4 Ways to Bankroll America's New Infrastructure

This is a follow up post to The Importance of Improving America’s Infrastructure to the Travel Industry.

Following are four ways to bankroll America’s new infrastructure in the next decade:

1. Spend Wisely – I know many pundits will argue that discretionary spending can only be cut by so much, but it’s time for U.S. congress to wake up and start govern in the interest of what’s best for the country and not for yourself.
   • Medicaid Fraud – According to a story on 60 Minutes (CBS) an estimated $60 billion per year is wasted on Medicaid fraud.  Realizing it will cost the government $5 billion per year to set up and run a strong enough enforcement agency  to combat the fraud it would still save the tax-payer $55 billion per year.
   • Student Loans – Housing/Farm Subsidies Fraud – Combined these three programs waste about $17 billion per year through a combination of fraudulent claims, mismanagement and criminal activities.
2. Increase the federal gasoline tax – yes it’s a tax increase and yes, I know the tea party faithful won’t like it, but it will put the money to good use and its temporarily until we’re caught up with our infrastructure within a decade.  According to U.S. Energy Information Administration, the U.S. uses about 400 million gallons of gasoline per day.  That means that increasing the tax on gas by just a dime would generate $40 million extra in tax revenues per day, which would equate $14.6 billion in added revenues per year.  The cost of gasoline is almost half that of Europe and yet the German and the Dutch economies seem to be doing just fine.  Raise the tax to $0.25 in the first year and add another nickel for every year thereafter for five years.  Understanding that America will start driving more economical cars, it would still generate about an extra $150 billion over 6 years.  You can do the same for surcharges on plane tickets, driver’s licenses, car registration, etc. and bring in an additional $10 billion per year.  It’s a small price to pay at the end of the day for new airports, roads and rail and would give the U.S. government an average of $35 billion of revenue per year to spend on infrastructure projects.
3. Reallocate funds from the federal government’s budget – It’s time for Washington to make some tough decisions to save this country’s future and to remain competitive in this global economy and not fall behind the likes of China, Japan and Germany.
   

   Government Infrastructure

   • Department of Defense is spending $663 billion for fiscal year 2010.  This includes over $100 billion per year in funding the war against terror in Iraq and Afghanistan.  Granted we need to continue fighting terrorists around the world and keep our borders safe, but it’s time to end troop deployment at such a massive scale.  We can continue to fight with predators and other drones and still be effective without putting ourselves in harms-way or spending the money.  It’s not unconceivable to think that we can easily save $80 billion per year in spending.
   • The cold war ended in 1989, but you wouldn’t be able to tell by looking at many of our overseas military bases.  Congress is holding the Pentagon hostage by demanding spending on programs the Pentagon doesn’t even want.  It only serves to protect local jobs in congressional home-states, but those jobs can be shifted to rebuilding America rather than building new tanks that will be stored in warehouses at military installations around the world.  We can easily cut 20% from the budget without impacting the readiness of our military or impacting our supremacy in the world.  That’s another $120 billion in savings.
   • Granted we need to cut spending overall so we’ll only take 50% of the $200 billion in military savings for our infrastructure projects and the rest goes towards paying off our $13 trillion plus national debt.
4. Trickle down economy – Ah yes, Ronald Reagan’s favorite, but it does work.  Put $207 billion in new funds (sum of item 1, 2 and 3 above) into infrastructure projects and the Federal Government will collect back about $36 billion in income and corporate taxes (18% in federal tax receipts from GDP), which it’ll need to funnel back into infrastructure.  Airport, rail and road improvements will stimulate economic activity and within 4-6 years the government can expect an additional $75 – $125 billion in increased tax revenues, at which point we can start lowering certain taxes again (surcharges on tickets, drivers licenses, etc.).  Short term pain for long term gain is going to be the mantra for this stimulus.

This scenario would generate about $243 billion per year in extra revenues to infrastructure projects.  Add the current $72.5 billion it spends per year on transportation and we’re at just over $315.5 billion per year on infrastructure spending.  Granted it falls short of the $2.2 trillion needed within the first five years, but it’s close enough from a compromise point of view as it will add over $3 trillion to America’s infrastructure in the first decade.

Not only could this secure America’s long term economic prosperity and reduce the deficit, but it would ensure that overseas tourists will continue to come to this great nation and spend their tourist dollars.  Now if only the bipartisan atmosphere in congress could be put aside for the nation’s best interests…

What are your thoughts on this topic?