Trump’s dilemma
In recent decades, more and more of the nation’s wealth has been concentrated in large cities with “information–oriented economies”, such as New York, the Bay Area, LA, Boston, Seattle and Washington. Now we are beginning to see some of the effects of this, as a physical transformation of these cities is underway. I see the effects every time I drive into Boston—each year it looks like a richer city than the year before.
Over the years, I’ve argued that cities like New York don’t upgrade their infrastructure because they would rather spend the money on social services. (By “they”, I mean powerful special interest groups; who knows what the voters think?) But now NYC is becoming so rich that there is private money available for infrastructure:
new york’s JFK airport is set to receive a vast overhaul, designed to transform the hub into ‘a unified, interconnected, world-class’ complex. announced by governor cuomo, the project also seeks to improve road access and expand rail mass transit to meet projected passenger growth. the scheme will be funded by up to $7 billion USD of private investment, with the governor endorsing a further $1.5-$2 billion in spending by the state department of transportation to improve surrounding roadways.
In a former rail yard called “Hudson Yards” they are building a “yuuge” project, with baubles like this:
It looks like the atrium of a large building, or perhaps a painting by Escher. Actually it’s a $150 million piece of public art, which will adorn the big new commercial development on Manhattan’s West Side:
Trump will eventually face a dilemma. He says he wants private funding of lots of big projects—and this is one of the few areas where I believe him. I think he’s a builder at heart, with the sort of edifice complex we used to associate with Roman emperors. But the question is where? If we rely on private money, these big projects will tend to be in the richer, information-oriented big cities. But, with the exception of a few Sunbelt cities like Houston, these are exactly the sort of places that despise Trump.
I don’t doubt where advisers like Steve Bannon would stand on this issue. He favors the “real America” of the rust belt, and would like to revive those areas. But Trump is a New Yorker, and the easiest way to get big infrastructure projects off the ground is to use private money, and do them in places like NYC.
So does The Donald want to try to “Make New York Great Again”, and probably succeed, at the cost of helping the areas that hate him? Or should he try to “Make Michigan and Ohio Great Again”, to help his base, and probably fail?
Over the next 12 months we’ll get the answer—keep a close watch on what Congress does, not what politicians say they are doing.
Tags:
22. January 2017 at 17:49
DUMB Read the damn plan.
We end Davis-Bacon and use the $200B+ in tax credits for $1.2T in private investment to PRIVATIZE FLINT’S WATER SUPPLY, amongst 100’s of other things.
You don’t seem to understand that Trump’s not just a builder, he’s a PRIVATIZER.
22. January 2017 at 17:49
Scott,
I don’t really think it’s either or. You’ll get more investment in more populated places and less investment in less populated places (together with a dash of political pork.)
Also remember it’s a heck of a lot cheaper to build in less populated areas where land acquisition costs are minimal.
22. January 2017 at 17:54
Don’t underrate how much we despise that jerk here in Houston. Look at an election map.
22. January 2017 at 18:17
Sumner: “[expensive] “information–oriented economies”, such as New York, the Bay Area, LA, Boston, Seattle and Washington.” – so why does Sumner want to move in his retirement from beautiful Boston to smog -ridden, gang-crime infested Los Angeles? Makes no sense… like the rest of the good professor’s posts. If it was me, a cornfield in some rural place nobody’s ever heard of would be my ideal retirement home in the USA, seconded by somewhere outside the US.
22. January 2017 at 18:32
Uh, Sumner, Houston hates Trump, and hates him deeply. The county containing it went for Hillary by twelve points. Romney lost it by less than a point.
Yes, a great deal of the population growth in America is occurring in places with lots of #NeverTrump Republicans. After all, Trump campaigned on being the champion of the forgotten man, and these people in Boston are not forgotten.
Some rich places (Livingston County, MI, Suffolk County, NY) did trend towards Trump, though.
Maybe helping #NeverTrump Republicans with infrastructure will help #NeverHillary Democrats by bringing the benefits of the well-educated to the less-educated.
22. January 2017 at 18:58
I don’t see how places like NYC could be the focus of Trump even if he wanted to. I assume these regions have a lot of state and city level regulation so Trump can’t really change that. I mean just look at how long it took NYC to rebuild after 9-11. Building the first WTC took like two years for each tower, building the new WTC took so much longer, I think around ten years, its cost quadrupled during this time, and all this for a construction that seems to be way smaller.
I think Trump’s first move might focus on all those pipelines that Obama blocked. And then maybe refineries, power plants, chemical plants, oil fields, oil rigs, roads, bridges, highways and yes also airports, but mostly in places in which construction is easier than in NYC. Cities like NY must have been planning new airports for decades, without too much success so far.
22. January 2017 at 19:15
dtoh, Where does Detroit get the money to build infrastructure? Let’s be realistic here.
Dirk, Fair point. But Trump got 4% of the vote in DC, what was the percentage in Houston?
Christian, You said:
“And then maybe refineries, power plants, chemical plants, oil fields, oil rigs, roads, bridges, highways and yes also airports, but mostly in places in which construction is easier than in NYC. Cities like NY must have been planning new airports for decades, without too much success so far.”
