Politicians love infrastructure, but many local government projects seem awfully wasteful. We’ve all seen the questionable spending—the half dozen union guys standing around while one digs, the needless reconstruction of sidewalks, the dangerous bike-lane schemes on city streets, the empty city buses clogging traffic, and those digital announcement signs on highways with no useful information.

Local governments are flush with cash, and they waste it. Where I live in Virginia, a local government spent $1 million on one bus stop that should have cost $20,000.

Kevin Kosar flagged a news story yesterday about Washington’s terribly mismanaged transit agency. ABC7’s Sam Sweeney found:

Metro has spent $3.8 million and taken five years to build two unfinished bike racks—at East Falls Church and Vienna Metro Stations.

WMATA originally budgeted $600,000 for each rack, but the price tag has soared to $1.9 million each.

The covered bike shelters will house 92 bikes, putting the price tag at more than $20,000 per bike. Future costs to finish the projects could raise that number even higher.

The projects were supposed to be completed in December of 2015 but remain unfinished in 2020.

… In January 2020 signs at the fenced-off construction site said the project would wrap up in late 2018. After ABC7 aired its story in January, the signs were removed.

Large cost escalations and delays are typical on government projects. Also typical: government agencies not being responsive to document requests and trying to blame others for failures, as ABC noted in its story.

People wonder why their local governments can’t seem to fill potholes, remove graffiti, maintain park equipment, and perform other basic functions. It’s because they are wasting money on Taj Mahal bike racks at $20,000 per bike.

President Trump came into office promising spending cuts and debt reduction, but so far he has delivered the opposite. His new budget promises cuts, but his record over the first four years is fairly spendthrift compared to past presidents.

The chart shows the total real (inflation-adjusted) spending increase over the first four years of each president. For Trump, I’ve assumed he gets the 2021 spending he proposes in his new budget. Thus, Trump’s spending increases are fiscal 2021 divided by fiscal 2017.

The data comes from Table 6.1 here with one exception. I’ve adjusted spending for 2009 to remove TARP and the stimulus bill. That affects the calculations for Bush II and Obama, as I explain here.

The nondefense figures include discretionary and entitlement spending.

Here’s a quick take on the presidential records:

Carter and Bush II were big spenders across the board.

Reagan was fairly successful at limiting nondefense spending increases.

Bush I and Clinton benefited from defense spending falling after the Cold War. Bush I was a big spender on nondefense programs.

Obama pushed to pass $800 billion in stimulus spending his first year. Luckily, most of it was temporary and petered out in subsequent years. Thus, Obama’s nondefense looks frugal in the chart, but it mainly excludes his misguided stimulus spending. Also, the GOP Congress pushed to restrain spending after the 2010 election.

Obama’s defense spending fell as Iraq and Afghanistan started to wind down.

Trump has been a big spender across the board. His new budget promises cuts, but it remains to be seen whether he really means it or whether his budget is just an accounting exercise.

President Trump’s new budget projects that federal spending will rise to $4.83 trillion in fiscal year 2021. When Trump came into office in 2017, spending was $3.98 trillion. In just four years under this president, spending will be up $850 billion, or 21 percent.

In reality, however, federal spending in 2021 will be more than $4.83 trillion. That figure is “net” outlays, but “gross” outlays will be $5.41 trillion, as shown in the chart. Reporters and budget wonks usually use the net figure, but the gross figure is the government’s actual total spending.

The difference is “offsetting collections” and “offsetting receipts” from the public. These revenues are netted against spending at either the program level, agency level, or government-wide level. Some examples are national park fees, postal service revenues, and Medicare premiums. There are hundreds of such cash inflows to the government that are deducted from spending before reaching the widely reported net.

Net outlays in 2021 will be 20.7 percent of gross domestic product, while gross outlays will be 23.2 percent. The latter is a better measure of the share of the economy controlled by the federal government through spending.

The Office of Management and Budget buries gross outlay data in the budget here, while the Congressional Budget Office does not report it. But citizens are entitled to full information about the government’s large footprint on the economy. OMB and CBO should highlight gross outlays in their main budget tables.

The House Ways and Means Committee held hearings on infrastructure yesterday. The testimony by D. J. Gribbin was excellent. He was special assistant to President Trump for infrastructure policy and is very experienced in the field.

Many of Gribbin’s themes support points I’ve made for years regarding infrastructure and federalism. Gribbin and I don’t come to the same policy conclusions, but his observations about current policy failings are spot on.

