonds is still less than 1 percent, which is below realistic estimates of long-run economic growth, let alone the Trump administration’s fantasy numbers. So borrowing now to pay for essential infrastructure would still be good economics.
.. some Democrats feared that Trump really would go big on infrastructure, which might drive a wedge into their party and be highly popular besides.
.. An infrastructure program involving real money could be very lucrative for Trump cronies, or for that matter Trump himself. Yes, there are rules that are supposed to prevent that kind of profiteering, but does anyone think those rules would be enforced under current management?
.. Part of the answer is that in practice Trump always defers to Republican orthodoxy, and the modern G.O.P. hates any program that might show people that government can work and help people.
.. But I also suspect that Trump is afraid to try anything substantive. To do public investment successfully, you need leadership and advice from experts. And this administration doesn’t do expertise, in any field. Not only do experts have a nasty habit of telling you things you don’t want to hear, their loyalty is suspect: You never know when their professional ethics might kick in.
So the Trump administration probably couldn’t put together a real infrastructure plan even if it wanted to. And that’s why it didn’t.
What Trump Bump? Businesses Aren’t Borrowing from Banks
A surge in loans expected after last November’s election has yet to materialize
Since President Donald Trump’s election, bankers and investors predicted that pro-business policies would lead to a surge in corporate borrowing, which would help bank profits.
Instead, the growth of loans to companies has dropped precipitously since last November—to 2.1% from 8.1%, according to Federal Reserve data.
“Everybody thought we were about to catch a wave earlier in the year,” said David Turner, chief financial officer of Regions Financial Corp. RF +0.57% , at a conference last month. “It didn’t happen.”
.. The loan-growth slowdown is noteworthy because it is occurring when many metrics show the U.S. economy strengthening. Unemployment is low, broader stock-market indexes have reached records and metrics of small-business confidence are up.
.. many companies have borrowed what they need for the current environment. “They already did the borrowing when rates were lower,”
Time to Borrow
the federal government can borrow at incredibly low interest rates: 10-year, inflation-protected bonds yielded just 0.09 percent on Friday.
Put these two facts together — big needs for public investment, and very low interest rates — and it suggests not just that we should be borrowing to invest, but that this investment might well pay for itself even in purely fiscal terms. How so? Spending more now would mean a bigger economy later, which would mean more tax revenue. This additional revenue would probably be larger than any rise in future interest payments.
.. what matters is the comparison between the cost of servicing our debt and our ability to pay. And federal interest payments are only 1.3 percent of G.D.P., low by historical standards... If 10 years isn’t long enough for you, how about 30-year, inflation-protected bonds? They’re only yielding 0.64 percent... American greatness was in large part created by government investment or private investment shaped by public support, from the Erie Canal, to the transcontinental railroads, to the Interstate Highway System.