America Needs To Invest $ 3.6 Trillion To Fix Its Crumbling Infrastructure

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WASHINGTON – A prominent victim of the policy paralysis caused by Washington’s toxic political climate is America’s basic infrastructure. For the Republicans, any additional public spending is suspect, because all public spending is by definition badly conceived and wasteful.

Pork barrel projects

Of course, there is plenty of anecdotal evidence of egregious “pork barrel projects”, such as “bridges to nowhere” built only because of the political pressure exercised by powerful legislators. All this is true.

However, it is also true that there has been chronic underinvestment in US infrastructure. And I am not talking about ambitious new projects. I am talking about the rather mundane, yet indispensable, upkeep of existing infrastructure, some of it quite old, or decrepit. (The backbone of US Interstate Highway System goes back to President Dwight Eisenhower. We are talking the 1950s! Denver Airport, the last major airport built in the US, opened in 1995. NYC Kennedy Airport Terminal 3 was built 50 years ago).

No money for upkeep

Because of budgetary constraints and political infighting, the US Federal Government does not have a decent plan nor dedicated funding to carry out needed repairs, upgrades and other necessary maintenance to what we have, never mind funding new projects.

This is almost grotesque. We are talking about the United States of America, still the largest economy in the world. And yet our policy-makers have allowed disrepair to reach crisis proportions.

Getting worse

Indeed, the American Society of Civil Engineers, (ASCE) gives America’s infrastructure a D+. Just a bit above failure. The ASCE estimates that we need to invest $ 3.6 trillion by 2020, just to tread water. In other words this is the bare minimum, not an ambitious growth plan.

And what is Washington doing about all this? Practically nothing. Because of the fierce ideological fight about all taxing and spending issues, Republicans and Democrats cannot agree on taking care of the mundane issues that every City Council has to deal with. “Yes, if the bridge is too old, we have to fix it, and find out a way to pay for the fix”. This should not be an issue tainted by ideology.

Obama’s proposal “dead on arrival”

In its budget proposal for Fiscal Year 2016, (beginning on October 1, 2015), President Obama included more spending on infrastructure. But this line item is presented in the context of a politically impossible mix of higher spending and higher taxes. No Republican controlled Congress will never approve any budget like this one. And so it is quite possible that the needed higher infrastructure spending item will be killed, along with everything else.

No PPPs in America

But there is more. Beyond this political gridlock, the US tax system effectively penalizes Public Private Partnerships solutions (PPPs) that could allow state and local governments to lease highways, airports and more, to private consortia (often created by pension funds and private corporations) so that they will upgrade them and run them.

The PPP partners get their money back over time, by collecting tolls and fees on the basis of negotiated rates. Via PPPs the local and state administrations no longer have to set money aside for infrastructure spending. Under the terms of the PPPs, the highways, bridges and airports are properly maintained. The general public gets a modern service, while paying for it via a user fee in the form of a toll.

Heavy taxes

PPP solutions are quite common all over the world, notes John Schmidt, an attorney specialized in PPPs, in a WSJ op-ed piece, (A Sane Way to Upgrade Bridges, Ports and Transit, February 3, 2015). But they are virtually unknown in the US. And this is largely because of taxes imposed on tax exempt financing for public infrastructure when something (a highway) is turned over to private partners. The need to pay all debt upfront, and other onerous financial obligations constitute, a major disincentive for more PPPs in the US.

Where are the policy-makers?

And so, here is the picture. Because of Washington politics, we do not allocate funds for the upkeep of the national infrastructure. And because of our punitive tax system we do not have the PPPs that are common in the United Kingdom, Australia, or Mexico.

As a result of this irresponsible approach, US basic infrastructure, much of it built in the 1950s and 1960s, has not been fixed and upgraded. This is disconcerting, but true.

No way to stay competitive

Look, it does not take a genius to realize that this neglect causes public safety issues and huge economic damage. Hard to believe that the US can remain a globally competitive economy with crumbling bridges and airports built 40 or 50 years ago.

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