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?

Importance of Improving America's Infrastructure to the Travel Industry

According to the American Society of Civil Engineers (ASCE) the U.S. government would have to invest roughly $2.2 trillion over five years to improve the infrastructure in America.  This is not to say that if the money was spent, which we all know won’t happen in today’s political tax/spending cut climate, that the infrastructure would be the best in the world.  No, the scary part is that it would only suffice to provide us with ‘decent’ roads, rail, airports, etc. at best.

Traffic problems

Any seasoned traveler knows the difference between the quality of airports in Amsterdam and Newark, or Singapore and LAX.  It’s like going back in time by 20 years when flying from east Asia or northern Europe to the U.S.  In the 1970s this would’ve been the other way around, but not only has most of the developed world caught up to the U.S., they have surpassed the U.S.

The much touted (and hated by many) stimulus spending bill was supposed to put America back at work and help improve our infrastructure.  A whopping $787 billion was appropriated by congress for the stimulus, yet only $64 billion, or 8%, was set aside for infrastructure projects.  That’s only 2.9% of the $2.2 trillion needed!

When Europeans and Asians visit this country and bring much needed tourist dollars to stimulate the local economies, it hurts America in the long term by not being able to move the tourists quickly between the different attractions.  For example, not many tourists take the train from Orlando to Miami and those that do still face an enormous challenge trying to get to Miami Beach using public transportation.  The alternative is for the tourists to use airports that were built to handle traffic capacity from the 1960s, not the upsurge of traffic seen these days.  A second option isn’t much better: renting a car and getting stuck in horrific traffic jams on I-95 because the roads can only handle traffic capacity limits set forth in the 1970s.

According to the Office of Travel & Tourism Industries (OTTI), in 1999 24,466,187 tourists visited the U.S. from overseas (all countries excluding Mexico and Canada).  Surprisingly, the number dropped ten years later down to 23,756,184, a decrease of almost 3%.  A contributing factor is that overseas tourists are spending their money at newly improved locations around the world, such as in China, Hong Kong, Taiwan, etc.  If you are a hotel guest and your room has mold or stained carpet would you go back there?  The same could be said for many U.S. airports, roads, etc.

I’m not saying it’s all rosy in those emerging markets, but when it only takes a government ten years to build a new airport, high-speed rail link and hundreds of skyscrapers like is true of Shanghai, yet the U.S. federal government, Port Authority, State of New York and city of New York can’t even build one skyscraper or subway station after more than 9 years after 9/11 at ground zero it makes you worried that we’re not spending our hard earned taxes wisely.

So what’s the solution?  Find out in my next post titled “4 Ways to Bankroll America’s New Infrastructure”.