Wednesday, November 23, 2016

INFRASTRUCTURE PROGRAM

At this point, it is not clear that Trump is proposing a real infrastructure program but intends to give utilities and other companies a big tax break for building what they already plan to do.  But let's say in the end it will be a real infrastructure program of improving bridges, roads, airports, train stations, the electrical grid, and others.

The way it goes is this.  It takes time to ramp up the program so if Congress is smart they will start a large infrastructure program slowly (this would be unusual, but let's suppose.)  So let's say, they start the first year with, um, $25 billion.

So an interagency committee is formed to select which infrastructure programs to do first.  This is important because, although it is supposed to be a multiyear program, Congress may abandon it after the first year (you never know).  The interagency committee forms a working group to select and prioritize projects.  The working group gathers together and starts to prioritize when someone gets a bright idea.  They point out that the American Society of Civil Engineers already has a list so why don't we just go with that?  Everyone agrees and the meeting is disbanded.

So they publish the list and the next thing you know, the Senator from, say, Mississippi says,"What do you mean that Mississippi is number 293 on the list?  We have projects as important as anybody. " Well, he is a powerful Senator (Mississippi happens to be a ward of the U.S. government) so something from Mississippi is made number 9 on the list.  Of course the Senator from the state that has just been dropped from the top 10 objects to losing out.  So the interagency group discusses if they could handle 11 projects to start.  It is agreed that with overtime, enough person power can be focussed on 11 projects and that is that.  Only the Senator and a representative from Arkansas object to being only 173 on the list.  And so it goes.  Finally, the system is overloaded so they are given authority to make some new hires.

The hiring has to be done quickly.  The Senators from Mississippi and Arkansas say they have an idea for some people. As time is passing, some people are hurriedly hired that the organizations involved spend the next 20 yrs trying to get rid of.

Finally, contracts are being prepared.  The approval process is slow but accomplished and contracts are let.  The low bid is an organization that can't do the job so papers have to be prepared explaining why the low bid isn't being selected.  A fight ensues and the contract may have to be relet.  Finally, a company is selected and some company higher on the list complains that they should have been selected so the whole thing starts over.  But a contract is finally issued (with luck) and ready to go about halfway through the fiscal year.  The approved company then has to ramp up their operation which takes more time.  With maybe about 3/4ths of the fiscal year gone, the company finally starts to do some work.

SUPERFUND AS AN EXAMPLE
Consider a program called Superfund Program initiated in 1980 that deal with cleaning up commercially contaminated sites with various chemicals and other toxic materials in the U.S.  To get a feel for what I am writing about, see the Superfund program in just the state of New Jersey (https://en.wikipedia.org/wiki/List_of_Superfund_sites_in_New_Jersey)
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Here is a quote from Wikipedia about the Superfund today:
Approximately 70 percent of Superfund cleanup activities historically have been paid for by parties responsible (PRPs) for the cleanup of contamination. The exceptions occur when the responsible party either cannot be found or is unable to pay for the cleanup. Until the mid-1990s, most of the funding came from a tax on the petroleum and chemical industries, reflecting the polluter pays principle, but since 2001, most of the funding for cleanups of hazardous waste sites has come from taxpayers. Despite the name, the program has suffered from under-funding, and Superfund cleanups have decreased to a mere 8 in 2014. As a result, EPA will typically negotiate consent orders with PRPs to study sites and develop cleanup alternatives, subject to EPA oversight and approval of all such activities.  https://en.wikipedia.org/wiki/Superfund

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