“I am the king of debt. I love debt,” Donald Trump said in the heat of the campaign. He was, for once, telling the truth: Trump’s business career was built on borrowing piles of money that he then spent with careless abandon. When he opened the Taj Mahal, in Atlantic City, in 1990, it was the biggest and most expensive casino ever built; he called it “the eighth wonder of the world.” It also had a debt load of almost three-quarters of a billion dollars. Now Trump plans to bring that ethos to Washington, borrowing trillions to finance a huge tax cut and an ambitious infrastructure-spending bill. Trump’s addiction to debt has often been disastrous for his companies—the Taj filed for bankruptcy within eighteen months—but national debt is different, and this could be the rare instance where his instincts might not wreak havoc.
Right now, the U.S. economy could use some borrowing and spending. It’s still growing more slowly than before the Great Recession, and millions of people have dropped out of the workforce; one in six prime-age men doesn’t have a job. Some economists think that the situation is contingent; Paul Krugman calls it a liquidity trap. Others think that it’s fundamental; Larry Summers has spoken of a new era of secular stagnation. But there’s no mystery about the basic problem. “We don’t have enough demand in the economy,” Dean Baker, a co-director of the Center for Economic and Policy Research, told me. “Spend money, and we can cure the problem.” Since the private sector isn’t doing that, the classic Keynesian answer is for the government to pick up the slack, borrowing freely in order to boost demand and create jobs. And at the moment, with interest rates still near historic lows, the U.S., unlike Trump’s companies, can borrow quite a lot before risking any trouble.
To be sure, Trump himself doesn’t seem to fully understand this: in addition to calling for tax cuts and more spending, he has also inveighed against the national debt. Still, he’s an accidental Keynesian. His tax plan, which calls for five trillion dollars in tax cuts, would be a colossal giveaway to the rich, but it would also boost demand. “The tax cuts are horribly targeted,” Baker says. “But I think they would be a positive for the economy. The real bang for the buck, though, would be from more infrastructure spending.” That’s something that Trump has called for since his campaign began, and to which he gave prominent place in his victory speech, promising to “rebuild our highways, bridges, tunnels, airports, schools, hospitals,” in order to “put millions of our people to work.”
This lands Trump, oddly, not just on the same page as economists like Summers, who has called for two and a half trillion dollars in infrastructure spending, but on the same page as Democrats, who have been trying for years to get more spending in an area where the U.S. is an inveterate cheapskate. (Voters, too, love the idea of a big infrastructure program.) As Aaron Klein, a transportation expert at the Brookings Institution, told me, “We have been living off the investments of the past, without doing enough to keep them up, and we’ve failed to build out the systems of the future.” There’s no dearth of good things to invest in. If Trump’s grandiosity requires glitzy, Taj-like projects—a gilded W.P.A.—he could modernize the electrical grid, a colossal and long-overdue project. But simply repairing roads and bridges would make a huge difference, too, and there are cost-effective ways of leveraging infrastructure that’s already in decent shape. As Klein points out, although our national airport network is good and many cities have good public transit, you often can’t use public transit to get to the airport. Likewise, our ports and freight-rail network are excellent, but in most of the country there’s no direct connection between them.
Done right, a big infrastructure spree would boost demand and make travel more efficient. But Trump might easily do it wrong. A couple of weeks before the election, his early pledge to spend more than half a trillion dollars gave way to a formal plan with a very different approach—a system of tax credits to encourage private investors to put up all the money for infrastructure. This is a bad plan. It would lead to underinvestment in most of the things that Trump said he wants to do, like repairing roads, upgrading schools, and improving air-traffic control, which can’t be monetized as easily as, say, building a new highway in a rich community. And it’s a recipe for inefficiency and corruption, with public assets being given away too cheaply to private owners. “There’s nothing wrong with public-private partnerships,” Klein says. “But when you read that proposal it doesn’t make sense. And a lot of the subsidy just gets lost to middlemen.”
If Trump is serious about rebuilding, then, he should go with his original idea and do it on the government’s dime. A traditional infrastructure bill could win the support of congressional Democrats (if they’re willing to do a deal with the Devil), and, while deficit hawks in the G.O.P. will push back, Republicans have a way of being obsessed with debt and deficits only when Democrats are in office. (Both Reagan and George W. Bush enacted huge spending increases as well as big tax cuts.) Liberal economists have been saying for years that in order to boost the economy the U.S. should borrow more. The bitter irony is that it may have taken the election of a reactionary to find out if they were right. ♦
This article appears in other versions of the November 28, 2016, issue, with the headline “Trump’s Infrastructure Promises.”