US Debates Infrastructure Spending: How Will We Pay for Repairs?
By John Ubaldi
Contributor, In Homeland Security
As President Trump prepares his first budget, the debate intensifies on how he plans to upgrade our nation’s vast aging infrastructure. That infrastructure includes ailing bridges, roads, highways, rail systems, ports, electrical grids and a vast Internet system.
With an $18 trillion economy, the U.S. relies on an antiquated infrastructure system that was put in place decades ago by the Eisenhower administration. Many economists and engineers say delays and ever-increasing maintenance costs have dramatically held back economic growth.
Civil engineers across the country continually raise safety concerns about many of the systems the public uses. For example, there are bridges that are structurally unsound and antiquated potable water and waste treatment systems that pose a high degree of risk to public health and safety.
US Infrastructure Lags Behind Other Western Nations
As the world’s largest and most diverse economy, the United States lags behind many of its western counterparts. Other nations enjoy a far more robust, efficient and reliable infrastructure system with higher capital investment than is found in the U.S.
In his book, The Road Taken: The History and Future of America’s Infrastructure, engineer and historian Henry Petroski explains that “poor infrastructure can impose large costs on the U.S. economy. In addition to the threat to human safety of catastrophic failures like bridge collapses or dam breaches, inadequately maintained roads, trains and waterways cost billions of dollars in lost economic productivity.”
The huge traffic congestion experienced by commuters across the country costs the economy over $120 billion in lost productivity a year. Airports are another choke point in particular with regard to international tourism, which supports 1.2 million jobs and provides billions in tax revenue. Antiquated airports across the U.S. cost the economy over $35 billion annually in flight delays and cancelled flights.
US Infrastructure Receives a D Grade from Civil Engineer Organization
The American Society of Civil Engineers (ASCE) has compiled regular “report cards” on the state of the U.S. infrastructure since the 1980s. In its 2017 report, the ASCE found that the United States’ infrastructure averages a pitiful grade of D.
Conditions are “mostly below standard,” exhibiting “significant deterioration” and have a “strong risk of failure,” the ASCE said. It predicts an “infrastructure gap” of almost $1.5 trillion in needed funds by 2025.
This isn’t the first attempt to overhaul the nation’s ailing infrastructure. In 2009, President Obama proposed an $840 billion stimulus package that was supposed to revitalize the economy by upgrading all bridges, roads, highways and other infrastructure projects.
The package never made it through Congress, in part because in selling his stimulus Obama said there were “shovel-ready projects all across the country.” Unfortunately, he had to walk back his statement and admit there were no such things as shovel-ready projects.
Now, we are once again tackling the immense challenge of overhauling an antiquated infrastructure. But the White House must deal with the complicated relationship between government spending on major infrastructure projects and ensuring they are approved in a timely manner by Congress and not subjected to bureaucratic delays.
US Spending on Infrastructure Relies on States and Municipal Contributions
The challenge is how the U.S. allocates its resources. Our system is quite different from other industrialized countries. Other nations fund their projects at the national level, while the United States relies on state and local spending for its infrastructure needs.
The federal government allocates only about 25 percent of its budget to public infrastructure spending, down from 38 percent in 1977. This means that the states, which are often cash-strapped, are burdened with meeting the demand for infrastructure repairs and maintenance.
The primary driver of federal infrastructure spending through direct grants to the states is the Highway Trust Fund (HTF), which was created in 1956 to fund the building of the interstate highway system. HTF revenue for roads and highways comes from the federal gas tax and other transportation-related taxes.
About 80 percent of the HTF goes to highways, with the remainder going to mass transportation. However, the HTF is near insolvency and will run out of money around 2021 if additional revenue is not raised.
Debate Rages on How to Fund Infrastructure Spending
The main debate on how to overhaul the dilapidated U.S. infrastructure has always been about where the money will come from. Republicans and Democrats have different theories on how this should be accomplished.
Democrats back more direct federal funding, which means higher taxes and/or debt financing. Republicans favor more private sector development, which would reduce the federal share of spending but could take dollars out of consumers’ pockets by way of increased toll roads and higher transit fares.
In fact, many economists have floated the idea of users shouldering more of the costs of maintenance through tolls or taxes on usage. That would increase revenue and simultaneously encourage a more efficient use of resources.
So far, debate has centered on increasing the federal gas tax, which has not been raised since 1993. The Obama administration floated the unsuccessful idea of taxing drivers by the mile.
One proposal that has gained some congressional support is a national infrastructure bank that is government owned, but operates like the Transportation Infrastructure Finance and Innovation Act (TIFIA). The bank would “leverage limited Federal resources and stimulate capital market investment in transportation infrastructure by providing credit assistance in the form of direct loans, loan guarantees, and standby lines of credit (rather than grants) to projects of national or regional significance.”
But this proposal has raised the ire of many conservative and libertarian economists. They worry about the expansion of the federal government’s role, especially when history is littered with past failed projects that often become wasteful infrastructure spending driven by politically motivated interests. Such projects, they say, waste taxpayer dollars for dubious purposes.
Many people believe the federal government needs to focus its efforts on speeding up the complex approval process that slows down projects and raises costs. Whatever direction President Trump takes in attempting to fund the repairing of our infrastructure, he will definitely spark heated debates.