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What Crisis?

Originally published in The Boston Globe

April 7, 2011
Edward Glaseser (Glimp Professor of Economics, Harvard University)

DOES AMERICA suffer from an infrastructure gap that requires spending hundreds of billions of tax dollars rebuilding America? Is President Obama right that the nation needs "the fastest, most reliable ways to move people, goods, and information" to attract new businesses? Of course, battered bridges and ruined roads should be repaired, but any larger federal infrastructure agenda should be approached with caution because the crisis has been oversold, and the current political climate practically ensures massive misspending.

One piece of evidence allegedly indicating the nation’s infrastructure inadequacy is that 68.2 percent of American households, as opposed to 95 percent of Koreans, have broadband, according to the National Telecommunications and Information Administration.

But only 3 percent of Americans without broadband said that it wasn’t available; 46 percent said they didn’t need it or weren’t interested. Limited interest in online information suggests a worrisome lack of curiosity, but it doesn’t imply an infrastructure crisis, or justify the $7.2 billion proposal to expand broadband deployment.

Alarmists also note that the US infrastructure ranking in the Global Competitiveness Report has declined to 15th worldwide. But the nation did far better on infrastructure than on other "basic competitiveness requirements," such as "institutions" or "macroeconomic environment," where we ranked 87th. A report that ranks us 118th worldwide in budget balancing and 68th in public waste cannot be a justification for borrowing even more to fund massive public projects.

That report gives the United States pretty good marks — 5.5 out of 7 or more — in every infrastructure area except rail. The low rail ranking is surely correct regarding passenger trains, but wrong regarding freight rail. Decades ago, railways were wisely deregulated, enabling them to specialize in what they do best: moving goods. As a result, 43 percent of goods are moved by rail, while only 18 percent of European Union shipping goes by train.

An infrastructure crisis is also proclaimed by an American Society of Civil Engineers’ Report that gives America a "D," but that report contains no quantitative benchmarks, no global comparisons, and not even the faintest whiff of trading costs against benefits. The nation’s drinking water gets a "D-" despite the report’s verdict that "Americans still enjoy some of the best tap water in the world." The low marks are used to justify a call for $2.2 trillion of spending over five years. One wonders whether this is just another special interest lobbying for more public spending on its industry.

America already has more motorways per capita than almost anywhere, but according to Smart Growth America, one-third of the stimulus surface transportation spending went to build more highways. The Office of Management and Budget gives the highway program low marks and reminds us that "projects are chosen by the states themselves and are not based on need or the value-added to the nation’s highway system." The poor targeting of spending makes it hard to support the call by the civil engineers’ group for an extra trillion dollars on roads and bridges over five years.

The US economy is built around ideas and services, not moving manufactured goods cheaply, and our economic future depends far more on the knowledge in our children’s heads, not more roads. Before increasing infrastructure spending, we should make current spending more efficient.

Better infrastructure spending would make more assiduous use of cost-benefit analysis vetted by outside experts. The Obama administration’s proposed infrastructure bank would surely lead to more such analysis, and the proposal would make sense if it were an experimental "fund" seeded with existing highways funds, not incremental spending.

Better infrastructure spending would rely on states, not the federal government, to fund repairs and new projects used primarily by residents of one state. States can better judge local infrastructure needs, and they will make wiser decisions if they pay for costs of their own infrastructure.

Most new investments, especially those that aid business, should be funded with user fees, not tax dollars. Really valuable investments — like the Erie Canal — can pay for themselves. Local infrastructure authorities with tolling power have long been able to borrow without any federal infrastructure bank.

Infrastructure spending should get smarter before it gets bigger.

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Photo by Greg MacKay