The Consequences of Underinvestment in Infrastructure

trafficTraffic jams may be the least of our worries according to a recent report released on Tuesday by the American Civil Society of Engineers. The report, entitled “Failure to Act,” focuses on the economic cost of continued underinvestment in our nation’s infrastructure. It estimates that by 2020, infrastructure woes could cost the U.S. 3.5 million jobs and a projected $3.1 trillion loss in GDP. Overall, according to the report, “The results show that deteriorating infrastructure, long known to be a public safety issue, has a cascading impact on the nation’s economy, negatively affecting business productivity, gross domestic product, employment, personal income and international competitiveness.” However, with an additional investment of $157 billion a year between now and 2020, the U.S. can eliminate this drag on economic growth.

Similarly, the San Francisco Federal Reserve has found that increasing federal highway grants can provide substantial economic benefits. The article states that highway grants led to a fiscal multiplier in which “each dollar of federal highway grants received by a state raises that state’s annual economic output by at least two dollars.”

While appropriate infrastructure spending is an essential part of economic growth and prosperity, Washington also must reign in its out-of-control deficit and focus on essential budget cuts. The current situation has made talks of spending across the board less likely. However, this tension between budget cuts and necessary spending is a thorny issue that must be addressed if the US is to maintain high level economic productivity.

Posted by: Matthew Goldberg

Sources: Reuters, American Society of Civil Engineers, Federal Reserve Bank of San Francisco

Photo Credit: New York City Traffic courtesy of flickr user Scott Mcleod

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