Don’t use COVID-19 to Excuse $2 trillion of Debt-Financed Infrastructure
For Immediate Release
Yesterday, President Trump suggested that the next phase of economic relief to offset the impact of the coronavirus (COVID-19) pandemic should include $2 trillion of debt-financed infrastructure spending, and lawmakers from both parties have floated infrastructure ideas. While some infrastructure spending might make sense to help the economy stabilize and recover, such a massive surge does not belong in a crisis response package and should be offset over time if enacted. The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
It feels like every day now, politicians are trying to use this national emergency to enact their favorite policies while avoiding paying for them. It is a worrying trend as we deal with the biggest economic crisis in the past half century, which merits a timely but targeted response.
Some infrastructure improvements could make sense in the next phase of economic relief legislation – to take advantage of light use of infrastructure to undertake otherwise disruptive repairs, to assure states can continue to undertake scheduled projects when safe, and perhaps to help jumpstart the economy once we are past the current public health crisis.
But such a package should be tailored to the needs of the economy and the reality of what it will take to mount an effective coronavirus response. The large scale infrastructure spending under discussion fails that test, and clearly has little to do with the crisis we face.
Nor do today’s extremely low interest rates offer a valid good excuse to borrow trillions of dollars for infrastructure spending; not when we’re already borrowing trillions of dollars for other purposes. All that debt must ultimately be rolled over, and today’s low interest rates aren’t likely to last forever.
If the President and Congress want to work together on a massive infrastructure package, they should do so once they’ve effectively addressed the immediate crisis and they should fully offset the cost over time once the economy has recovered. The Congressional Budget Office, Penn Wharton Budget Model, and others have shown that fully paid-for infrastructure would do much more to grow the economy than debt-financed infrastructure. And there are plenty of tax and spending options available to cover the costs.
Just because borrowing is cheap right now doesn’t mean it’s free. And just because we should borrow more to manage a crisis doesn’t mean we should borrow infinitely more for every feel-good project that comes to mind.
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