If you have spent much time traveling around the United States, you likely have noticed that our infrastructure looks a bit worn and tired and in need of some refreshing. If you spend much time traveling around the world, however, you will notice that our infrastructure is shockingly bad. So bad that it’s not an exaggeration to declare it a national disgrace, a global embarrassment and a massive security risk.Not too long ago, the infrastructure of the United States was the envy of the world. We had an extensive interstate highway system, deep-water ports connected to a well-developed rail system and a new airport in every major city (and most minor ones). Electricity was accessible to the vast majority of the nation’s residents, as was Ma Bell’s telephone network.

That was then. In the ensuing decades, we have allowed the transportation grid to get old and out of shape. Our interstate highway system is in disrepair; our bridges are rusting away, with some collapsing now and then. The electrical grid is a patchwork of jury-rigged fixes, vulnerable to blackouts and foreign cyberattacks. The cell system of the United States is a laughingstock versus Asia’s or Europe’s coverage. There are very few things that are done better by government mandate than by the free market, but cell coverage is one of them. Broadband, almost as laughable as our cell coverage, is another.

Consider that we consume more than 34 billion liters of bottled water a year — about 50 billion bottles — at a cost north of $8 billion dollars. What does that say about America’s confidence in its water supply?

Don’t take my word for it. The American Society of Civil Engineers recently issued a U.S. Infrastructure Report Card (see infrastructurereport-card.org) that reviewed key civil engineering projects on their quality and state of repair. The society graded aviation, bridges, dams, drinking water, energy, hazardous waste, inland waterways, levees, public parks and recreation, rail, roads, schools, solid waste, transit and wastewater.

Overall, America’s infrastructure GPA was a “D.” We earned our highest grade in solid waste — a C+ (insert your own infrastructure joke here).

To get to an “A” would require a five-year infrastructure investment of $2.2 trillion dollars. You can understand why recent proposals of $50 billion were so underwhelming. That is 10 percent of what is required to return the United States to a competitive level with the rest of the developed world. Even the emerging world outshines us in these areas.

A massive infrastructure program would have numerous benefits, not the least of which would be giving a boost to the economy when it could use one. The big advantage of infrastructure rebuilds is that they create a lasting effect by creating tools and platforms that the private sector can build upon. Consider the vast economic benefits we have enjoyed from the interstate highway system, DARPAnet and NASA, and you have a sense of what a massive infrastructure program can yield.

This sort of a program is in many ways vastly superior to the spending increases and tax cuts we saw in the American Recovery and Reinvestment Act of 2009. The limitation of most of the spending increases and tax cuts in the last rescue plan was that they were merely temporary fixes; they had no long-lasting effects. As long as the money flowed, they were stimulative; once the spending stopped, the stimulus stopped as well.

That’s the beauty of major infrastructure projects: They leave something worthwhile behind.

We still enjoy the benefits of the interstate highway system, which allows goods to be moved cheaply around the nation. Innovations at NASA led to many new products and industries, including innovations in the semiconductor, satellite and mobile computing sectors. And DARPAnet? You might recognize that as today’s Internet. All three are massive economic wealth generators, filling a role that is too long term and too expensive for the private sector.

Give me a trillion or two dollars to invest in the economy so the next expansion could proceed, and here is what I would do:

Electrical grid refurbishment. This is both an economic and national security issue. The electrical grid is an unreliable mishmash of public and private ownership, vulnerable to both blackouts and cyberattacks. It needs to be upgraded yesterday. While Congress has approved several billion dollars to begin work on the U.S. grid, it is not nearly sufficient to complete the job.

How to pay for it: A 1-cent per kilowatt-hour grid tax will fund the entire grid upgrade.

Roads, bridges, tunnels. We may love big construction projects, but we seem to dislike the maintenance. Most of the transportation grid in the United States is in need of massive repair. It won’t take much to bring it up to standards, but if we want to be competitive with places like Germany and China, we need to commit more to maintenance and to better design.

Smart road grid. Too many of our roadways are dumb. By that I mean not driven by data and lacking in real-time intelligence. You need only sit too long at a red light in the middle of the night to know that our system can be technologically wanting. Road sensors integrated with lights and other signal controls will move traffic around quickly, more efficiently and more safely. This is just as true in urban areas as it is in the suburbs. Sitting at red lights wasting time and money when no one else is coming should be a thing of the past.

How to pay for it: Infrastructure gasoline tax of 5 cents a gallon; usage tolls on roads, ports, bridges and landing slots.

Airports. Older U.S. airports are simply awful, compared with European and Asian facilities. I would say that some U.S. airports look like they are from Third World countries, but I have been in Third World countries, and they eat our lunch in terms of facilities, speed and gleaming cleanliness. Heaven forbid you have to check a bag on a flight into New York City; you can expect to waste 30 to 60 minutes at LaGuardia or JFK.

