The State of U.S.
Infrastructure
Amid an economic
crisis caused by the coronavirus pandemic, debate continues over how to improve
the nation’s infrastructure, as analysts say U.S. transportation, water, and
other systems face major shortfalls.
Construction on
Metro's Silver Line at Dulles International Airport continues. Katherine
Frey/The Washington Post/Getty Images
WRITTEN BY
James McBride and Anshu
Siripurapu
UPDATED
Last updated April 8, 2021
Summary
·
Experts say that U.S. infrastructure is both
dangerously overstretched and lagging behind that of its economic competitors,
particularly China.
·
Lawmakers offer a number of proposals to fix what many
see as a broken financing system, including more public-private partnerships, a
federal infrastructure bank, and increased federal spending.
·
President Biden has put forward an ambitious $2
trillion plan to overhaul U.S. infrastructure in the midst of the economic
shock caused by COVID-19.
Introduction
The
$20 trillion U.S. economy relies on a vast network of infrastructure from roads
and bridges to freight rail and ports to electrical grids and internet
provision. But the systems currently in place were built decades ago, and
economists say that delays and rising maintenance costs are holding economic
performance back. Civil engineers raise safety concerns as well, warning that
many bridges are structurally deficient and that antiquated drinking water and
wastewater systems pose risks to public health. Meanwhile, Americans’
international peers enjoy more efficient and reliable services, and the U.S.
lags behind other developed countries in infrastructure spending.
Skeptics
of federal spending have pushed for new models of private sector involvement,
which they say is more efficient and cost-effective. Others argue that
increased public spending will be necessary to meet the country’s growing
needs. With the COVID-19 pandemic delivering a major economic shock, President
Joe Biden has rolled out a sweeping plan to overhaul the nation’s
infrastructure that, if approved by Congress, would be the largest federal
investment in decades.
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How important is infrastructure to the U.S. economy?
Economists
argue that robust investment in infrastructure in the twentieth century set the
foundation for the nation’s strong growth in the aftermath of World War II. And
as engineer and historian Henry Petroski explains in his book The Road Taken:
The History and Future of America’s Infrastructure, poor
infrastructure can impose large costs on the U.S. economy. In addition to the
threat to human safety of catastrophic failures such as bridge collapses or dam
breaches, inadequately maintained roads, trains, and waterways cost billions of
dollars in lost economic productivity.
According
to Petroski, the delays caused by traffic congestion alone cost the economy
over $120 billion per year. Airports are another choke point: air
transportation services support 1.4 million U.S. jobs, and international
tourism brings in hundreds of billions of dollars of tax revenue. But some
studies have found that delays and avoided trips due to the poor state of the
nation’s airports cost the
economy over $35 billion per year.
Many
analysts say that investing in both new infrastructure and current maintenance
would stimulate the economy. By increasing efficiency and reliability and
lowering transportation costs, it would boost long-term U.S. competitiveness,
insulate the economy from shocks, and create jobs. Economists generally see
infrastructure spending as having a significant “multiplier effect,” meaning
that the economic gains are greater than the amount spent. A 2014 University of Maryland study [PDF]
found that infrastructure investments added as much as $3 to GDP growth for
every $1 spent, with a bigger effect during a recession.
What is the overall state of the nation’s
infrastructure?
The
U.S. population has more than doubled since the 1960s, when most of the
country’s major infrastructure systems were designed. Many are reaching the end
of their lifespan, and are dangerously overstretched, experts say.
The
American Society of Civil Engineers (ASCE) has compiled regular “report cards”
on the state of U.S. infrastructure since the 1980s. In its 2017 report, the
ASCE found that the nation’s infrastructure averaged a “D+,” meaning that
conditions were “mostly below standard,” exhibiting “significant
deterioration,” with a “strong risk of failure.” The
group estimated [PDF] that there is a total “infrastructure
gap” of more than $2 trillion needed by 2025 that if failed to be addressed
would result in almost $4 trillion of GDP lost.
Other
analysts agree that the shortfall is large. McKinsey researchers say that $150
billion per year will be required between 2017 and 2030 to keep
abreast of all the country’s infrastructure needs.
Transportation
will require the largest chunk of funding needs. The U.S. Government
Accountability Office finds that nearly one in
four bridges are deficient, with 10 percent categorized as
structurally deficient and 14 percent categorized as functionally obsolete.
While America’s airports carry the most passengers of any country in the world,
its aviation infrastructure is also overburdened, with some 20 percent of
all arrivals and departures delayed in 2019, according to the Department of
Transportation’s Bureau of Transportation Statistics.
