Renewable Energy

How Are We Going to Fix Up the Homestead?

­When I bought my farmstead back in 1982, there wasn’t much that didn’t need to be done. In terms of infrastructure, it needed a septic system and indoor plumbing (the existing one was an outhouse), a lot more electricity (each room had one light, no outlets), and new roofs for all six of the existing buildings.

I didn’t start spending money like a drunken sailor. First, I determined what was the most critical project (new roofs) and how I was going to pay for it.

President Trump is gearing up for his next big project: infrastructure spending. The White House unveiled its $1.5 trillion plan two weeks ago.

There’s just one problem… It’s a little light on funding. About $1.3 trillion light.

Trump wants to pony up only $200 billion from the federal government. The rest would come from public/private partnerships and/or state and local coffers.

That’s probably not going to fly. In the past, when it came to infrastructure spending, the feds put up 80% of the bill.

At least that’s been the case with roads and bridges. State and local governments put up the rest.

There’s just one problem with that model now. The federal Highway Trust Fund – the money pot used to maintain and expand our interstate highway system – is just about broke.

Part of the reason is that cars today are more fuel-efficient. So drivers spend less at the pump and fewer tax dollars are collected. (Gasoline taxes keep the Highway Trust Fund in the black.)

But the fund’s problems will only get worse. An increasing number of alternative fuel vehicles (like electric vehicles) aren’t going to pay any fuel tax.

There hasn’t been any increase to the federal gasoline and diesel tax since President Bill Clinton raised it in 1993. Now Trump wants to increase it by $0.25 per gallon.

Phased in over the next five years, a $0.25 increase would generate an additional $375 billion in tax revenue over the next decade. That’s money that’s badly needed to repair or replace our 60,000 ailing bridges and pothole-ridden roadways.

Trump’s proposal may have legs. Both Republicans and Democrats in Congress are in favor of road and bridge upgrades.

However, sprucing up our roads and bridges is just one aspect of needed infrastructure repairs and upgrades.

Among the other spending needs is an expanded electrical grid. The growth of EVs is a big driver here.

Also, with the continued growth in utility-scale wind and solar, the U.S. transmission grid needs to be updated and expanded. And as the U.S. continues to increase its use of natural gas, pipelines will need to be upgraded and expanded too.

Where’s the money going to come from to fund all of these projects? Right now, the federal government is conspicuously absent from the picture.

While Trump is talking up a good book, we’ll have to wait and see what we eventually end up with. I personally believe that Congress will pluck the low-hanging fruit first.

That means an increase in the federal gasoline tax. In addition, I expect we could see narrowed restrictions on what Highway Trust Fund dollars can be spent on.

In the past, Congress has raided that piggy bank. That’s one of the reasons it’s so light on funds.

The big question is, how are we going to fund all these other infrastructure projects? Is some sort of a national sales tax the answer?

Or does it make more sense to have usage taxes based on specific infrastructure projects?

I’d like to know what you think. Share your thoughts in the comments section below.

This is an important national issue and your views are important to me. I certainly don’t have all the answers.

Over the coming year, I’ll continue to focus on infrastructure, energy and technology: the three sectors driving our economic engine forward.

Good investing,