Traffic control system. This is held at the heritage foundation, its an hour and 10 minutes. We ask that courtesy that our other mobile d devices have been silenced or turned off as we begin. For those watching online and here in the house, we remind that questions and comments can sent at any time to speaker at heritage. Org and we will post on the heritage home page for your future reference as well. Eading our discussion today is michael sergeant, Research Associate in our thomas a. Roe for Economic Policy studies. He leads our efforts to free ate and implement market transportation and infrastructure policies. Oversees and watches and examines our surface ransportation, of aiation, waterways and other policy issues related to infrastructure around the country. Contributor to the daily signal and his commentary has also been featured in the washington boston herald, houston chronicle, thehill and fox news. We welcome michael sergeant. Mike. [applause] mike thanks, john. Good afternoon, thanks for oining us at the heritage foundation. At least in terms of sheer lip one ce, infrastructure was of the most promise nentishes during the 2016 campaign. Candidates embraced major infrastructure proposals as a way to address our roads and drijz and dilapidated airports in the president. E new both candidates also propose job ing as a panacea for creation. In addition, now the new resident is poised to offer a 1 trillion infrastructure plan and has the democrats also suit with their own trillion dollar proposal. We have very few specifics, issues will come to the forefront as Campaign Promises run up against reality. Now the questions we must haphazardlyhat will throwing taxpayer money at pork barrel project really help an mired in debt with relatively low unemployment or s it possible to generate Effective Investments in truly worthwhile projects in a fiscally responsible matter. Today to discuss these very important issues is a distinguished panel of analysts. Tion policy first we welcome chris edwards, the director of Tax Policy Institute the cato and editor of downsizing government. Com. E is a top expert in federal and state tax and budget issues and before joining cato, he was economist on the congressional joint economic committee. He has testified to congress on times and hismany articles on tax and budget policies have appeared in the and many othert major newspapers. Us is robert of a s, a president nonprofit think tank with the mission of improving transportation policy and leadership. He was the senior fellow at the metropolitantitute policy program. Robert has worked extensively on a variety of transportation issues, infrastructure funding and finance and city and urban planning. Speaker to a nt variety of groups, a regular contributor to newspapers and has testified before congressional committees. Finally, mark describener is a fellow at the Competitive Enterprise Institute where he focuses on transportation, land urban growth policy issues. These include infrastructure operations, nd Transportation Safety and Security Risk and regulation, privatization and Public Finance well as emerging transportation technologies. Advised urrently policimakers on these matters at the federal, state, and local levels. Well start off just with a conversation style panel, so to lists should feel free chime in, but please avoid another as we e have gotten a bit tired of that years. E last two i think weve heard enough to get started just based on some proposals weve heard from the incoming president as well as congress. Into it with a question from mark. You have written a good bit nations state of the infrastructure assets and do you hink that its a fair characterization to say theyre really crumbling and if we dont a trillion dollars, will the bridges all collapse . In other words, do you think spending plan is kind of the best way to go a better is there option . Mark i think the problem is or but that ourroblem nfrastructure is not uniformly crumbling. You have problems in many local and thats true. Highways, we have seen the number of structurally bridges steadily decline, pavement smoothness has increased. When it comes to the federal side of things, things arent arent necessarily looking that bad. Now were going to have reconstruction needs for the a lottate highway system, of money over the next two decades decades. Really where our biggest problems lie are in the realm. Al you have transit systems with tens of billions of dollars in backlogs. E you got crumbling municipal streets. Is, especially when youre talking about federal policy is, our federal programs very well not equipped to deal with these local issues. At the g that folks federal level, members of congress and the administration is perhaps at federal g how we do aid, that means allowing more of these funds to be used for routine maintenance. Might be a good idea. Resident trump the other idea emphasized a fix it first strategy, that brookings has talked about when rob was still over there. Yeah, we do have problems, but its important not to lose sight of these t that many problems are local and the feds re not necessarily the best folks to address them. If i could chime in here, if bridges, for example, there is 600,000 bridges in the United States and the federal Highway Administration says that about structurely are deficit. Politicians often mention that it was a 000 as if huge catastrophe. Share of ted, the deficit has fallen over the years. S an economist, the number of bridges is not zero. To eliminate all of the structurally it deficit bridges, enormously expensive, hundreds of billions of dollars. You want to get to a point where investment more than pays for itself in terms of creating additional benefits. Highway al Administration Says that those structurally deficit bridges, theyre not at risk of falling down. Theyre not unsafe. Updated. Uld be there is an optimal rate that we should be updating them. Is. Ont know what that you have to think about this in terms of optimal. I thinkexample of this, the Texas Transportation Institute says that traffic costs americans