Investing in U.S. Infrastructure
April 16, 2012 Leave a comment
America’s infrastructure is aging. What were once world class facilities and engineering marvels are now severely outdated behemoths in need of revitalization. Most experts, from economists to engineers agree that significant new investments that strengthen the skeleton of the American economy are needed to remain competitive into the future. This includes everything from energy grids to water systems to transportation.
The transportation system tends to be the most widely discussed aspect of infrastructure investment and redevelopment. It is critical to both the health of the United States economy and its citizens at large. Given current high levels of unemployment, investment in rebuilding transportation infrastructure also has the added benefit of job creation because much of the construction work still remains labor-intensive. Because these projects are expansive and long-term, they have the ability to employ persons on a large scale, something the American economy needs desperately. A plan for opening the door to greater infrastructure investment in transportation was outlined in a recent briefing by Scott Thomasson of the Renewing America Project.
According to Thomasson, a comprehensive, long-term investment plan still eludes policymakers to the detriment of the American economy and its workers. As an example, he notes the continued failure to pass a surface transportation bill since 2009 as a complete plan that would lay the groundwork for this massive undertaking. He estimates that the costs of modernization will total at least $2.3 trillion over the next ten years, yet public investment infrastructure remains half of what it was fifty years ago. These budget problems at all levels of government continue to pose the biggest obstacles to necessary investment. There are already many good options on the table to promote investment such as President Obama’s infrastructure bank, the leveraging public-private partnerships (PPPs) to spread costs and risks, and developing alternative forms of financing. However, Thomasson recognizes that these are likely to fail due to disagreements in Congress. “Grand bargains” are increasingly unlikely to succeed as well.
To unlock investment, Thomasson argues that Congress can take smaller steps to get the ball rolling through alternative financing and more streamlined regulation. First, states should be given greater flexibility to finance various projects through new revenue sources and the increased use of PPPs while taking steps to reduce state borrowing costs. Second, enhancing existing financing programs and cutting bureaucratic tape to hasten project proceedings would do well to ensure that many proposals are put into practice.
Thomasson admits that none of these steps are silver bullets, but they at least begin to substantially address infrastructure needs and encourage initial investment that the country desperately needs.
Posted by Brian Gowen
Sources: Council on Foreign Relations