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America’s Infrastructure Problem

March 03, 2014

D+. That’s the overall grade America’s infrastructure received from a comprehensive assessment done by the American Society of Civil Engineers in their 2013 report. If that sounds shocking to you, it should.

Author: Jake Lahr, C’16 W’16

D+

That’s the overall grade America’s infrastructure received from a comprehensive assessment done by the American Society of Civil Engineers in their 2013 report.

If that sounds shocking to you, it should. Out of the 16 items evaluated, only solid waste earned a grade higher than a C. And, even that grade was challenged because America only earned a B- for its solid waste infrastructure. Since 1998, the average grade for American infrastructure has been a D, primarily because of delayed maintenance and under-investments.

The American Society of Civil Engineer’s assign grades according to eight criteria: capacity, condition, funding, future need, operation and maintenance, public safety, resilience, and innovation. Particularly shocking from these findings is that people are taking two hundred million trips daily across structurally deficient bridges.  This means that one out of every nine bridges, across the U.S., are unsafe for use in the U.S.  To bring the US infrastructure up to where it should be, the report estimates the US would need to spend an additional $1.6 trillion by 2020 (ASCE 2013).

While that number may seem shockingly high, there is one caveat to keep in mind: the report neither discriminates between the most and least urgent projects, nor the projects that would result in a true cost efficient infrastructure upgrade (Plumer 2013). What is clear, however, is that in recent years the problem of infrastructure underfunding has gotten worse.

According to the Congressional Budget Office, transportation and water infrastructure spending dropped from a peak of 3.1% of GDP in the early 1960s to 2.4% of GDP in 2007 (CBO 2010).  Data compiled by the St. Louis Federal Reserve concluded that infrastructure spending has regressed back to the spending levels of 1992 (see the graph below), which consistently fell below 2% of GDP.  This trend remained constant until 2008 when Congress passed a stimulus package that allowed for increased spending on infrastructure.  But, after the stimulus package ended in 2010, there has been a sharp drop off in infrastructure spending, which has resulted in the percentage of GDP used for public construction projects falling to its lowest levels since the Federal Government began tracking this data.

This is especially problematic given that times of high unemployment, and low interest rates are ideal instances for government borrowing.  Low interest rates mean that governments can borrow money for projects that would need to be funded anyway at a lower rate. This would be good for America’s economy because increased construction projects can boost national employment levels, which would result in fewer laid-off construction workers, and would present greater opportunities for job creation.

A common concern with increased government spending is the negative spillover effects on private investment. Namely, when government spending stimulates the economy, interest rates tend to rise, which can lead to a decrease in private investment spending. However, as seen in the chart below which displays private investment as a percentage of GDP, private investment has hardly recovered from the recession, meaning there is little chance that an increase in infrastructure spending would crowd out those investments (Irwin 2013).

InfrastructureProblemGraph2

While earlier in 2013 congress passed a bill to improve port infrastructure and spend up to $8.2 billion, the reality is that significantly more resources are needed to improve the nation’s infrastructure—and that Congress has little interest in providing those resources (Wallbank 2013). Given the current political environment it is unlikely that we will see a large increase in infrastructure spending any time soon.

Recently, Congress has turned its attention to healthcare and other budget matters while completely neglecting any discussion on the need to improve the nation’s infrastructure. With the current shortfall in needed infrastructure spending, and the deteriorating state of the roads, bridges, and waterways that keep the economy humming along, it’s clear Congress must do more to address these issues. As a result, Congress must invest immediately in infrastructure spending from its current levels. Although spending $1.6 trillion by 2020 will not be easy, it must be done to protect our country from infrastructure failure. With all the issues Congress will be able to improve through increased infrastructure spending, it’s clearly time for Congress to come together and develop a plan to rebuild America’s vital infrastructure in order to ensure and preserve a prosperous future.

References:

2013 Report Card for America’s Infrastructure. American Society of Civil Engineershttp://www.infrastructurereportcard.org/a/#p/grade-sheet/americas-infrastructure-investment-needs

Federal Reserve Economic Data (FRED). Federal Reserve Bank of St. Louis.http://research.stlouisfed.org/fred2/

Irwin, Neil. “Is Congress really going to miss its free lunch on infrastructure?” The Washington Post. February 11, 2013.http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/11/is-congress-really-going-to-miss-its-free-lunch-on-infrastructure/

Plumer, Brad. “America’s infrastructure gets a D+. That’s not as bad as it sounds.” The Washington Post. March 19, 2013. http://www.washingtonpost.com/blogs/wonkblog/wp/2013/03/19/good-news-americas-infrastructure-is-now-5-percent-less-shoddy/

“Public Spending on Transportation and Water Infrastructure.” Congressional Budget Office (2010) http://www.cbo.gov/publication/21902

Wallbank, Derek. “Tea Party Republicans, Obama Back Waterway Projects Bill.”Bloomberg. October 24, 2013. http://www.bloomberg.com/news/2013-10-24/tea-party-republicans-obama-back-waterway-projects-bill.html

 

 

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