about 150 billion a year in lost time and productivity. Like a lot of money. But again the optimal amount of highways is the not zero. It would be enormously expensive. Have to spend trillions of dollars to get the amount of nations n on the highways down to zero. Maybe we should reduce it, maybe at the optimal now, i dont know. Its a complicated question that at both of the engineering and the economics to get to the right answer. I think part of the solution here is the more we move of the ucture out government to the marketplace we can get marketplace feedbacks and response to find out which are in the most need of fixup and expansion and which arent. The problem when youre in the government realm, the money isnt allocated efficient the government doesnt work based on marketbased indicators. On other factors such as formulas and pork barrel politics. As mark mentioned and chris alluded to, a lot of these problems are more local in and while i know your organization has done a lot of looking at what is going level, a the federal quarter of expenditures, can you give us an overview of what is down at the ground level, the local level of government . Here nks for having me today. I think that part of the comments ise of the we dont define infrastructure very well. E think of infrastructure, we think of roads and bridges and transit. Thats what most americans think about. Infrastructure, there isnt an infrastructure right, there is ransportation, energy, telecommunications, water structure are in the news and ach are designed, governed, financed very differently. The federal role in each of those sectors is actually very things like freight rail. The federal government has a but regulatory part doesnt fund. Telecommunications is a lot of private sector, energy is private. It is really different. There is a definitional problem e have to get sorted in this country. Its added to a lot of confusion and misunderstanding of what the should be ernment doing. In the realm of that, a lot of the interest, a lot of the have ment and things we seen around the country, particularly over the last 10 years or so is what is happening beltway from city, metropolitan areas that arent waiting for the federal government to pass their theyre doing their own things. Theyre doing gasoline taxes in their own states. To 10 states passed their own gas states, red states, blue inbetween. Ything theyre going directly to the voters having them approve ballot measures. Consistently year after year we ee 70 of the ballot measures pass, some is for routine stuff investments. Or a lot of money by any major. You need 2 3 of the vote in l. A. Sales tax. Sales tax increase. Thats a very popular method for raising transportation revenues. Lots of other places. The point is as we have this conversation on the national and these big proposals, very ambitious, very far infrastructure on the national level, city, states not etropolitan areas are waiting around, theyre doing things. Wn. Absolutely chris, you walked about the markets and when you have these decided kind of by the arent alwayshere the right incentives in place. Proposal alked about would use tax credits to provide an incentive to invest in infrastructure. Do you think are most right for privatization. He trump plan with tax incentives is kind of a good Way Investment in those areas . Belt on what robert said, over the years, i have learned issues, of them on the im appreciative of that. To build on what robert said, ou can see with trump the confusion of what is infrastructure, what is properly and al, state, local, private. The plan put together by two of fall that would rovide tax credits for i guess private investment reflect the sort of confusion that were not specific in their plan. Were they talking about the local infrastructure or private federal. We need to start at the find out what is federal responsibility and what is properly state, local, and private. On, we have seen a revolution around the world in countries, dozens and dozens of our trading partners oving more and more to private sector involvement on infrastructure. You can see this in airports, in highways, in sea ports. In the r countries 1980s figured you could get better allocation of capitol if moved infrastructure to the private sector. Efficient et more construction, fewer cost verruns and management in construction by moving to the private sector and more management in the private sector. Government infrastructure is mispriced. For example, we tend not to use congestion pricing on our highways. Federal water instraw structure, water, we price it too low, environmental problems caused by that. Sector,g to the private ou get more efficient allocation of the investment dollars, the allocation determined more by market demand. You get more efficient onstruction and you get more efficient management in operations over time. I think all of the people on you panel have generally, know, talked in favor of moving oward private sector involvement and the new Trump Administration is moving in that direction as well. Dont like his tax credit plan. Urrently municipal and government infrastructure is already tax favored on the debt and local tate overnments finance debt for infrastructure, its tax exempt. That. Is a problem with all of the airports in this country are governmentowned and reason why theyre governmentowned, when governments issue debt to expansion, they can issue taxexempt debt. Would have to rt issue taxable debt. We have a government bias in infrastructure. The trump plan would move more n that direction and even distort the tax code even more by favoring equity as well as debt. Thats the way to go. The way to go is reduce the bias favor oflready have in government infrastructure and create more of a level Playing Field with the private sector. Building on what chris said, biased in favor of overnment infrastructure, exemptions with bonds. Eliminating that tax do ption, one thing we can is build on a tool that already exists, bonds capped at 15 obama , the administration to their credit roposed qualified Public Infrastructure