In 2016, the American Society of Civil Engineers (ASCE) issued a report on the status of infrastructure for the nation and for each state. According to the ASCE, the nation's infrastructure may be characterized as anywhere from discouraging to alarming.
The report is a pretty depressing read, with the society mincing no words and giving an overall grade of D-plus. Pennsylvania received a C-minus. My students would be depressed with such grades, but my guess is that most Americans do not understand the severity, and apparently most legislators who should know do not care that much.
Failing infrastructure financially impacts our families and our country — as it is the foundation of our economy and quality of life. Every family and every business needs infrastructure. It encompasses drinking water and power lines, as well as the local roads to our house and the interstate highway system that takes us from New York to Florida.
For the most part problems are hidden. Most of us do not notice infrastructure until it stops working — when a bridge is closed and we are late for work, or when drinking water is turned off because of bacteria.
The ASCE estimates an investment of $4.6 trillion is needed by 2025, and failing to close this infrastructure gap would bring serious economic consequences by that year, including a loss of $3.9 trillion in gross domestic product; $7 trillion in business loses; and 2.5 million in lost jobs.
Three years ago I was part of the State Budget Crisis Task Force — a national commission co-chaired by Paul Volcker, former chairman of the Federal Reserve. The problem common to every state was the mounting level of infrastructure needs and lack of funding. Furthermore, at a recent forum on presidential transition issues hosted by the National Governors Association, I was part of a panel that focused on the mounting deterioration of transportation infrastructure.
The ASCE report indicated that Pennsylvania has the highest percentage of structurally deficient bridges in the country (roads were rated D-minus); has the most combined sewer overflows of any state; had traffic fatalities higher than the average; and needs to invest $28 billion over the next 20 years just to repair wastewater systems.
How do we pay for all this stuff? Most infrastructure financing is done at the state and local levels of government — including bond financing, user charges and fees (particularly for water and sewer), and tolls on roads.
Enter President Trump. The president has said he wants to invest $1 trillion to fix infrastructure — but, remember, the gap is $4.6 trillion. A good start, but as yet no plan submitted to Congress or vetted in the public arena — and certainly not enough money.
Many congressional leaders are balking at the $1 trillion price tag, and others suggest doing it by "granting" tax credits to the private sector. That's not a good model. There is not sufficient money, it is not well targeted, and it has limited application because maintenance-type projects cannot be monetized.
The only logical solution is to bite the bullet and begin a 10-year plan of borrowing by states by issuing municipal bonds. That is how most public sector projects have traditionally been built. The states issue bonds that spread the costs over a period of 20 to 30 years — this is important as future beneficiaries need to contribute to this large investment.
And, most important, the federal government must provide funds as states simply do not have the financial resources. This is not a new role for the feds, as they already provide grants for transportation, water, and sewer projects. But funding needs to be substantially increased and consistent.
Critics will argue that general taxes will increase or the federal gasoline tax will increase (it should — it has not been increased since 1993). All true. How else do you get almost $5 trillion? But the alternatives would be far more costly.
I have two other suggestions to ensure this large infusion of funds is used appropriately:
Use better cost-benefit analysis to determine the best use of the funds. For example, we should improve busy airports, not all airports.
Stop worrying where investments will create the most jobs — and where politics determines the projects. Instead invest money where it is really needed for critical improvements and long-term economic benefit. Simply using jobs as the single criteria is, in my judgment, a mistake.
These two points are critical. If we are going to invest almost $5 trillion we need to do it intelligently — not in a pork-barrel manner.