Slideshow
U.S. Infrastructure Under Strain
View Slideshow
The
country’s rail systems are a mixed bag. U.S. commercial rail, a large portion
of which is owned by the private freight industry, is among the most developed
in the world, moving nearly 40 percent of the nation’s goods. At the
same time, the focus on freight rail has relegated passenger rail to a lower
priority. Amtrak, the United States’ main provider of intercity passenger rail,
has more than $30
billion in backlog [PDF] of infrastructure investments.
The
country’s water and energy systems are under stress. The Environmental
Protection Agency estimates that drinking water, wastewater, and irrigation
systems will
require $632 billion in additional investment over the next
decade. Ports and waterways, which handle over one-fourth of the country’s
freight transport, face mounting delays. The operators of the U.S.
electrical grid are struggling to make the necessary
investments, and increasing power outages are costing the economy billions of
dollars.
Meanwhile,
experts warn of the “broadband gap,” in which rural and low-income communities
suffer from a lack of infrastructure to deliver reliable, fast internet,
referred to as broadband. A 2020 Federal
Communications Commission report [PDF] finds that some 18
million Americans, the majority of whom live in rural areas, lack access to any
broadband network. Other estimates
suggest that more than twice as many people lack access.
Governors from both major parties identify internet access as a priority
in their state, and propose plans costing tens of millions of
dollars.
How does that compare internationally?
The
United States generally lags behind its peers in the developed world. According
to the World Economic Forum’s Global Competitiveness Report, in 2019, the
United States ranked thirteenth
in the world [PDF] in a broad measure of infrastructure
quality—down from fifth place in 2002. That places it behind countries
including France, Germany, Japan, Spain, the United Arab Emirates, and the
United Kingdom.
U.S.
infrastructure performance suffers from its comparatively low quality, with
consequences for businesses, workers, and travelers. U.S. passenger trains
average just half the speed of Europe’s high-speed rails. Aviation industry
rankings cited by Business Roundtable put only four U.S. airports in the top
fifty worldwide, with the top-ranked coming in at number thirty.
When
it comes to internet access, the World Economic Forum ranks the United States
eighteenth worldwide in broadband coverage. At the same time, Americans pay more than
their European peers, and receive slower
internet speeds. Some analysts attribute this to the lack of
competition in most U.S. markets, which are often served by only one internet
provider. Others argue that the incoherence of federal internet regulations discourages
telecommunication companies from investing in better infrastructure,
especially in rural areas where running broadband lines across vast distances
is more expensive.
Much
of the discrepancy between the United States and its peers can be traced to
very different funding levels. On average, European countries spend the
equivalent of 5 percent of GDP on building and maintaining their
infrastructure, while the United States spends 2.4 percent. Other countries
tout investment far higher. China’s infrastructure spending averages
roughly 8
percent of its GDP, and that amount is only expected to increase
with the country’s ambitious coronavirus recovery plans. Simultaneously,
China’s Belt
and Road Initiative is slated to increase the country’s
economic influence across Asia.
Australia,
Canada, France, and the United Kingdom have also developed national infrastructure frameworks that
allow the central government to direct and prioritize projects in a way that
the United States’ more decentralized system has struggled to do.
How is U.S. infrastructure funded and financed?
The
United States differs from most other industrialized countries in the extent to
which it relies on local and state spending to
meet its infrastructure needs. While most European countries fund the bulk of
their infrastructure development at the national level, only 25
percent of U.S. public infrastructure funding comes from the
federal government. That is down from a peak of 38 percent in 1977, leaving
often cash-strapped local governments to bear more of the costs of investment
and maintenance.
Washington’s
primary mechanism for funding transportation infrastructure is through direct
grants to states, paid out from the Highway Trust Fund (HTF),
created in 1956 to fund the creation of the interstate highway system. The HTF
raises money through the gas tax (which has not increased in over two decades)
and other transportation-related taxes, and spends it on roads and highways
(about 80 percent) as well as mass transit projects (about 20 percent).
But analysts say that
the HTF is facing insolvency, and a deficit of over $6 billion as soon as 2022.
The
federal government supports infrastructure in some indirect ways, through
financing mechanisms or tax incentives. These include the 1998 Transportation
Infrastructure Finance and Innovation Act (TIFIA), which provides low-interest
loans and other credit assistance that local governments can use to finance
their infrastructure projects. The Congressional Research Service (CRS)
calculates that TIFIA has provided nearly $25 billion [PDF]
in financing since its creation.
The
federal government also supports the municipal bond market, which is what local
governments mostly rely on to finance infrastructure projects. States and other
municipalities issue bonds to raise money from private investors, and
Washington gives these bonds a number of tax incentives. Most significantly,
the interest on municipal bonds is exempt from federal taxes. The CRS estimates
this costs the federal government some $37 billion a year.