bonds that would pabs the eligibility of to cover different Asset Classes covered. t currently thats one way short of eliminating the tax exempt bonds to municipal s. Vel the Playing Field its more realistic to build on acronym we can come up, then at least in the short than to eliminate that tax bias. I agree, too. Its interesting that even hough we had this period where borrowing even for local, if the you didnt o low, see that much borrowing from the as much asocal level you would think that borrowing is so cheap. Something else is going on here. Part of the problem is a lot of places dont really know what do. Y want to there is an inconsistency between this big message that apart. Ructure is falling we need to do a reinvestment, very cheap debt for places to advantage of and then a lack of investment. Something is not right there. It is. Exactly sure what part of the problem is well really havent embraced, what about,. Real ing need is for rehab and maintenance of the existing system. Its not engineering to last in perpetuity. It has to be fixed at some point. Did a lot of the building in 1970s, s, 1960s and its reaching the end of its useful life. Attractive to as issue debt to rehab, even though thats the thing we need to do the most. Do like chris point, too, figure out how to make the level. Field more i dont know if its going to take any wholesale changes that do. Re able to what we need is like what virginia is starting to do, figure out, what do we want to project. This particular here is what we want to accomplish and do a really assessment, here is how much it will cost us to do it the traditional way. Can beat , if someone that, beat it and do it better. Project it for a big inside the beltway, either inside or outside, two different projects. The state knew what it wanted to get, knew how much was going to cost and opened it up and in and is doing it better. Thats a great model to take advantage of. Absolutely, i think this whole discussion has kind of entered around more on the financing side of things, at least from what weve seen. Think there is general confusion about the difference between funding infrastructure and financing it. Can talk about some of the different kind of financing models that we have a bit and how that diverdz from funding the infrastructure. Some en maybe recommendations you have in addressing both of those things the new administration. We get it confused in this country. Were trying to engage in the private sector. Theyre looking for different return, looking for Something Different than the traditional Public Sector is looking for. I think for advice and for recommendations, we got to get sorted out and stop talking about infrastructure in the abstract. Very specific about it. Infrastructure is such a tangible team. It has this he t esoteric type of terms. A major conversation now about spinning off the air a ffic control system to nonprofit or some other corporate entity. Thats something we should be quicklymove on and very in the new year, a bunch of ndustrialized countries have already done. The proposal is on the table and we should be able to address it probably the biggest change we have seen in aviation in a generation. That is something we can soon. To work on very i think making these connections better between the different departments, the different something in the last administration, we saw that there was some, a lot more you joining up things. They focused on h. U. D. And e. P. A. And transportation trying to working together to get more bang for their buck. Experience on the labor side, there is a Big Conversation about labor and transportation, a big theme in about using infrastructure as a way to stimulate job creation, things like that. It may, 11 of american jobs are directly to infrastructure. Not the guy cutting the hair or pothole, but directly working in infrastructure. If were thinking about that as source of american jobs, lets figure out how to capitalize on that. Transportation is going through a technological change with new players, public private, providing services that were heretofore provided by sector agencies. This whole shared economy revolution, how is that playing labor and american jobs. H iven her perception and expertise, they trend closely. Im excited about the new of transportation, ellen ciao, watching her hearing, she was open to the idea about major restructuring of the air Traffic Control system which robert touched on. The biggest opportunity this infrastructure is not he trillion dollar spending plan that trump alluded to which is not going to happen. Congress passed a bill a year lasts through 2020. I dont think were going to see highway bill. The f. A. A. s funding runs out by september. Congress needs to do something. The house has a plan to do a reform to move the air Traffic Control system off to a Nonprofit Corporation sector. Rivate the canadian system works extremely well. Entity. Elffunded it doesnt get taxpayer subsidies. In at the leading edge technology. It really is a great model. There are special interest to that, to ill that air Traffic Control restructuring. Can be overcome. Im hopeful the new secretary of transportation is going to look at that opportunity. Written a lot about this as well. Ne thing to mention on the funding that really strikes me ften, i watched the confirmation hearing. A number of the senators who got subsidiesansportation hounding states kept her to say she supports the go to their t states. That really struck me. The senators from hawaii and alaska, they favor the essential air service which is a fairly that funds air service at smaller airports and strikes me that a city that wants air service in their they dont have currently, they can fund it themselves anytime. Governments have all the financing tools that the federal government has. The state and local governments in both gas, income and sales can issue debt as robert mentioned. Most debt issue is up for ballot go up for ballot are passed by the public. The public is very supportive of infrastructure, financing and spending at the local level. Mind