Infrastructure: When Politics and Economics Align

Back in 2016, national polling conducted by Gallup, found that 75% of those surveyed agreed with the idea of spending more “federal money to improve infrastructure, including roads, buildings and waterways.” Then in January 2017, just before President Trump’s inauguration, Gallup asked Americans how important it was that the administration keep each of 12 policy commitments made during his presidential campaign. Infrastructure was at the top of the list. In March 2017, Gallup again asked Americans about their agreement with a $1 trillion infrastructure proposal. The high-value assigned to the plan made essentially no difference; 76% agreed with the idea. And a Monmouth University survey, conducted in April 2018, found that 62% of Americans believe the federal government is not spending enough on “transportation infrastructure, including roads and bridges.”

So, considering that the American public doesn’t seem to have an issue with the level of spending, the next step would be to attempt to quantify what the “right level” of investment would be to shorten the nation’s economic recovery. Analysis by S&P Global in May 2020, when the US was at the peak of its national shutdown, looked at two economic scenarios — one with an infrastructure investment and one without (baseline). Their analysis found that, if the U.S. invested $2.1 trillion into public infrastructure spending over a 10-year horizon, it could create 2.3 million jobs by 2024 as the work is being completed, helping those millions of unemployed workers displaced by COVID-19. But, the productivity boost from the infrastructure investment, if done wisely, could add as much as $5.7 trillion to the U.S. over the next decade. The estimated potential real GDP growth over the next 10 years would be lifted to 2.2% from 1.7%.

S&P’s analysis determined that the productivity boost from infrastructure investment would likely re-right the post-virus expansion’s course. In the baseline “no investment” forecast, S&P found that there would be no productivity gains from pre-pandemic levels. But, in their “investment” scenario, the productivity gains would help steepen the slope of the economic (re)expansion path, closer to the pre-crisis growth. They modeled that it would take only four quarters to return to pre-crisis GDP levels instead of seven without that spending and that this investment would provide both a short-term boost to the economy and create desperately needed jobs over the long run.

However, all of this requires legislators to take action to pass spending bills that authorize funding for this work. And, while elected officials at all levels have introduced a number of competing bills, the country still doesn’t have a comprehensive infrastructure plan that sets out national priorities, special authorizations, and regulatory frameworks that facilitate the investment. In fact, as of the time of this article, many of the country’s infrastructure operators have seen such sharp declines in operating revenue, that any injection of “stimulus” would actually be “relief” funding to partially fill the budgetary gaps left as a result.

In 2020, House Democrats unveiled a five-year, $494 billion surface transportation dubbed the Investing in a New Vision for the Environment and Surface Transportation, or “INVEST in America Act”. The act would provide $411 billion in contract authority out of the Highway Trust Fund and would provide critical transportation funding for counties, as owners of 45 percent of all public roads, 38 percent of the National Bridge Inventory and direct supporters of 78 percent of the nation’s public transit systems. Passing a bill with this level of commitment would be a strong start to tackling the multitrillion dollar investment needed. But, it would still be a long way from a proper national infrastructure plan.

Unlike most policy initiatives these days, support for a federal infrastructure program is high among Republicans, Democrats, and economists. Rarely do we see this type of political consensus. The government should take action on the things that they do actually agree on and help the nation and the region move forward.