Deficit-Financed Infrastructure Spending Could Harm Economy

May 21, 2019 | Other Spending

For Immediate Release

President Trump and Congressional Democrats are meeting this week to discuss how to pay for as much as $2 trillion of new infrastructure spending. The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

Policymakers should beware claims of a free lunch. Like tax cuts, infrastructure spending does not pay for itself – those who claim otherwise are simply trying to buck the hard choices by throwing new spending on the national credit card. 

There is broad agreement on the need to improve our nation’s infrastructure, and it is important that any new spending not add to the national debt. If new spending is worth doing, it is worth paying for – particularly with the national debt relative to the economy already at record levels outside of World War II.

Deficit-financed infrastructure would be largely self-defeating by reducing private investment to make space for public investment. Studies from the Congressional Budget Office, Penn Wharton Budget Model, and others have found that unpaid for infrastructure spending could actually shrink the economy and certainly won’t be as pro-growth as paid-for infrastructure.

Fortunately, there are many options to pay for new infrastructure spending. The gasoline tax, which has historically funded highways, bridges, and other projects, hasn’t been raised in decades and has lost almost 40 percent of its value. New ideas like a carbon tax or Vehicle Miles Traveled (VMT) fee are also gaining attention. And there is plenty of lower priority spending on infrastructure and throughout government that could be cut to make space for new investments.

We can’t keep adding trillions of dollars at a time to the national debt. Our leaders should come together in a bipartisan way to work out a responsible deal to make sure we expand investment, not borrowing.

For more information on why it’s important to pay for infrastructure and ideas for how to do so, see Pro-Growth Infrastructure Needs Concrete Pay-Fors and Options to Offset An Infrastructure Package.

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For more information contact Patrick Newton, press secretary, at newton@crfb.org.