Dream on.
22. January 2017 at 19:19
I recently made a trip to Europe. It was weird to be in a place that didn’t have ADA rules. That artsy Escher does not look ADA friendly. Trump has a called for $1T in mostly private infrastructure. Good to Scott on the Trump train!
22. January 2017 at 19:22
“I think he’s a builder at heart, with the sort of edifice complex we used to associate with Roman emperors.”
Sumner fawns over the architectural wonders of the world, and yet he associates the builders as having an “edifice complex”.
It is almost as if his stark realisation of his own inability to build a mud hut makes him communicate his own “inferiority complex” as implying others have issues needing a fix.
22. January 2017 at 19:27
Scott,
“Where does Detroit get the money to build infrastructure?”
Sell off their art collection.
22. January 2017 at 19:47
Scott you haven’t read Wilbur Ross’ plan have you?
“Where does Detroit get the money to build infrastructure? Let’s be realistic here.”
1. GUT EPA, so that there are no added costs.
2. End Davis-Bacon, so work is done at 45% of what it normally costs.
3. Provide tax credits which make running projects a slight loss PROFITABLE.
4. PRIVATIZE everything. There are a ton of communities in TX with private water and sewer. Indianapolis is privatized.
Yes the cost of water will go up slightly. NO you will not be able to appeal and appeal etc to keep your water from being turned off.
But the upside is Flint has clean water!
None of this happens in a vacuum and NO Trump’s infrastructure plan isn’t JUST 200B in tax credits, but anything that can have a realistic revenue stream behind it will be privatized.
The truth is there is a ton of bureacracy, labor costs, and regs that once slashed, make non-viable projects marginally viable, and marginally viable projects, profitable.
The difference is America has NEVER had a builder, someone who COMPLETELY understand the red tape and now suddenly has the ability to slash thru all of it.
It makes good men tingle al over.
22. January 2017 at 20:36
Yes; private firms are chomping at the bit to rebuild lucrative levees and crumbling 100 year old sewer systems.
We are going to get toll roads to nowhere.
22. January 2017 at 20:39
There’s no reason private infrastructure has to be confined to coastal cities like NYC. Mitch Daniels showed how to do it a decade ago in Indiana.
22. January 2017 at 20:43
‘We are going to get toll roads to nowhere.’
Did it ever occur to you that the only places private investors will want to build toll roads are where people WANT to go?
22. January 2017 at 21:13
Let’s throw in a few extra bucks and buy designboom.com a Shift key.
23. January 2017 at 03:21
@ssumner
Dream on
My expectation is that he will build pretty much nothing at all, the status quo will remain as it is. But if I’m wrong I expect him to go for the pipelines first and not for new buildings in NYC (that would make his Trump Tower look bad). Maybe NYC does construct big on his own, but de Blasio looks rather ideological to me, so he is more an obstruction than a builder.
23. January 2017 at 04:58
Life in big cities can be harsh, and cost a lot of money. In the information age,there is no need for people to pack into big cities like NYC. That is actually an industrial economy paradigm. Why not improve infrastructure everywhere, and then create conditions for people not to move to NYC ?
23. January 2017 at 05:54
dtoh, You said:
“Sell off their art collection.”
Detroit’s creditors would then sue to receive that money, and they’d win. In any case, wasn’t the art museum privatized?
Jose, People seem to want to live in big cities.
23. January 2017 at 10:32
“Jose, People seem to want to live in big cities.”
No single people, DINKs, etc love big cities. I have never known an engineer from silicon valley or San Francisco who grew up there…they primarily grew up in small towns all over this land. The number of children in San Francisco is like 1/2 of what it was 25 years ago…so the contrast will be even more stark in the future. Nobody moves to a big urban area because the want to raise a family.
I streamed a show on Amazon the other day on this group of motorcycle riders that drove from London to Beijing, which I found quite entertaining. Blue staters think Nebraska is remote…try driving a motorcycle through Tajikistan and Tibet.
We are so lucky to live on a country that spans the continent so we can have an integrated infrastructure.
23. January 2017 at 12:11
Davis-Bacon requires that employers pay local prevailing wages on projects receiving federal funds. Dont dispute that the prevailing wages are estimated in a piss poor manner but 45% less is a guess. Again, it also has no bearing whatsoever on private infrastructure costs.
23. January 2017 at 12:28
There was a mini-baby boom in the late 1980s/early 1990s.
Those young Millennials flocked to urban cores around 2010-2015. Now they’re aging out of urban living and looking for homes in the suburbs to raise families.
We spend pages and pages of newsprint fawning over new developments in San Francisco and Boston but the reality is that the fastest growing places are sun belt suburban-focused cities, not elite coastal cities.
Over the next forty years, America will add another hundred million+ people. The vast majority of them are not going to be moving into loft apartments in Brooklyn.
The SF bay area added 90K people last year, Dallas metro added 144K from a much smaller base. Which city got more headlines as a boomtown?
