Trump Proposes Selling ‘Infrastructure Bonds’

Dave Johnson

Tuesday’s post, A “Look At Clinton And Trump’s Promises To Spend To Boost Economy,” said Trump’s infrastructure plan was nothing more than a promise with no details. “We will build the roads, highways, bridges, tunnels, airports, and the railways of tomorrow. This, in turn, will create millions more jobs,” Trump said.

Trump has since added a detail to his plan, saying he will “at least double” what Clinton’s plan spends. Bloomberg has the story, in “Trump Says He’ll Spend More Than $500 Billion on Infrastructure”:

Donald Trump on Tuesday proposed a plan to rebuild U.S. infrastructure that costs “at least double” the amount that Hillary Clinton has floated, in what would amount to a massive new government program.

Asked on Fox Business Network how much he’d spend, the Republican presidential nominee said, “Well, I would say at least double her numbers, and you’re going to really need more than that. We have bridges that are falling down. I don’t know if you’ve seen the warning charts, but we have many, many bridges that are in danger of falling.”

So there. A detail. He’ll spend “double what she said.” (It’s not clear that he knows what she said.)

How Trump Pays For Infrastructure Spending

Here’s the fun part. Trump then describes how he will pay for this. From the Bloomberg report:

“We’ll get a fund. We’ll make a phenomenal deal with the low interest rates,” he said. Who would provide the money? “People, investors. People would put money into the fund. The citizens would put money into the fund,” he said, adding that he’d use “infrastructure bonds from the country, from the United States.”

Trump is saying he would borrow the money for his infrastructure plan by selling US Treasury bonds. Which is exactly what the US government and every other government does and has done to fund infrastructure maintenance and modernization. He just uses different words to describe it.

He’s Right

But here’s the thing. This might be standard practice — the standard way governments fund infrastructure projects — except for the last several years that the Republican Party has objected to selling bonds to pay for infrastructure. They call it “government spending.” They object to “borrowing” and “debt.”

So Trump words it differently, and this is important to get. He says investors will buy “infrastructure bonds” and that “citizens” will pay into the fund (aka borrow money and use taxes to cover interest payments). Trump sells the idea. On top of that, right now the government makes a profit off of borrowing. The interest rate on US borrowing is lower than the rate of inflation. This is known as a “negative interest rate,” which means bond-buyers are actually paying the government to let them buy those bonds. So the government comes out ahead every year. Trump knows that, and uses it to sell the idea of “infrastructure bonds.” (I’ve been making the same argument for quite some time. Much more here.)

Meanwhile, too many Democrats have bought into the conservative propaganda that taxes, government, government spending on infrastructure and the whole lot of it are somehow bad things, so they propose policies that line up with this distorted picture. And this puts them in a bind because it prevents them from doing things to make people’s lives and the economy and the country better — like spending on infrastructure (or education, health care, scientific and medical research, space exploration, good courts, public transportation or … you name it.)

Backs Clinton “Into A Corner”

Zach Carter, writing at Huffington Post explains, in “Why Is Hillary Clinton Letting Donald Trump Back Her Into A Corner On The Economy?”. Carter warns that by “moving right,” and saying she won’t borrow to pay for infrastructure, Clinton is allowing herself to be trapped in a corner.

In late June, Ezra Klein directly asked Clinton whether she would take advantage of these conditions to boost government spending. She rejected the idea, arguing that the government should tax the rich to pay for new investments. That’s all well and good, but there’s no reason Clinton couldn’t do both. She didn’t explain why her administration would be incapable of both taxing the rich and capitalizing on a debt market that quite literally allows the government to reduce the deficit by borrowing money.

[. . .] “We know what happens to countries that tried that in the past, like Germany in the ‘20s or Zimbabwe in the ‘90s,” Clinton said.

Clinton is echoing the worst of the right’s anti-government, anti-spending propaganda there, and she is just wrong. Carter again:

The United States in 2016 is not Germany in the ‘20s or Zimbabwe in the ‘90s. It has a functional economy and a stable, legitimate democratic government with a debt burden nowhere near what the Weimar Republic faced after World War I. Even if investors weren’t offering to pay us money to borrow from us, we would not be risking hyperinflation by financing modest new borrowing with money-printing.

No shit.

Carter concludes:

The infrastructure plan Trump floated … involves borrowing money (at a profit) and spending it on projects that put people to work tackling real economic needs. That’s a good idea, if Trump actually understands it.

Trump is proposing to just do what governments are supposed to do. Clinton is trying to get to the right of him by saying that if government borrow then we’ll end up “like Germany in the ‘20s or Zimbabwe in the ‘90s.”

Democrats know that borrowing to spend on infrastructure (or education, health care, scientific and medical research, space exploration, good courts, public transportation, or … you name it) is how governments are supposed to function. It’s just normal. It works. It makes people’s lives,  the economy, and the country better. Democrats need to step up and learn that they should be selling this, not cowering and reacting to right-wing nonsense. I mean, Zimbabwe? Really?

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