Rebuilding our Infrastructure – well past time!

ASCE complies a report card of the nation’s infrastructure every four years.  They look at all infrastructure, from dams and airports to water and sewer.  The newest release was March 2021.  Table 1 shows a comparison over the past 20 years.  The grades are bad.  The new report shows slight improvements in water and sewer, but a D+ and C- still are not passing grades.  It points to significant needs for infrastructure in our field as well as the accompanying fields for power, roads, drainage and more.  It also suggests that as utilities have invested over the past 4 years, we can move the grades upward.  It is just that more needs to be done.  Washington has been talking about this problem for many years but little has come from. We got some money in 2009, but since then, very little other than WIFIA funds. Now its Biden’s chance.

Table 1  ASCE infrastructure grades

The reality is that our infrastructure condition probably peaked in the 1950s or early 1960s.  The major roadway, water, and sewer piping and treatment expansions were well underway of nearing completion.  Rural areas had running water and sewers, something that did not exist before the Great Depression.  The construction of infrastructure has always been critical for economic development.  Look no further than China to demonstrate this. 

The Biden Plan started with $2.3 trillion dollars, about 15% of the total economy per year, and less than the value of private property in south Florida (which doesn’t sound quite as expensive as it initially seemed).  The package would include investments fixing 10,000 bridges (there are over 600,000 bridges and nearly 50,000 that are inadequate), 20,000 miles of roads (there are 4.2 million miles of roads in the US), $120 billion for water and sewer (AWWA says the need exceeds $1 trillion in the next 20 years), $150 billion for transit and rail, $100 billion for broadband so rural and underprivileged areas have better access to the internet, and funds for the electrical grid which is woefully inadequate in many places. 

The funds would be spent over 8 years.  The payback is expected to exceed 2:1 in private sector economic activity.  Most of the funds would be directed by government’s to the private sector for design and construction (and Engineer and contractor employment act), which translates to millions of jobs.  People can easily see how this benefits them by increasing employment and likely increases wages due to tightening job markets.  As a result, there is a lot of support for this in much of the country among the people. 

There are contrarians in Congress who think it costs too much or for other reasons.  But look at the statistics – one could easily argue that the proposed expenditures are 10% of what is really needed – the bill does not go nearly far enough.  But if this is only a start to returning American infrastructure to its glory days, the economy appears to have taken notice.  Bloomberg forecasts the economy to increate 5.5% this year.  Goldman Sacs thinks that is conservative.  The more federal dollars move to the private sector, the more fuel there is in the economy.  Getting unemployment in the construction industry down from 9.6% is part of that plan.  The Federal Reserve is keeping inflation in check which could wipe out this growth, but needs to ensure that secular stagnation does not appear (a stalled economy).  Continued investments by both the pubic and private sector can prevent this.   

But returning the infrastructure to the 1950s is not going to be enough in the 21^st century.  And no one can expect the federal government to foot the entire bill.  Local communities will need to invest more as will the states.  The US has permitted its infrastructure to decline under the premise that if it works fine, we do not need to worry about it.  Until it fails.  Then there is a big discussion to assign blame.  The blame goes back to many people many years when actions could have been taken.  Reactive maintenance is the expensive kind.  Proactive replacement is easier to plan and develop.  And less costly. 

There is an argument that our lack of attention to infrastructure condition has weakened our economy.  We invested heavily in automation in the 1990s and early 2000s to increase our productivity (through robotics which created massive job losses for factory workers), but not in the replacement jobs for those displaced.  There is an argument that part of the Rust Belt’s problems is antiquated infrastructure (think Flint).  There is an argument that rural dissatisfaction in the US, especially toward government, is directly related to the fact that little investment in infrastructure has taken place there, causing the economy to pass them by.  Less jobs, lower pay, higher unemployment, poorer healthcare and less access to quality education are common rural complaints.  And the complaints are not without merit because we know that relying on the private sector to construct the grid means that they will invest where the payback is highest, which is populated areas.  That is why these differences between rural and urban areas exist and continue to widen.  Hence the broadband cost in the Biden proposal.  The situation is no different than the rural electrification efforts that started in the 1930s. 

ASCE estimates that delays to infrastructure upgrades may cost US households $3400 per year, increasing with time.  This includes water and sewer utilities.  A study conducted 2 yea4rs ago indicated that only about 20% of Flroida utilities were spending the needed amount on infrastructure.  Some of those who did, relied on larger periodic bond issues that come with rate increases, to accomplish their updates.  Pay as you go can be demonstrated to be a cheaper, but too subject to trimming for political reasons.  The question is how to get elected and appointed officials to buy into the long-term upgrade plans so we can make that C+ and D- into at least a B.  At the same time, the costs will impact certain segments of the population that have not participated as yet in the economic growth.  But that is a topic for another column.