August 29, 2012

Do You Want to Create Jobs, Stimulate Private Investment, and Boost Productivity? Repave Your Roads...

…among other things. That’s the loud and clear message Haas School of Business professor Laura D’ Andrea Tyson heard in two recent reports on the state of the nation’s infrastructure. But the President’s Council on Jobs and Competitiveness and the New American Foundation provide “sobering evidence of the growing deficiencies of infrastructure in the United States, which millions of Americans experience every day in traffic and airport delays, crumbling and structurally unsafe schools and unreliable train and public transit systems.”

All these deficiencies cost money—freight train bottlenecks costs about $200 billion a year and air traffic delays, about $33 billion per year. And this picture isn’t likely to change soon. The American Society of Civil Engineers documents a five-year gap of more than $1.1 trillion between the amount needed for maintenance and improvements of the nation’s infrastructure and the amount of public funds available for that purpose.

Pouring money into infrastructure improvements is a cost-effective way to create jobs according to the Congressional Budget Office ($1 billion spent on infrastructure creates between 4,000 and 18,000 jobs). But it takes time to plan, approve, and complete infrastructure projects.

But the problem is more basic than that. For example, state and local governments would rather spend money building new roads and bridges than fix existing ones “despite compelling evidence that repairs are more cost effective.”  Roads, for example, tend to deteriorate slowly at first, but then their deterioration rate picks up over time. Consequently, it’s cheaper to repair roads early when they’re still in good condition than when they fall into serious disrepair.

Tyson isn’t the only one weighing in on infrastructure. Michael Mandel agrees our infrastructure’s in bad shape, but frames the issue this way: Should we spend scarce resources on improving road links to a regional shopping mall or should we place top priority on infrastructure improvements that might entice foreign firms to locate manufacturing facilities in the U.S.?