Let the Market Take Care of Infrastructure


As the dust continues to settle from President-elect Donald Trump’s surprising victory, one idea is quickly gaining bipartisan currency in Washington: more infrastructure investment. House Democratic leader Nancy Pelosi has pledged to “work together” with the Trump administration to “quickly pass a robust infrastructure jobs bill.”

The problem with politically created infrastructure jobs is that, contrary to great myth, there is little evidence that more infrastructure spending is a good way to boost the economy or promote job growth. In reality, these projects often fail to deliver on their promised gains while costs spiral out of control, leading Oxford University economic geographer Bent Flyvbjerg to propose The Iron Law of Megaproject Management: “Over budget, over time, under benefits, over and over again.”

Anyone seriously concerned about shoring up infrastructure in this country — the roads, bridges, mass transit systems and water networks people rely on — should rethink his priorities. Few of the problems with America’s infrastructure networks are the result of an alleged lack of federal spending. Instead, most are the result of political misallocations of resources.

Under federal grant programs, expansions are prioritized over routine maintenance projects, which are generally ineligible for federal funding. As a result, states and municipalities chasing federal dollars have an incentive to gold-plate projects in an attempt to grab as much “free” money as possible, allowing them to brag to their constituents about bringing home the pork. Real maintenance needs are then often neglected until the problem grows large enough to force politicians to act, costing several times more to bring infrastructure facilities up to a state of good repair.

Interest group lobbying is also a factor. The construction industry has an incentive to warn of doom and gloom over the state of American infrastructure. We are constantly reminded of our supposed infrastructure crisis, crumbling roads and bridges. But what the infrastructure lobby doesn’t say is that the number of structurally deficient bridges has been steadily declining for 25 years, according to the Bureau of Transportation Statistics. The same goes for the improving pavement quality of our major highways.

Infrastructure problems, where they do exist, are not national in scale, and federal programs are not equipped to fix them. Most of these problems exist in our cities, where regional and municipal leaders have allowed mass transit systems, water and wastewater networks, airports and local streets to decay over the years. Instead of expecting Washington to bail them out of their provincial troubles, Americans should demand that their local leaders stop creating local infrastructure problems in the first place. As Harvard University urban economist Edward Glaeser recently noted, “Treating transportation infrastructure as yet another public-works program ensures the mediocrity that we see all around us.”

If we wish to see infrastructure improve and benefit the people who use it, a smarter approach would be to reduce the reliance on the federal government and focus much more on the maintenance and performance of specific facilities. Address problems when and where they arise in a targeted way. This would entail prioritizing maintenance over ribbon-cuttings, collecting user charges and holding that revenue at specific facilities for targeted reinvestment, and eliminating the cronyist procurement and construction policies that drive up costs. Political appropriators must also be willing to cede their turf by opening up these government monopolies to private-sector investment and competition.

The notion that federal infrastructure spending isn’t an economic panacea won’t appeal to politicians more interested in claiming credit than solving problems. But if they want to support infrastructure improvements that can do real good, responsible politicians need to think and act locally.

Originally posted at USA Today