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Infrastructure Spending in the United States, Essay Example

Pages: 5

Words: 1247

Essay

Many parts of the transportation infrastructure of the United States are ultimately funded by the federal and state governments. Once the envy of the world, today the country’s transportation infrastructure was ranked twenty-fourth amongst one hundred and twenty-four countries by the World Economic Forum (Ford). Investment has not kept up with the rest of the world, which has caught up to and in some cases surpassed the United State for infrastructure quality. Despite these issues, there seems to be no political consensus about what, if anything needs to be done. Both sides of the debate look at it differently, with some calling for increased government spending, while their opponents call for turning over more of infrastructure to market agents.

Proponents of increased government spending usually begin with citations of the decline in American infrastructure, trying to show that there is a problem before they can argue for using public dollars to fix it. For example, spending is well below what it would take to simply maintain transportation systems, with forty-eight billion dollars being spent annually, when the required level for maintaining would be between seventy eight and eighty seven billion a year. Despite these low levels of spending, the highway trust fund is in a ten billion dollar deficit as citizens constantly oppose funding measures like increased gas taxes or higher tolls (Ford).
The lower spending was often cited as a contributor to the 2007 fatal collapse of a bridge spanning the Mississippi River in Minnesota. After that, supporters of increased spending also pointed out that almost one-third of bridges in America were in need of repairs (Nisen). On top of these declines in the infrastructure already present, some also worry about America being passed by foreign countries, whom have developed high speed rail systems, larger bridges, and other improvements at a time it is difficult to argue that the United States is even stagnating in terms of infrastructure.

Another argument for increase transportation spending is related to the current macroeconomic situation in America. The unemployment rate is currently above eight percent, about three percentage points above what is considered the natural rate of employment for the country. On top of that, the United States government faces extremely low borrowing costs presently, with some bond yields lower than projected inflation rates over the same time (Feldstein). In other words, the country has a problem with declining infrastructure, excess labor, and easy access to capital at the moment. Not only is this the lowest the opportunity cost for infrastructure repair is likely to be any time soon, increased spending could be a boon to the economy, as the fiscal stimulus needed to bring the country back to full employment.
Despite these numerous arguments in favor of increased infrastructure spending, it is not happening presently, meaning someone must disagree with it. It could be a political problem, as the heavily regionalized nature of congress means that individual projects cannot be approved as there are too many members of congress who can vote down projects sending money into other districts. However, there should be ways to circumvent this problem, such as aggregate bills that commit to spending in geographically diverse enough regions to gain widespread support. On top of this, they could send the money to the Department of Transportation and allow them to divide it up. The fact that these solutions are not occurring implies that some group of decision makers does not believe in the value of increased spending.
The heart of this opposition seems to be the idea that our transportation issues stem not from a lack of government spending, but from too much. Government involvement has taken the transportation system from one reliant on user fees, gas taxes, and private companies to one reliant on government control. According to the National Center for Policy Analysis (NCPA), a free market think tank, the transportation system has gone from a largely free market to one dominated by the government. Taking the coordinating system from the invisible hand of the market to the American political system has been the cause of the downfall. According to this view, increased government spending and the increased government control likely to come from it will make the problem worse, not better.

Proponents of this system also believe that the issues with transportation infrastructure are routinely overstated. For example, the NCPA countered that the claim that one third of American bridges were in need of repair was largely made up. On top of that, the bridge collapse in Minnesota that started this discussion was eventually concluded to be a design flaw, not an issue due to lack of maintenance (O’Toole). This seems to at times be conflicting, as they are calling for their own reforms to the system while trying to undermine their opponents’ calls for reforms in opposite way, by denying the need for reforms.

One must wonder whether or not the choice between a freer market and increased spending is not just a false dilemma. For example the best piece of infrastructure for American life that was developed in the past half century was the internet. It seems difficult to imagine anyone arguing that the government spending into the internet was not warranted after seeing the incredible gains it has given the American economy during its existence. Yet, America has avoided a top down approach to the internet. Private enterprise is allowed to flourish there in a way that is not seen almost anywhere else in the American economy. This seems like a good template for all transportation infrastructure, increased spending, but in a way that does not interfere with market forces.
Public investment in infrastructure is warranted, both due to the positive externalities it can have by making trade easier and the current situation where investment could help the economy rebound. If one million people were employed making infrastructure improvements, unemployment would drop .7 pecentage points (Bureau of Labor Statistics). According to Okun’s Law, this would increase GDP by 2.1% this year even before any fiscal multiplier is taken into effect. However, this spending should not make the infrastructure system less dependent on user fees. Tolls, congestion pricing, and gas taxes are the best ways to fund the operations of transportation, even if initial investments are coming from general government funds.
As the world moves into a more globalized marketplace, a country’s relative standings become more important. Commodities can be mined for in many places, but if it is more to transport them to market in America, then America will fall behind. These effects can take place across the entire economy and this is why there is a desperate need for improved American infrastructure. It should be done in a way that does not erode market forces in the transportation sector, although this does not mean privatization necessarily, just attempts to keep the transportation system dependent on its users for funding. In conclusion, both sides have merits to their arguments, but they need to find ways to compromise before infrastructure falls further behind.

Works Cited

Feldstein, Martin. “Main Navigation.” Project Syndicate. N.p., n.d. Web. 30 Sept. 2012. <http://www.project-syndicate.org/commentary/the-case-for-fiscal-stimulus>.

Ford, Andrea. “Failing U.S. Transportation Infrastructure.” TIME.com. N.p., n.d. Web. 30 Sept. 2012. <http://business.time.com/2012/06/15/failing-u-s-transportation-infrastructure/>.

Nisen, Max. “19 Structurally Deficient Bridges That Americans Drive Over Every  Day.”Business Insider. N.p., n.d. Web. 30 Sept. 2012.  <http://www.businessinsider.com/american-bridges-in-need-of-repair-2012-6?op=1>.

O’Toole, Randal. “Is U.S. Transportation Infrastructure Falling Down? | NCPA.” Is U.S. Transportation Infrastructure Falling Down? | NCPA. N.p., n.d. Web. 30 Sept. 2012.  <http://www.ncpa.org/pub/ba767>.

The Employment Situation-August 2012. Tech. N.p.: Bureau of Labor Statistics,  2012.Employment Database. Web. 30 Sept. 2012. <http://www.bls.gov/news.release/pdf/empsit.pdf>.

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