Finally,
a small but growing number of infrastructure projects are being organized as
joint efforts between government and private developers, known as
public-private partnerships, or P3s. Under this model, private firms win a
concession from the state to build infrastructure, say a highway, as well as
the right to charge tolls or user fees on it in exchange for the responsibility
of operating and maintaining it. P3s are much more popular in European
countries partially because, experts say, the low cost of private financing via
municipal bonds in the United States is often an easier and cheaper route for
local governments to secure financing.
What is the debate around infrastructure investment?
Many
experts argue that the United States will have to find ways to spend
significantly more money to address its infrastructure deficit. Proposals to do
so often break down along partisan lines, with Democrats backing more direct
federal funding, whether financed by debt or higher taxes, and Republicans
generally arguing that better results can be achieved at lower cost by
encouraging more private sector development.
Many
economists support raising revenue by increasing user fees, such as tolls. They
argue that requiring users to shoulder more of the cost of the nation’s
infrastructure both raises revenue and encourages more efficient use of
resources. At the federal level, the most common proposal is increasing the gas
tax. States could also increase the use of toll roads in order to raise revenue
for road maintenance.
Some
economists worry about expanding the federal role, given what they see as a
history of politically driven and wasteful federal infrastructure spending.
Some argue that a steady flow of federal money gives states an incentive
to build
things they don’t need and that they struggle to maintain.
Proponents of this view say the federal government should return public funding
back to state and local governments, which are more equipped to manage local
infrastructure needs, and cut red tape.
Under this model, funding for local projects would be raised by hiking local
taxes, issuing debt, or expanding P3s, rather than borrowing from the federal
government during a time when most states are struggling to repay existing
debt.
Other
experts say that further localizing infrastructure management will widen the
gap in quality that already exists across states, since differences in climate,
weather patterns, and frequency of use—as well as taxpayer wealth—mean states’
infrastructure needs and abilities vary. They also point out that the federal
government is better
equipped to spend on large-scale infrastructure projects; it
can run a deficit, whereas nearly all state and local governments must balance
their budgets.
Some analysts say that
the focus on using P3s and relying on private sector financing alone won’t
address major gaps in the system, such as in maintenance, since those projects
are unlikely to be profitable enough to entice private investors. And, as CFR
Adjunct Senior Fellow Heidi Crebo-Rediker argues, the United States lacks a
culture of private ownership of major infrastructure, which could pose enduring
political barriers to efforts to privatize swaths of the transportation system
and public utilities.
A
proposal in Congress that has seen some support [PDF]
is the establishment of a national infrastructure bank. Such a bank would be a
government-owned corporation and, like the TIFIA program, would provide cheap,
long-term financing for infrastructure projects. Supporters argue that this
could overcome the fractured nature of local spending, help coordinate
developments that cross state borders, and give Washington greater ability to
prioritize important projects; they point to the European Union’s version of
such a bank, the European
Investment Bank, as evidence of this. Skeptics point out that
municipal bonds already offer very cheap financing, especially with interest
rates near record lows.
What is President Biden proposing?
President
Donald Trump’s administration put forward several ambitious infrastructure
plans, including a proposed $2 trillion to be included in the fourth COVID-19
recovery package. Little came of them, though he did take executive action to
try and spur investment by shortening some regulatory reviews. President Biden
campaigned on a pledge to “build back better,” and in March 2021, unveiled the
specifics of a $2 trillion infrastructure plan he has hailed as a “once-in-a-generation
investment in America.”
Biden’s
plan includes more
than $600 billion in funding to upgrade physical infrastructure
such as roads and bridges, railways, airports, and water systems. But the Biden
administration is also pushing to expand the traditional definition of infrastructure;
the plan includes money for worker training, research and development, and manufacturing incentives,
as well as $400 billion for in-home medical care for the elderly and people
with disabilities. Additionally, climate change is a major focus of Biden’s
plan, with hundreds of billions of dollars set aside to modernize the U.S.
electrical grid and foster the adoption of electric vehicles nationwide.
To
pay for his plan, Biden proposes hiking the U.S. corporate tax rate to 28
percent, up from 21 percent. The administration is also proposing a new global minimum corporate tax and
other measures to crack down on companies moving overseas for tax
purposes.
However,
the plan has drawn opposition, mostly from Republican lawmakers, complicating
Biden’s efforts to win congressional approval. Top Republicans say Biden’s
plan needs to be substantially pared down to
focus on conventional infrastructure projects such as roads and bridges, and
funded with other revenue sources, such as user fees, rather than tax
increases. Meanwhile, some progressive lawmakers say Biden’s plan does not go
far enough in addressing issues such as housing and climate change.
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