Here are eight lessons for infrastructure policy:

1. States Own Most Infrastructure. Gribbin notes, “the federal government owns less than 7 percent of the nation’s public, non-defense infrastructure.” The disconnect between federal funding and this state ownership leads to “inefficiencies.” That is for sure, I’ve discussed here and here.

2. Federal Funds Come from the States. Gribbin says, “The federal government does not have the ability to create funds, just reallocate them,” making the point that federal aid ultimately comes from taxpayers who live in the 50 states. To me that simple reality creates a high bar for federal action—why not let the states keep their own money and fund their own highways and transit?

3. Costly Federal Regulations Are Tied with Aid. Gribbin argues, “Expenditure of federal highway funds triggers the need for compliance with an exhaustive list of federal requirements. These requirements not only impose direct additional costs on projects, but can also cause delays, which in turn lead to further costs.” I discuss some of these costs here.

4. Federal Aid Induces States to Delay Projects. State and local governments delay high-value projects for years waiting for federal money when they should go ahead and get the projects done. Gribbon calls this the “coupon effect” and points to a highway example in Kentucky. I’ve discussed (#12) this problem and pointed to delayed seaport, highway, and air traffic control projects. In my view, if the Feds got completely out of the way, infrastructure would be built faster and cheaper with fewer delays.

5. Federal Aid Crowds Out State Investment. Gribbon says that sometimes “state and local governments reduce their own, planned expenditures on infrastructure after having received federal grants.” He points to a Federal Reserve study finding crowd out of highway spending. A more serious problem I’ve noted (#17) is that federal aid crowds out the private provision of infrastructure such as airports, seaports, and transit.

6. U.S. Infrastructure Costs Are Suspiciously High. Gribbin is right that “U.S. infrastructure costs have become unacceptably, and inexplicably, high,” meaning the costs to build specific projects. He points to a study finding that “real per‑mile construction costs for the Interstate Highway System were three times higher in the 1990s than they were in the 1960s.” And Gribbin hits the nail on the head saying that policymakers put little effort into researching the root causes. Congress is all about more spending, never cost reduction.

7. Federal Regulations. Federal rules inflate construction costs, as I discuss here (#9). Gribbin says that his “anecdotal conversations with state transportation departments suggest that accepting federal funding reduces purchasing power by 20 to 30 percent due to myriad regulations.” Gribbon discusses how other countries have much shorter environmental reviews for projects such as highways.

8. Governments Fail at Maintenance. Gribbin says, “Today, state and local leaders are incentivized to ignore maintenance … so they can spend those funds elsewhere. Yet, poor maintenance practices damage the long-term quality of infrastructure and result in a maintenance backlog that must be met by future taxpayers.” Federal aid induces the states to buy expensive systems such as fancy rail projects. The politicians get the photo ops at groundbreaking, but then they ignore maintenance until a crisis hits, as we’ve seen with subway systems in Boston, New York, and D.C.

The solution to all these chronic problems is to end federal funding of infrastructure owned by the states, including highways, transit, airports, and seaports. In addition, the federal government should privatize or devolve to the states many of the assets it owns, including Army Corps facilities, the postal system, passenger rail, dams and water projects, and many other items.

On her campaign website, Senator Elizabeth Warren discusses reasons why she supports an annual wealth tax. She says, “Consider two people: an heir with $500 million in yachts, jewelry, and fine art, and a teacher with no savings in the bank.”

Is that how an heir would hold $500 million—in yachts, jewelry, and fine art? That perception of the assets of the rich seems to be common. Economist John Cochrane suggests that people think top wealth looks like Scrooge McDuck’s gold vault.

Of course wealthy people own personal luxury assets, but most wealth at the top is business assets. In this piece, I look at the holdings of the richest 0.1 percent of Americans, who are people with net wealth above $16 million. Almost 90 percent of that group’s wealth consists ultimately of equity and debt in businesses, which in turn funds capital investments and creates jobs and growth.

A related belief people have is that wealth at the top comes at others’ expense, as does the lady in this 1979 video below (h/​t). But the reality is the opposite, as Milton Friedman explains to her on the Phil Donahue show.

Wealth at the top supports opportunities for other people, as discussed here, here, and here.

Looks like another federally backed solar energy plant has gone bust. Bloomberg News reports, “A $1 Billion Solar Plant Was Obsolete Before It Ever Went Online.”

