Infrastructure: Investment in Jobs
Back in November of 2008, immediately after the presidential election that year, our editorial focused on infrastructure. We pointed out the benefit of infrastructure investment to our industry specifically and the economy in general. Since then, we have had numerous governmental stimulus “investments” in the economy, including the multiple QEs by the Fed, but little seems to have been done to invest in our crumbling infrastructure. Much has been written about it recently, and the President has even jumped on the bandwagon again, so we thought another discussion was in order.
Referring back to our previous editorial for a definition of infrastructure, we are reminded that while other things could be added to the list, we think of highways/bridges, the power grid, drinking water and sewer systems, levees and dams, and ports and locks. Government – local, state and federal – is charged with maintaining and upgrading our infrastructure. Five years ago, we reported that the American Society of Civil Engineers (ASCE) estimated that $1.6 trillion was needed over the next five years to get this job done. I wonder how much was actually spent in that time-period. This same group estimates that disruptions caused by infrastructure problems will amount to $3 trillion in lost GDP by 2020.
The U.S. Chamber of Commerce indicates the following on their website:
• One dollar spent on infrastructure construction produces roughly twice as much ($1.92) in direct and indirect economic output.
• Increasing public and private investment in roads and bridges could save nearly two billion hours in travel time and save every family $1,000 per year.
• Successful construction of the 351 energy projects identified in the Project No Project inventory could produce a $1.1 trillion boost to the economy and create 1.9 million jobs annually.
In a recent column, FORTUNE magazine provides some insights on this subject. Using the same type of data and thought process as we have, Sheila Bair indicates that the Fed’s “money has been squandered mostly on sugar-high stimulus and paper profits in the stock and bond markets – ephemeral benefits that are fading fast. In contrast, infrastructure programs would have lasting and much-needed benefits for this and future generations.”
She discusses a proposal by the New America Foundation – a leading centrist think tank – for the creation of a National Infrastruc-ture Bank (NIB). Only projects approved by a team of engineers and paid for over time with user fees or dedicated revenues like energy taxes would be supported. The proposal provides almost $500 billion in infrastructure financing without adding to the long-term deficit. Studies show that every $1 billion spent on infrastructure can create 20,000 new jobs.
In the 2009 American Recovery and Reinvestment Act, $105 billion was designated for infrastructure. After quite a bit of time re-searching how and where this was spent and how effective it was, all I can say is that it is anything but transparent. I was able to find that 393 recipients of funds did not submit a report in the last reporting cycle. Additionally, 47 recipients have not submitted reports in two cycles and 16 have not submitted any type of reporting since late 2009. The NIB idea sounds like a much better way to be certain the money is used for the right projects and to provide some accountability.
The Federal Highway Administration estimates that $170 billion in capital investment is needed on an annual basis to significantly improve roadway conditions. This is nearly double the current allocation. Experts say that 25% of the more than 607,000 U.S. bridges are “functionally obsolete” and don’t meet current standards. A third of the nation’s bridge decking is “structurally deficient” (in need of significant repair). U.S. bridges have an average age of 42 years, and more than 30% have exceeded their 50-year design lives. Some local municipalities can’t even afford the increased inspections required for these aging structures.
Beyond the obvious needs, infrastructure improvement is also a problem of national security. We have detailed in the past some of the issues with our power supplies with no back-up systems and replacement parts in the event of an EMP-type event/attack.
It’s clear that there’s a big job ahead. We may not all agree as to the best way to get it done – more or less government – but our industry and the overall economy will benefit as infrastructure projects are undertaken across the U.S. Let’s get creative with solutions such as the National Infrastructure Bank. We can’t afford to keep kicking this can down our crumbling roads. IH