Establishing Priorities

I have to admit I was a bit baffled by this post at Brookings about making “wiser infrastructure investments” not the least reason for which is that they only include three bullet points:

1. Pooled procurement
2. Open source material competition
3. Eliminate or sharply reduce street parking in congested areas

which to my eye falls short by at least one bullet point. Even so the last point in particular rings false to my ear. Although 80% of Americans live in “urban areas” since the Census Bureau’s definition of “urbanized area” as having 50,000 or more people and “urban cluster” as having 2,500 to 50,000 people, that’s misleading. Both are included under the heading “urban area”.

Do you think of a town of 2,500 people as urban? Me, neither. But the Census Bureau does. The 48 urban areas with the largest populations account for just under two-thirds of the total U. S. population. But even that doesn’t tell the whole story. The central cities account for just a fraction of the total populations of those urban areas. In Chicago, for example, the population of the urban area is about 8.6 million and the percentage of the people in the urban area is about 31% of that. I live in Chicago, in what is considered the “central core”, and where I live is a residential area where reducing street parking would do exactly zero towards improving the allocation of infrastructure resources. Heck, where I live the most important thing that the city could do to improve the allocation of infrastructure resources would be to manage their projects competently or at least less incompetently. The street that runs in front of my house has been torn up for the last ten months and at least eight of those ten have been pure incompetence. But that’s a story for another time.

My point is that congestion parking is only an issue for a small fraction of a small fraction of the places where people live.

What can we actually do to spend our infrastructure dollars more wisely? Here would be my suggestions:

• Distinguish between investment and consumption
• Manage money better
• Convert public pensions from defined benefit to define contribution
• Focus on local government
• Establish priorities

“Investment” means that there is a quantifiable return over the life of the investment. Nowadays education and health care are being promoted as investment but in many cases they are actually consumption. A college degree is not an investment for many people. That’s something the statistics on lifetime earnings don’t tell you. Those statistics don’t talk about standard deviations for a good reason. Taking out a loan for $100,000 to get a Fine Arts degree is not an investment. Governments should concentrate on investment rather than consumption.

Borrowing to pay for infrastructure only makes sense under very specific circumstances. Here in Chicago where the population has been declining for the last 70 years it makes very little sense to borrow money to build a new road or bridge to serve today’s population when the debt you incur will be serviced by many fewer people.

Money spent on building a road here cannot be used to build a road somewhere else. Here in Illinois two-thirds of the state’s spending is spent on education, health care, or public pensions and all three of those will only increase over time. If we want to spend more on infrastructure, we need to get some sort of control over those other spending priorities. They crowd out all other priorities. In Illinois there is a desperate, urgent need to start converting defined benefit pensions to defined contributions. Doing that will require amending the state’s constitution and our politicians can’t bring themselves to do it.

Almost all infrastructure projects are decided on, financed, and managed by state and local governments. Forget about the federal government. It only contributes to building new roads not for maintaining the old ones. In the United States building a foot of road or bridge costs more than in an other developed country. To change that we need much better management at the state and local level.

We have lots of priorities. The environment, jobs that pay well, and better road, bridges, sewers, and other infrastructure are all priorities. We cannot maximize all of them simultaneously. We must choose. Over the last several decades infrastructure improvements have taken too great a backseat to other priorities. If you want better infrastructure, that has to change.