I had a little problem with Noah Smith’s remarks at Bloomberg on rebuilding America’s highways:
When we calculate the social return on infrastructure, we have to think about the cost of doing nothing. If the U.S. never repairs its roads and bridges and ports, its world-class transportation network will decay until it is no longer usable. It’s worth remembering that there is no country in the world that has a private transportation network with anywhere near the quality of the mostly government-funded U.S. system — if Uncle Sam doesn’t fix the roads, we just won’t have nearly as many roads. So the government’s return on infrastructure investment includes the sizable benefit of maintaining the network we now enjoy.
The problem with his analysis is that Uncle Sam is the least significant player in the funding and spending on highway construction. Consider the pie charts above, courtesy of the Federal Highway Administration.
As you can see two thirds of the funding and almost 99% of the spending on highways is at the state and local level. That’s sensible. The federal government does not retain vast numbers of inspectors in Washington, combing the country to determine what should be maintained an dispatching money to address the most urgent needs. Which highways are built or rebuilt are decided politically, almost entirely at the local level.
The reason that highways are in disrepair is that the states have priorities and highways are way down on the list. The greater priorities as measured by what state and local governments are actually doing are paying current and past public employees and providing healthcare for the poor.
Federalizing highway spending would either require a vast transfer of power from state and local governments to the federal government or vastly increased federal spending on highways—much, much larger than anything that Paul Krugman has ever proposed. And highway construction would become even more political and even less in touch with the priorities of real people than it is today.
My own belief is that our infrastructure spending needs to start taking issues like projected use and life expectancy much more into account. It’s hard to estimate the life expectancy of a road—a lot depends on variable issues like climate, soil, traffic, the type of traffic, and so on. Let’s use a 30 year average life expectancy as a rule of thumb.
Will that highway you want to build still be useful, not usable but useful, in 30 years? I think there are foreseeable changes coming along which suggest that it won’t be. These include fuel costs, autonomous vehicles, and patterns of residence.
IMO we’d be a lot better off if we thought of vital infrastructure spending priorities in terms of sewers and power grids than in terms of roads and bridges. They aren’t as glamorous and you can’t make the same rosy predictions of employment and wage growth but they’re more likely to be useful over their productive lives.
Improve the grid for our electric cars.
http://news.mit.edu/2016/electric-vehicles-make-dent-climate-change-0815
Steve
Whence the discrepancy in funding and spending? Swamped at work so can’t chase it down? Why is is growing, just the general decreased funding by the states? What’s the chicken and egg?
Steve
The NHWA website to which I linked doesn’t really explain it so I just passed it along. I assumed that the discrepancy was being resolved by borrowing.
I can’t speak for other states but in Illinois the proper metaphor is probably not “chicken and the egg” but the “donkey between two bales of hay”. The legislature won’t cut spending and it won’t raise taxes. That leaves borrowing. Or just standing frozen between the two alternatives which is what the Illinois legislature is doing.
I think the difference is that “funding” shows where the money comes from, and “expenditures” shows who actually spends it. The gist is that federal money is transferred to states and localities who take that money and actually spend it.
I shared Andy’s assumption. I think the feds give money with their conditions, and really if the highways that the feds fund are not being maintained, that should be a federal condition.
FWIW, my relative who works for the state highway department was told that something like 95% – 99% of his salary is paid for by the feds. I don’t think that’s inconsistent with the above figures, since most of the costs are contractor’s, but I was surprised at how high it was given that he primarily works on state highways. Also wondered if any of the benefits were covered by the feds.
That interpretation makes sense.
Not only is it consistent with the NHWA’s figures, it’s also consistent with my observation about state spending. The money is paying for staff wages.
There’s a lot of that hidden federal spending I think. For example, a good friend works for a county in emergency management – his salary is almost completely due to federal grants to increase “first responder” readiness at the state and local level. Some of that money has dried up since the peak after 9/11, but not all of it.