The Committee for Economic Development (CED), the public policy center of the non-partisan think tank, the Conference Board, has issued a new report identifying sweeping policy recommendations for comprehensive, long-term-focused U.S. infrastructure investment.
“Modernizing our infrastructure is one of the few issues that enjoys broad bipartisan support, so both sides can work together to comprehensively address this glaring issue,” said CED President Lori Esposito Murray, in a statement upon the report’s release. “The large number of areas that fall under the infrastructure rubric demonstrates its importance to our economy. A sharp focus on its role and key issues can lead the nation toward faster economic growth and job creation, environmental protection, equality of opportunity, shared prosperity, and eventual public savings.”
CED’s report documented multiple shortfalls in U.S. infrastructure performance compared to other developing economies, as well as current industry standards. In many cases, they noted, Americans themselves are dissatisfied with the state of their own local or regional infrastructure, with government and private sector actors more or less equally blameworthy for the decline.
Transportation infrastructure is a key source of discontent. A 2018 Monmouth University poll found 64 percent of Americans rated the roads and bridges in their area as only fair or poor.
Energy reliability also rates poorly compared to other developed economies. CED found that the average U.S. customer loses power for 214 minutes per year, compared to 70 in the United Kingdom, 53 in France, 29 in the Netherlands, 6 in Japan and 2 minutes per year in Singapore.
“These outage durations tell only part of the story,” CED’s researchers wrote in the report. “In Japan, the average customer loses power once every 20 years. In the United States, it is once every 9 months excluding hurricanes and other strong storms.”
Despite the fact that broadband access has become “a necessity of citizenship, like public education (of which broadband has become a prerequisite), postal delivery and electrification,” CED notes that internet speed and coveragein the U.S. lag global industry standards. They point to studies from independent wireless research group Opensignal, which ranked the United States 25th in the world in overall internet speed in 2020, and 30th in the world for cellular download speed in 2019.
Yet despite the glaring need and demonstrable economic benefits of smart infrastructure investment, Bureau of Economic Analysis data shows average annual investment in U.S. non-defense public infrastructure has fallen from 4 percent of GDP in the 1960s to 2.7 percent in the 2010’s.
What to do
CED offers a number of broad policy recommendations to reverse this decline. First, in their view, is to choose the right projects for investment, based on rigorous cost-benefit analysis. Innovation in infrastructure development should be encouraged, and cost of financing infrastructure projects should be reduced—possibly through the use of a refundable tax credit, available even to non-taxable entities.
This alternative credit, they say, would make state and local government bonds potentially attractive to a new market of institutional investors: specifically, pension funds, endowments, and insurance companies.
CED also recommends reducing regulatory burdens through smarter, more efficient regulatory regimes. They offer as an example a 2018 analysis that found the median time for review of federal projects under the National Environment Policy Act (NEPA) in the 2010’s was more than three and a half years, while Federal Highway Administration and Federal Aviation Administration projects averaged more than seven years to complete.
“Like other efforts aimed at encouraging innovation, an efficient regulatory regime would facilitate faster deployment of new technologies and upgrades to existing infrastructure assets to capture economic opportunities, increase resilience, and reduce environmental impact,” CED writes. “In areas like broadband, regulations should ensure that providers must compete over customers based on innovation, quality, and price rather than rely on barriers to entry or other forms of ‘crony capitalism.’”
PPPs
Private-sector involvement can be better managed, CED writes, through “appropriate” deployment of public-private partnerships. Such partnerships could fund the construction of new, revenue-generating projects, or assume operational responsibility for existing assets and encourage innovation, efficient operations, and sustained upkeep and modernization, rather than the “build-it-and-forget-it” approach to some public infrastructure projects that result in rapid decline due to poor maintenance.
CED favors exploring alternative approaches to private investment. While private-sector funding through tax-exempt municipal debt issuance is central to today’s U.S. infrastructure funding model, CED notes that creative financing mechanisms like Transportation Infrastructure Finance and Innovation Act assistance, as well as the (currently lapsed) Build America Bonds program, have been successful in encouraging efficient upfront utilization of private investment resources.
Finally, CED urges infrastructure policy makers to build allowances for technological advances (like the advent of autonomous and electric vehicles) and climate risk (and preparing for climate-related stresses and hazards from extreme weather events like floods, droughts and wildfires). The need for resilience and adaptability is both challenging and urgent, given that the “life cycle” of infrastructure investment is often measured in decades, while technological and environmental changes are rapidly accelerating.
“Investment decisions made today can lock in current technologies, with their carbon footprints and weather and climate effects. Given present large uncertainty, analyzing and pricing such risks will be essential to achieving sound infrastructure decisions. To avoid making such mistakes, options that preserve flexibility, even though they may add some short-term cost, may be preferable to irreversible decisions,” CED writes.
