Finance & Economics, Public Policy Analysis

Who is going to fund Infrastructure Bill ?

It seems the underlying idea of funding in the Infrastructure bill proposed by President Trump is based on Pareto Principle. The proposal caps funding by federal government to 20% and requires states, cities, and municipalities to fund the remaining 80%. In terms of business parlance, Pareto Principle implies that 80% of the business comes from 20% of clients.

The only problem with this rule is that it should have been implemented the other way.  The funding of the infrastructure project should have been 80% by the federal government and the rest from the cities etc. It’s very difficult for the US to fund infrastructure projects now after the tax reform with already a huge budget deficit. It will put a lot of pressure on the government to raise cash through bond issuance making the cost of capital to increase drastically. The proposal has some good ideas including that of rural infrastructure development program but the public-private partnerships to boost infrastructure development has never been a good one. No doubt private sector brings in technological know-how but the answer lies to what degree does government need private expertise. We will look into infrastructure bill in detail?

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