23. January 2017 at 12:44
I feel like you continue to have trouble seperating Trumps “speaches and branding” from what looks like good governance to me.
Fiscal Policy is undoubtedly move to the supply side.
The FDA is being appointed with libertarians. Especially since medicine is moving towards individualized medicine instead of blockbuster drugs is very important. Millions of lives could be saved by having a FDA that approves drugs faster and at lower costs.
Both of these are hugely important.
Yes he’s a demogogue. And I can’t support his speaches or talk on trade. But both are relatively minor. Trade is important, but becoming less so with the rise of automation.
There is also a good chance he will limit executive power which I think is a very good thing. His appointments and congress are going to gain power. POTUS the man himself is losing power. He’s said it himself that he’s concerned with branding and “Making America Great Again”. I can’t agree with all of his branding, but policy isn’t the same as the brand.
While I couldn’t vote for him before the election he’s certainly the better candidate than the policy cocktail we would have gotten from Hillary.
23. January 2017 at 13:54
It’s not a dilemma. This is example #346 of circular logic and assuming facts not in evidence. Also, not understanding the objective function.
Trump supporter’s lists of demands for infrastructure consists of: Wall. Easy-peasy.
If Trump provides $$$ to cities for non-Wall infrastructure, they will despise him less than they do now. It’s really only a question of what the quid pro-quo will be in return for $$$.
My expectation is that direct federal aid will be provided conditional on enforcement of federal laws, and some other items like improving zoning restrictions. Some cities will be in a position to refuse, many won’t. Cities such as Baltimore and Chicago are crushed under structural deficits due to unfunded pensions, high taxes, bad zoning, and high crime. The police are hated, and crime is rising. Police forces are under a consent decree with the DOJ to “reform,” whatever that means.
A few mayors can refuse – those of rich cities with immobile labor, say San Fransisco.
Most mayors will be put in a position to either refuse federal money, and take the risk of looking like idiots because their cities keep crumbling, or accept federal money and look like idiots for backtracking. My expectation is that the Trump admin will use this as a wedge between voters and the political class running or ruining the cities. If New York does not get money, it’s because Trump wants to hold out DeBlasio as an example of a progressive idiot ruining a city. New York is a high-tax high-regulation city, it won’t be terribly difficult to incentivize companies to move south to someplace like Charlotte, NC (which is already happening anyway in financial services). Presto, NYC has to raise taxes or cut services to close a budget deficit.
New York City has more ability to resist the Trump agenda than most, only 10% of the budget comes from Federal sources. Cuomo might help him out (but based on past history, not much, as there is no love lost). Among the least able to resist though will be Chicago and Baltimore.
Nobody will want to be the first to buckle, but after the first few mayors jump on the Trump train, no one will want to be last either. People first in will get the best deal, people last in, the worst.
23. January 2017 at 15:55
morgan s warstler, gutting bacon-davis means those who voted for Trump will get paid less. isnt that like spitting at those who voted for you? wonder how that will turn out?
23. January 2017 at 16:00
arent pipelines owned by companies, and not built by governments? and while there was supposed to be at least a better safety from pipelines, its not always true. just check around a bit and you can find where they bust and spill oil, and in some case blow up. better than trains? some but not exactly 100% either. and while i suppose dont care if they pollute the environment, unless they happen to make the drinking water where you live undrinkable. which has happened
23. January 2017 at 16:08
sean, if we the FDA can approve safe drugs faster sue, but if all we do is make more drugs available that are not safe, is that really an improvement? do we really want to go back to the days of patent medicine? and given what you seemed to fell like, just give us more drugs, that may kill us, but thats ok
23. January 2017 at 19:08
I wish Morgan still blogged. Dude has a perspective that is not one I normally encounter and dang is he spot on at times. OTH, I prefer Scott’s style.
24. January 2017 at 06:43
Sean, You said:
“There is also a good chance he will limit executive power which I think is a very good thing.”
Is this a joke? I agree about the FDA, way too soon to judge other policies.
dwb, I’m skeptical that much will change in the infrastructure area, beyond a few symbolic items like Keystone.
24. January 2017 at 09:42
In terms of Trumps personal power I think he will do far less than other POTUS. I think Ryan is a bigger player on tax reform (having more influence) than Trump. I think most of his cabinet positions will be more powerful for making final decisions than Trump. I don’t think Trump has much interest in actual decisionmaking. He will do high profile CEO visits but not much else.
24. January 2017 at 13:32
I think sean got a point here.
Donald J. Trump is also the oldest President ever. This fact alone might force him to share his power.
Not to mention that he appointed people like Tillerson and Mad Dog Mattis. People that he admires and who are an equal match for him. Some many self-proclaimed experts claim that Trump is a pathological narcissist. But pathological narcissists don’t surround themselves with co-equals, they surround themselves with inferior yea-sayers.
Merkel might not be a pathological narcissist (or is she?) but funnily enough she loves to surround herself with sycophants and inferior yea-sayers.
28. January 2017 at 07:51
Sean and Christian, Maybe, but check out today’s news.