Ports. We are checking too little of the cargo coming into the United States. Since 9/11, we simply have not upgraded our port security sufficiently, and we remain vulnerable to attack by a dirty bomb or biological weapon. As long as we are discussing security, our chemical plants and petroleum processing centers could use a good security upgrade as well.

Alternative energy. Gains in the basic science of solar energy conversion, battery storage and biofuels have been incremental. The private sector does not have the patience or money for a decade-long research and development program performing research into fundamental sciences. We should be working on a very fundamental level, aiming for the kinds of scientific breakthroughs that create entire new industries.

How to pay for it: License patents to private sector; tax base improvement from new industries.

Our key economic competitors are spending very heavily in all these areas. Since World War II, both Japan and Germany have had ongoing infrastructure programs. If you prefer a different example, look at the Chinese: They are spending trillions to build out their entire nation.

We in the United States are willing to spend trillions in Iraq and trillions more bailing out reckless bankers. But when it comes to the most basic functions of civilization, we skimp on ourselves. Does that make any sense? Why not spend trillions on the national infrastructure, and generate economic gains instead?

Ritholtz is chief executive of FusionIQ, a quantitative research firm. He is the author of “Bailout Nation” and runs a finance blog, the Big Picture.

Failing U.S. infrastructure The grades from a civil engineers group: Aviation D Bridges C Dams D Drinking water D- Energy D+ Harzardous waste D Inland waterways D- Levees D- Public Parks and Recreation C- Rail C- Roads D- Schools D Solid Waste C+ Transit D Wastewater D-

 
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Originally published at Washington Post October 22, 2011: Repairing infrastructure can help repair economy
By Barry Ritholtz, Published:

Category: Really, really bad calls, Taxes and Policy, Travel

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

20 Responses to “Repairing infrastructure can help repair economy”

  1. chartist says:

    As someone who leases land to waste management for a landfill operation, I am quite fond of solid waste. I highly support the shrinking of blighted cities to a manageable size, think Detroit. I support our desire to buy junk made in China designed to last no more than two months which is ultimately thrown away. I will happily accept America’s uneaten food, yard waste and the unwanted contents of attics. So, on this 4th of July, I celebrate America’s throw-away society. Keep it coming, my place can hold six million tons and I’d like to have it sooner rather than later.

  2. Alain says:

    The US has a party that is hell bent on stopping any form of government spending other than military and security spending so I doubt that any of the projects you suggest will happen in the next 10 to 20 years.

    • Bob is still unemployed   says:

      That party always speaks of the debt burden we are leaving to our children and grandchildren in the form of the national debt.

      What that party does not (or does not want to) realize is that we are leaving to our children and grandchildren the much larger burden of our crumbling infrastructure. If we do not stop the deterioration and start the reparation, the legacy we leave our children and grandchildren may well be a third-world infrastructure, and an economy that reflects it.

    • 873450 says:

      “The US has a party that is hell bent on stopping any form of government spending …”

      The scared party (most particularly Obama and Reid) is too intimidated to do anything meaningful in opposition to the hell bent party.

  3. ironman says:

    It’s all well and good, but the biggest obstacle to doing that kind of infrastructure investment is the current class of politicians, many of whom seem to believe that increasing spending for non-capital investment-related things like food stamps is better for the economy. And perhaps the real obstacle to progress is that they don’t get enough graft from non-green energy-related projects to be more serious about what would seem to be bigger problems.

    • The data is pretty overwhelming: If you extend benefits or tax cuts, the effects are temporary and last only as long as that specific policy is in effect.

      But build infrastructure, and you leave something behind for the private sector to add yo. The multiplier effect is much much bigger — think Interstate Highway program, Hoover Dam, the Internet or NASA

      • urban legend says:

        But we need to take the next step: to identify specific projects in specific parts of the United States, estimate the number of workers in that locale that will be needed, and make the case that we will be stuck in a major recession until we do this — because the neglect itself is a major reason for inadequate employment. We can yell “infrastructure” forever, and many of us will nod our heads, but we will not make progress until we start showing how Americans in particular locations will benefit.

        People are capable of understanding instinctively that creating several million infrastructure jobs — good, high-paying, long-term and non-outsourceable jobs — will probably generate at least as many other jobs, at which case the unemployment situation will essentially be solved, the inequality crisis will begin to be repaired and revived tax revenue will eliminate deficit concerns. But until they can really see it for themselves, they won’t bite and put pressure on their representatives.

  4. InterestedObserver says:

    Sounds about right. It’s ironic that our political establishment can’t seem to squeeze a fraction of the cost for any of these efforts, yet the cost of the combined wars in Iraq and Afganistan comes in at something like $1.5 trillion with little thought by many to cost when they started. Talk about misguided priorities….

