We Don’t Need This Much Infrastructure
Infrastructure is the most celebrated type of government spending. Politicians and commentators across the political spectrum portray it as one of the core functions of government. Most claim that America has abdicated its responsibility to maintain and improve its infrastructure.
This article argues that America creates and maintains too much infrastructure. There is widespread acceptance that America’s infrastructure costs too much on a project-by-project basis, due to mandates for everything from environmental planning to interest group contracting goals. There is less widespread understanding that American infrastructure projects today bring lower returns than before, regardless of the cost of individual projects, and many are bringing negative returns. These low returns would counsel for a vast reduction in government infrastructure spending.
One reason for the reduced value of infrastructure is that investment is going to older systems with long-term diminishing returns, such as trains, canals, highways, airports, electrical transmission, and water pipes—systems which are over a century old. The age of these systems is not due to a refusal to invest in new infrastructure, since it is not obvious that there are equivalent new technological frontier infrastructure projects that require significant public investment. The other reason for declining returns is that infrastructure projects are increasingly selected for reasons unrelated to citizen needs, which means more “roads to nowhere,” unused transit projects, and transmission lines that are not reducing electricity prices.
This article argues that the issue of diminishing returns to infrastructure, increasingly politicized projects, and increasingly burdensome demands on individual projects are related. When infrastructure brings clear benefits to broad numbers of citizens, politicians are rewarded for the increase in wellbeing that comes from the projects. When returns are abstract or questionable, the main political beneficiaries are the project builders and interest groups that can be enlisted with side payments. As broad-based returns diminish, political demands for projects and political demands on projects increase.
The cascading problems that emerge from diminishing returns should restrain our hopes for increased infrastructure investment. They should also chasten hopes for a renewed “supply side progressivism.” Both the right and the left have looked at reducing regulatory barriers to infrastructure as part of a move towards increased infrastructure spending. But the progressives have focused on barriers to infrastructure projects that further environmental goals, such as electric transmission lines and transit projects. These are the projects that already bring the lowest direct returns to citizens and instead rely on abstract issues like global temperature reduction to justify them. Without direct benefits to citizens, it is difficult if not impossible to create a coalition for such projects without politicized selection of projects as well as cost-increasing mandates and side payments.
The main solution to the problem of decreasing infrastructure returns is to cut back government spending on infrastructure, especially spending coming from the federal government that funds projects with questionable beneficiaries. New capital spending provided by the federal government is funding the lowest valued projects with the most additional requirements. Maintenance support by the federal government is even less plausibly related to core federal functions and only serves to increase normal maintenance costs and support failing projects. Cutting back federal grants would create more room for the state and local governments that represent the immediate beneficiaries of projects to decide when and if a new project is worthwhile. It would also increase incentives for governments to involve the private sector more in funding and delivering infrastructure. By focusing only on core public projects with clear beneficiaries and allowing the private sector to fund and build as much as possible, America can both improve its infrastructure and reduce politicized mandates.
