Last week, President Obama spoke in Ohio and pressed Congress to boost federal investment in the nation’s infrastructure. This serves as a great time to reiterate all the reasons why boosting infrastructure investments is a no-brainer:
1) Our infrastructure is terrible. More than one in four bridges are structurally deficient or functionally obsolete, indicating that the Minnesota bridge collapse wasn’t an isolated event. The American Society of Civil Engineers conclude that we need to double our investment in surface transportation infrastructure just to keep it from literally crumbling beneath our feet.
2) Win the future. Public investments such as infrastructure are vital to long-run economic growth and fuel higher incomes and living standards for decades. A recent and comprehensive review of the literature on this topic finds that a sustained 1 percent increase in public capital growth rate translates into a 0.6 percentage-point increase in the private-sector GDP growth rate.
There’s an even stronger case for doing it now:
3) It creates jobs. Regular readers of this blog won’t need to be reminded that millions of Americans are still suffering under the worst jobs crisis since the Great Depression. Job creationh as become an economic, political, and moral imperative. Infrastructure investments create jobs now, when we need them most.
4) A LOT of jobs. Infrastructure creates 16 percent more than a payroll tax holiday, nearly 40 percent more than an across-the-board tax cut, and over five times as many as temporary business tax cuts. We need to squeeze as much job creation out of each dollar of cost, and infrastructure certainly passes the test.
5) It’s targeted. The construction industry has been disproportionately hammered by the recession and has even greater unemployment levels than the economy as a whole.
6) We’ve got cheap financing. The recession has precipitated a capital flight to safety, with the safest assets being U.S. government bonds. That has made the cost of borrowing insanely cheap (10-year Treasuries hit a record-low last week), with real interest rates actually negative. Capital markets are actually paying us to borrow their money.
7) We’re getting great deals. During economic downturns, infrastructure projects are less costly as many contractors are competing for work amidst slack labor and capital markets. Many states actually had difficulty getting Recovery Act infrastructure funds out the door because contract bids kept coming in below the states’ original estimates.
8) Delay costs money. Deferring maintenance of our infrastructure saves money in the short run, but costs much more in the long run. It’s certainly cheaper to repair a bridge than to rebuild it after its collapse.
9) There’s no one else. States governments are facing nearly $150 billion in shortfalls in this fiscal year and the next, and, unlike the federal government, states generally cannot run deficits. Adding to this situation, fiscal relief from the Recovery Act has petered out, falling from $127 billion over the last two years to only $6 billion over the next two years. Local governments face equally difficult fiscal challenges. At this point in time, only the federal government can make these needed investments.
Economic policy tends to be pretty complex stuff, but this is a BIG exception. We need infrastructure work, we need jobs, the price is low, and we’re being given nearly free money to do it. All we lack is the political will.