The Danger of Infrastructure Incoherence
While it will be tricky to complete, some version of President Biden’s nearly two trillion-dollar COVID stimulus package will land on his desk for signing before current stimulus aid ends on March 14. The next big-ticket item on the Biden agenda will be infrastructure. One hears about a two trillion-dollar infrastructure program over the course of Biden’s four-year term. According to his campaign website, the Biden infrastructure program:
“…will create millions of good, union jobs building and upgrading a cleaner, safer, stronger infrastructure – including smart roads, water systems, municipal transit networks, schools, airports, rail, ferries, ports, and universal broadband access – for all Americans, whether they live in rural or urban areas. Americans deserve infrastructure they can trust: infrastructure that is resilient to floods, fires, and other climate threats, not fragile in the face of these increasing risks. We need infrastructure that supports healthy, safe communities, rather than locking in the cumulative impacts of polluted air and poisonous water. And we need infrastructure, like universal broadband, that unleashes innovation and shared economic progress and educational opportunity to every community, rather than slowing it down.”
The cost of restoring old, neglected infrastructure suffering deferred maintenance and of building new modern infrastructure will be far more than $2 trillion. America’s transportation, water, sewage and energy systems have been ravaged by decades of efforts to reduce taxes and fees. Federal subsidies will need to leverage other resources to get the job done. These include private funding and capital and revenues generated by state and local governments. The federal government’s money should be seen as investments that lead to American economic efficiency and competitiveness and will stimulate private sector investments that generate private profit.
While this sounds good in theory, the reality of pork barrel politics and private sector payoffs is nearly inevitable with this much “free” money on the table. The way to reduce infrastructure pork is to develop an infrastructure strategy organized around clear principles and implemented by a highly visible infrastructure czar — in this case, I hope it will be Vice President Harris. We need a visible, single point of responsibility and accountability to make this work. President Biden played a similar role during the Obama 2009 economic stimulus and even though the right wing had a field day publicizing the investments that failed, nearly all of the Obama stimulus investments paid off. Perhaps none as spectacularly as the auto industry bailout.
The need to entice private investment will likely be opposed by ideologues opposed to “privatization.” There is little question that many governments have entered into one-sided partnerships with private firms where the public was the victim of bad agreements. The key to effective public-private partnerships is to maintain public control of the project. An effective public works project in the 21st century requires the capital and legitimacy of government along with the efficiency provided by the competition of the market. That efficiency is compromised by partnership agreements that sacrifice the public interest to private corporate profit and to unions seeking more than they are due.
The infrastructure strategy should focus on three areas of investment:
- Aging transportation, water, waste and sewage facilities in danger of collapsing due to age or extreme weather, or that could be made more cost-effective by modernizing with new technology. Let’s call this defensive investment.
- The energy system: the grid, renewable energy generation and storage and electric vehicle charging stations.
- New transportation facilities that increase the efficiency of moving people and goods.
The focus should be on infrastructure that makes our economy more globally competitive. Renewable energy and smart grids reduce greenhouse gasses, but they also make our energy supply less expensive and more reliable. Modern water, waste and sewage technology reduces the cost of dealing with the biological necessities of human settlements. Old water systems leak, waste supplies of water and can pollute drinking water (See Michigan, Flint). Inadequate sewage treatment leads to expensive flooding and can lead to higher-cost water filtration.
As I indicated, where possible, public-private partnerships should be utilized. Airport modernizations can be partially funded by airlines and shipping companies that will generate greater profits due to better designed facilities. New York’s LaGuardia airport rebuild is a model of such a partnership. Federal funds can be used to capitalize state and local projects in return for contractual agreements for local, state and private commitments to pay for operation and maintenance of the infrastructure. This could include a requirement for periodic investment in modernizing and repairing facilities. Americans often build new infrastructure but then under-invest in its maintenance, requiring premature demolition and reconstruction. “Maybe if we had painted that bridge, it wouldn’t have rusted.”
There are certainly other areas of potential investment from schools to agriculture, but energy, water, transport and waste are central to the functioning of sustainable cities. The federal program must focus on a limited number of easily understood and desperately needed investments. The investments must be analyzed for their direct and indirect costs and benefits. Sometimes it takes a few years for a new facility to stimulate indirect investment and generate long-term employment.
The revival of the American economy requires the immediate pump priming of the stimulus package that passed the House of Representatives this past weekend, but it also requires strategic infrastructure investment. The medium-term impact of infrastructure investment will be creation of new jobs to construct the new facilities and to manufacture the materials required for construction. But the long-term return must also be analyzed. Will this new mass transit facility or highway attract business and reduce travel time? Will this subsidy for a new vehicle charging facility enable a convenience store to switch from fossil fuels that attract customers to something new? Will this microgrid investment ensure lower priced and more reliable energy for consumers?
We know that the politics of infrastructure is often but not always partisan and messy and we also know it can encourage corruption. If Vice President Harris is made the government’s chief infrastructure officer, she will need to work hard to reduce the political content of infrastructure decision-making. Hopefully, the law funding the infrastructure will provide investment criteria and decision processes that help her do that, but she must take additional steps to increase transparency and ensure fairness.
It appears that the only time we seem to invest in infrastructure is when our economy is in deep trouble. President Trump was unable to move on a program and after the 2009 stimulus, President Obama was also unable to fund infrastructure. People say they support infrastructure spending, but the details never seem to work out. Our current catastrophe creates a rare opportunity. America no longer seems able to take on large-scale national projects or build for the future. Our politics have become particularly polarized between those that think government should do as little as possible and those who think it should do as much as possible. The pandemic and ensuing economic crisis have merged short-term emergency needs with the chance to solve long-term problems. Deteriorating infrastructure due to public under-investment and child poverty may actually get addressed in the current session of Congress. It is vitally important that sound public policy result from this rare set of circumstances, but it is even more important for effective public management to ensure that program implementation delivers desired outcomes.
The set of problems we face are complex and the polarized times we live in have decreased our ability to address complexity. A complicated problem cannot be discussed if facts are in dispute. Sadly, the lost lives, lost jobs, vacant stores and overcrowded hospital ICUs cannot be denied. Over 70% of the American public favors Biden’s stimulus plan and I suspect a similar number will support an infrastructure bill that will rebuild our roads and restore employment. It will be up to the new administration to ensure that the infrastructure program developed is coherent, competent and well communicated to the American public.
Excellent perspective and great points, an important one being: ‘That efficiency is compromised by partnership agreements that sacrifice the public interest to private corporate profit and to unions seeking more than they are due.’ To this point, how might an effective fleet transformation from fossil fuel to EVs be facilitated without usage of federal and state tax credits which enhance the operating margin of private EV manufacturers?