In 2011 the $1 billion [Crescent Dunes] project was to be the biggest solar plant of its kind, and it looked like the future of renewable power. Citigroup Inc. and other financiers invested $140 million with its developer, SolarReserve Inc. Steven Chu, the U.S. Department of Energy secretary at the time, offered the company [$737 million in] government loan guarantees, and Harry Reid, then the Senate majority leader and senior senator from Nevada, cleared the way for the company to build on public land.

The state of Nevada chipped in another $119.3 million tax abatements over 20 years. But, Chris Martin and Nic Querolo write at Bloomberg,

By the time the plant opened in 2015, the increased efficiency of cheap solar panels had already surpassed its technology, and today it’s obsolete—the latest panels can pump out power at a fraction of the cost for decades with just an occasional hosing-down.…

The plant’s technology was designed to generate enough power night and day to supply a city the size of nearby Sparks, Nev. (population 100,000), but it never came close. Its power cost NV about $135 per megawatt-hour, compared with less than $30 per MWh today at a new Nevada photovoltaic solar farm, according to BloombergNEF, which researches fossil fuel alternatives.

It all reminds me of another giant taxpayer-funded failure of the Obama administration’s green-energy enthusiasm, Solyndra. Visiting the Solyndra solar-panel factory in Fremont, California, in May 2010, President Obama declared, “The true engine of economic growth will always be companies like Solyndra.” But despite $535 million in federal loan guarantees, Solyndra declared bankruptcy 16 months later.

Plenty of people in and around the Obama administration genuinely believed that fossil fuels were dangerous and unsustainable. But as I wrote in 2018 in American Consequences magazine,

when governments pick winners, politics usually rears its ugly head. Official investigations and reporters dug into the story and found that, as the Washington Post reported, “Obama’s green-technology program was infused with politics at every level… Political considerations were raised repeatedly by company investors, Department of Energy bureaucrats and White House officials.”

The family funds of Oklahoma billionaire George Kaiser, a big Obama fundraiser, owned a third of Solyndra. As the company was failing, Kaiser wrote to a Solyndra board member, “Why don’t you pursue your contacts with the WH?” Two months later the board member wrote Kaiser, “The DOE really thinks politically before it thinks economically.” Solyndra’s lobbyists met at least three times with an aide to top White House official Valerie Jarrett.

Government subsidies can bring any business into existence. But apparently even subsidies can’t ensure the production of something useful.

I reported that state and local governments in New York spend twice as much as governments in Florida. New York also has a larger bureaucracy. Carl Campanile of the New York Post reported on these findings yesterday and captured a retort from the office of New York Governor Andrew Cuomo:

“Sounds like this ginned-up study from a group of right-wing 19th century robber baron wannabes fail to mention that New York is Washington’s favorite ATM, paying $26.6 billion more in federal taxes than we get back while Florida receives $45.9 billion more than it pays,” said Cuomo senior adviser Rich Azzopardi. “Get a calculator.”

Actually, I am familiar with the “balance of payments” data Azzopardi refers to, and back in the 1990s aided then New York Senator Daniel Patrick Moynihan with such calculations. New York has long paid more to Washington in taxes than it receives back in federal spending on social programs, contracts, grants, and federal wages.

New York’s Rockefeller Institute has done the latest calculations. It found, “New York’s overall balance of payments remains the least favorable of any state in the nation.” Why does New York get such a raw deal? The Institute found, “New York’s consistently negative balance of payments is driven primarily by the disproportionate amount of federal taxes paid, rather than relatively lower federal spending received.”

And why does New York pay a disproportionate amount of federal taxes? Because the federal tax code is highly progressive and New York has a large number of high-earners and a high cost of living. The progressive federal tax code has ripped off New York and other wealthy states for decades. The chart below from Rockefeller shows federal taxes paid per capita.

But here’s the thing: New York politicians have done nothing about it! New York politicians should be leading the charge against the unfair soak-the-rich federal income tax. Instead, most House and Senate members from New York are liberals who cheerlead for progressive taxation, and thus who work in the federal legislature to undermine their own state.

Since New York gets such a raw deal from federal fiscal relations, New York politicians should be the ones trying to revive federalism by shrinking federal spending and transferring activities back to the states. I argue here that such devolution would be good for every state, but it would particularly benefit states such as New York that pay so much in federal taxes.

Finally, note that New York’s balance of payments problem is no excuse for the gross inefficiency of its government compared to that of Florida. Rather than griping about Cato Institute data, Cuomo and Azzopardi should be grabbing their calculators and finding savings in the state’s bloated budget.