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Posted by Content Coordinator on Wednesday, June 7th, 2017

Importance of Infrastructure

The President has consistently emphasized that the Nation’s infrastructure needs to be rebuilt and modernized to create jobs, maintain America’s economic competitiveness, and connect communities and people to more opportunities. The United States no longer has the best infrastructure in the world. For example, according to the World Economic Forum, the United States’ overall infrastructure places 12th, with countries like Japan, Germany, the Netherlands, and France ranking above us. This underperformance is evident in many areas, from our congested highways, which costs the country $160 billion annually in lost productivity, to our deteriorating water systems, which experience 240,000 water main breaks annually.

The Current System is Not Working

The Federal Government inefficiently invests in non-Federal infrastructure. In part, our lack of sustained progress has been due to confusion about the Federal Government’s role in infrastructure. During the construction of the Interstate System, the Federal Government played a key role – collecting and distributing Federal tax revenue to fund a project with a Federal purpose. As we neared the completion of the Interstate System, those tax receipts were redirected to projects with substantially weaker nexus to Federal interests.

The flexibility to use Federal dollars to pay for essentially local infrastructure projects has created an unhealthy dynamic in which State and local governments delay projects in the hope of receiving Federal funds. Overreliance on Federal grants and other Federal funding can create a strong disincentive for non-Federal revenue generation.

At the same time, we continue to apply Federal rules, regulations, and mandates on virtually all infrastructure investments. This is despite the Federal Government contributing a very small percentage of total infrastructure spending. Approximately one-fifth of infrastructure spending is Federal, while the other four-fifths are roughly equally divided between State and local governments on one hand and the private sector on the other.

We will reevaluate the role for the Federal Government in infrastructure investment. For example, in the Interstate System, the Federal Government now acts as a complicated, costly middleman between the collection of revenue and the expenditure of those funds by States and localities. Put simply, the Administration will be exploring whether this arrangement still makes sense, or whether transferring additional responsibilities to the States is appropriate.

The Administration’s Goal: Seek and Secure Long-Term Changes

Given these challenges, the Administration’s goal is to seek long-term reforms on how infrastructure projects are regulated, funded, delivered, and maintained. Providing more Federal funding, on its own, is not the solution to our infrastructure challenges. Rather, we will work to fix underlying incentives, procedures, and policies to spur better infrastructure decisions and outcomes, across a range of sectors.

Key Principles

As the Administration develops policy and regulatory changes, and seeks statutory proposals working with Congress, we will focus on proposals that fall under the following key principles:

  • Make Targeted Federal Investments. Focusing Federal dollars on the most transformative projects and processes stretches the use and benefit of taxpayer funds. When Federal funds are provided, they should be awarded to projects that address problems that are a high priority from the perspective of a region or the Nation, or projects that lead to longterm changes in how infrastructure is designed, built, and maintained.
  • Encourage Self-Help. Many States, tribes, and localities have stopped waiting for Washington to come to the rescue and have raised their own dedicated revenues for infrastructure. Localities are better equipped to understand the right level – and type – of infrastructure investments needed for their communities, and the Federal Government should support more communities moving toward a model of independence.
  • Align Infrastructure Investment with Entities Best Suited to Provide Sustained and Efficient Investment. The Federal Government provides services that non-Federal entities, including the private sector, could deliver more efficiently. The Administration will look for opportunities to appropriately divest from certain functions, which will provide better services for citizens, and potentially generate budgetary savings. The Federal Government can also be more efficient about disposing underused capital assets, ensuring those assets are put to their highest and best use.
  • Leverage the Private Sector. The private sector can provide valuable benefits for the delivery of infrastructure, through better procurement methods, market discipline, and a long-term focus on maintaining assets. While public-private partnerships will not be the solution to all infrastructure needs, they can help advance the Nation’s most important, regionally significant projects.

2018 Budget

The President’s target of $1 trillion in infrastructure investment will be funded through a combination of new Federal funding, incentivized non-Federal funding, and newly prioritized and expedited projects. While this Administration proposes additional funding for infrastructure, we will structure that funding to incentivize additional non-Federal funding, reduce the cost associated with accepting Federal dollars, and ensure Federal funds are leveraged such that the end result is at least $1 trillion in total infrastructure spending.

While we will continue to work with the Congress, States, tribes, localities, and other infrastructure stakeholders to finalize the suite of Federal programs that will support this effort, the 2018 Budget includes $200 billion in outlays related to the infrastructure initiative.

In addition to the $200 billion, these proposals are also in the 2018 Budget:

  • Air Traffic Control Corporatization. The Budget proposes to create a nongovernmental entity to manage the nation’s air traffic control system. Many countries have corporatized their air traffic control function, separating it from the governmental aviation safety regulation function. This will be a multi-year effort resulting in a more efficient airspace while maintaining our premier aviation safety record. The proposal would reduce aviation passenger taxes and the new entity would be responsible for setting and collecting fees directly from users based on their use of the Nation’s airspace.
  • Increase Infrastructure Flexibility at VA. The Department of Veterans Affairs (VA) has a nationwide physical footprint that includes aging facilities, which are not always located where veterans most need care. The Administration will pursue numerous reforms to help VA acquire and maintain the facilities necessary to provide veterans high quality medical care where they live. The Budget includes proposals to expand VA’s authority to lease out its vacant assets for commercial or mixed-use purposes and to speed its ability to pursue facility renovations and improvements. Future reforms will encourage public-private partnerships and reduce barriers to acquisition, contracting, and disposals.
  • Divestiture of the Power Marketing Administration’s (PMA’s) Transmission Assets. The Budget proposes to sell the PMA’s transmission assets. Investor-owned utilities provide for the vast majority of the Nation’s electricity needs. The PMA’s transmission infrastructure assets (lines, towers, substations, and rights of way) could be leased out so the private sector could fulfill transmission functions. Leasing these assets will more efficiently allocate economic resources and help relieve long-term pressures on the Federal deficit related to future Federal capital investment.
  • Reform the laws governing the Inland Waterways Trust Fund. The Budget proposes to reform the laws governing the Inland Waterways Trust Fund, including by establishing a fee to increase the amount paid by commercial navigation users of inland waterways. In 1986, the Congress mandated that commercial traffic on the inland waterways be responsible for 50 percent of the capital costs of the locks, dams, and other features that make barge transportation possible on the inland waterways. The additional revenue proposed in the Budget will finance future capital investments in these waterways to support economic growth.

Download full version (PDF): 2018 Budget – Infrastructure Initiative

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