  5. DonF says:

    This was the right thing to do in 2007, 2009, and remains the right thing to do today. I know this was from an article from 2011, but I believe Barry was railing on this (correctly I might add) since way before that. It is completely frustrating that we have made zero progress on any of this in that time. Especially with regard to the electrical grid–because it is owned by so many different entities over state lines with some of them being private and some public, how on earth is that ever going to be upgraded without some sort of government funded project?

  6. postpartisandepression says:

    Holy mackerel Batman! Would that we had leaders that could actually understand what stimulus is.

    How is it that we are plagued with elected officials that do not seem to understand simple economics. And not just here – in Europe they raised taxes while they face a 25% unemployment rate in the affected countries and yet they can’t see that what they are doing can’t possibly work? And the sequester (equally the responsibility of our president as the republicans) is just a mechanism to follow Europe into the abyss. If we implemented your plan we would be out of our slow recovery (basically a recession) in no time. More americans need to visit our CCC projects.

  7. 873450 says:

    Until yesterday Egypt and the U.S. had the same type of democracy – elected government comfortable ignoring and disregarding the will and best interests of 90% of their nation’s population.

  8. DeDude says:

    Great ideas and even thought it is perfect for what should have been done in 2009, it would still be worth while doing it today. The mixture of tax-cuts and infrastructure in the ARRA in 2009 was completely wrong for the specific problem at that time. You do not use tax-cuts as stimulus when consumers are scared to death of what the future may bring them – because in that situation they will not use the money to spend (and stimulate the economy). In 2009 a stimulus package should have been 100% infrastructure.

    I would prefer an even more radical approach to the alternative energy and grid infrastructure problems. I think we should have self-sustained local grids in all our suburbs powered by renewable energy. Forget national or even regional grids. Let it all be run in small local networks. They are much less vulnerable to major disruptions. If every house has its own baseline power produced by solar panels on its roof then power disruptions are as simple as waiting with the laundry and driving your Chevy Volt on the generator rather than the battery for a few days. I know that small individualized projects are less efficient than larger ones, but the security benefits would be worth the extra cost (and fit well with the American ideals of individualism and freedom).

  9. mobellus says:

    Barry,
    Timely & spot on piece. Just a shout out to my lovely bride & her cohorts for that top grade in Solid Waste (now a B- in 2013). She’s the Chief of Engineering & Technology @ the Delaware Solid Waste Authority and one of their major projects is listed as one of the success stories and reasons for “raising the grade.” As with many of the other posters, it would be nice if our legislators stopped being politicians and started being leaders.

  10. biglot says:

    From one end of the continent to the other, there is no shortage of work that needs to be done. Fixing and adding to infrastructure also holds the last great hope for mass employment. Trouble is, a hell of a lot of trade types are getting long in the tooth. Their replacements have not been coming along in lockstep, learning from the masters. This leaves a massive skills deficit which will take years to overcome. Oh, it’s just one challenge after another, isn’t it?

  11. farmera1 says:

    I say we need more military spending. I believe in a strong military. Infrastructure ha. Who needs roads, airports, ports that kind of thing, we just like to do that sort of thing somewhere else. They don’t have any of that in Egypt, Somalia and we are doing our absolute best to become a third rate third world country. A good war would help. Cut taxes and invade somewhere. It doesn’t much matter where. How about a lot of nation building. That seems to have worked out well for the USA. A war and nation building (any where but here). That will get the economy moving.

    USA USA USA

    We are number one in military spending. More than the next ten countries combined. WE can fight two front wars and lose them both. What a country.

  12. davidl says:

    I think you omit an important point. If you assume that at least some of these projects will have to get done, then why not do this when you can borrow money for nothing instead of waiting until you have to tack on a 5+% interest rate on top of the bill. Waiting is what I would consider to be fiscally imprudent.

  13. BobS says:

    “Consider that we consume more than 34 billion liters of bottled water a year — about 50 billion bottles — at a cost north of $8 billion dollars. What does that say about America’s confidence in its water supply?”

    Barry,

    I agree pretty much universally with what you say. However, the drinking water “confidence” issue is over stated. I think it’s more a result of beverage industry marketing and convenience than anything else. True, US water infrastructure is old – and that’s a problem – but water quality is “universally high” according to the engineers’ report.

    Perhaps if people put the money they spend on bottled water, that has far fewer quality checks than does tap water, toward repairing our infrastructure we’d be in a much better place right now.

    • Bottled water costs more than refined gasoline, so there is something to the marketing issue — although that could be a measure of just how cautious people are abouyt the water supply.

      I assume giving the growth of fracking that this too is a growth industry

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