Not Much Grade Inflation Here

The American Society of Civil Engineers (ASCE) has released its 2013 Infrastructure Report Card, and the overall grade has inched up from a D in 2009 to a D+ this year. The estimated amount required to address deficiencies (to get a grade of B) is $3.6 trillion by 2020. As this table makes clear, of the $3.6 trillion, only $2.0 trillion is likely to be funded, leaving a $1.6 trillion gap. That's an additional $200 billion per year for eight years.

A lot of the infrastructure we have is at the end of its useful life. We continue to be lucky rather than smart in avoiding widespread failure. This is an important report that should be read and appreciated in Washington. Like many other advanced warnings, it is likely to be ignored until the subject becomes an imminent crisis.

At one level, the inability for the federal government to oversee adequate infrastructure is just another in a long line of failures of government to effectively do the things that even a person who believes in limited government would agree that it should do. Many of these projects, like transportation, energy, parks, drinking water, education, and waste management, have characteristics of public goods.

At another level, the continued deficiencies in infrastructure are a missed opportunity. This is a subject I have been following for over five years, in the context of what policy makers should have done differently with fiscal policy as the Great Recession began.  In two op-eds in early 2008, one in the Washington Post and the other in the Ripon Forum, I pointed out the connection between capital projects and how to deal with economic downturns. The prevailing wisdom for what to do during a downturn was deficit spending to boost economic activity in ways that are "timely, targeted, and temporary." I thought this was short-sighted -- the right thing to do during a downturn is to advance forward capital projects that have already been planned over a window of several years. You can only do that if you have made those plans. Good luck with that in a Washington policy-making climate that cannot agree on anything constructive.

What is saddest about today's report is that we are no closer to having a well defined plan for replacing antiquated infrastructure or adding critical infrastructure than we were four years ago. I wish more people in Washington would have appreciated the following simple insight. The best reason to do infrastructure spending in a downturn is not because of some mythical Keynesian multiplier. The best reason to do it is because you have to do it at some point and the cheapest time to do it is in a recession, when both labor and capital are underutilized and available more cheaply than in business cycle upturns.

In fairness to the Obama Administration, key advisers recognized the need for more government spending as the depth of the Great Recession became more apparent. It started with a change in language, as Larry Summers dropped the "timely, targeted, and temporary" mantra in late 2008 and substituted "speedy, substantial, and sustained over a several-year interval." But it wasn't clear to me at that point that the Obama team had connected this to infrastructure when they designed the stimulus bill that passed as the American Reinvestment and Recovery Act in early 2009. Provisions for "shovel-ready" projects and an infrastructure reinvestment bank are fine, but what ASCE's report makes clear is that these efforts are too modest. Even as the connection was made to infrastructure and the Obama Administration joined what I referred to as the "build while it's cheap chorus," the sheer dollars being proposed were too small, even today, compared to what the ASCE estimates we need.


My favorite saying is, "The best time to plant a tree is 20 years ago. The second best time is today." With economic growth still tepid and unemployment still above 7.5 percent, let's hope the newest report card is enough to motivate a renewed effort in Washington to combine sound fiscal policy with proper oversight of public goods and address this growing problem.