What can Republicans do about Biden’s next multi-trillion-dollar spending binge?
What can Republicans do about Biden’s next multi-trillion-dollar spending binge?
W elcome back to “infrastructure week.”
Having already blown $2 trillion on “COVID relief,” Democrats would like to pile another $2–4 trillion on top, this time largely on infrastructure. And where the COVID bill was deficit-financed, word is that this new round of spending could have tax hikes attached.
Conservatives should root for this to fail, because the case for this level of federal infrastructure spending is weak. But resistance from free marketeers might be futile.
As you may recall from the previous administration, big infrastructure spending has some Republican supporters too, in part because it provides jobs to guys who wear hard hats. And even if Democrats can’t get any bipartisan help, they may be able to enact a plan the same way they just handled COVID relief: through the “budget reconciliation” process, which is limited to policies that directly affect the federal budget but is immune to the filibuster. They’re already discussing that option.
As the debate takes shape, conservative members of Congress will have to decide whether they want to vote no, keep their hands clean, and maximize the chance of this dying, or instead try to have some say in how the bill looks.
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Those clamoring for more infrastructure spending often claim that our roads and bridges and so on are “crumbling,” and that infrastructure investment will “pay for itself” in higher economic growth. Both of these claims are highly overstated, as nicely laid out in a 2019 paper written by Gilles Duranton and two coauthors and released through the National Bureau of Economic Research.
Infrastructure advocates, including the president, will often cite dire evaluations from the American Society of Civil Engineers. But as Duranton et al. show, the ASCE is quite a strict grader, and more reasonable measures of infrastructure quality show that things are not so bad:
Over the past generation, the condition of the interstate highway network improved consistently, its extent increased modestly, and traffic about doubled. Over about the same time period, the condition of bridges remained about the same, the number of bridges increased slowly, and bridge traffic increased modestly. The stock of public transit motor buses is younger than it was a generation ago and about 30% larger, although ridership has been about constant. The mean age of a subway car stayed about the same from 1992 to 2017, but at more than 20 years old, this average car is quite old.
Now, that’s not to say that everything is peachy. The paper notes that, while the physical condition of interstate highways is basically fine, there’s more congestion than there used to be, because travel by car has increased faster than the highways have added capacity. The study also points out that we don’t have great nationwide data on some types of infrastructure, including local roads and sewers.
But in general, there is little evidence of an acute crisis requiring a massive influx of federal funds. And international comparisons only make this clearer, as Eli Lehrer and Pete Sepp laid out in a Morning Consult article last year:
Americans have the shortest commute to work of any G-7 country as well as the fastest broadband internet in that group of wealthy countries. Americans take more airplane flights per capita than residents of any other sizable country and have, by far, the world’s most productive and efficient freight railroads. Among the G-7, only Germany and Japan — both far denser than the United States — do better on the infrastructure component of the World Bank’s logistics performance index.
(If you want a deeper dive into such comparisons, see this National Affairs piece from Lehrer.)
There might be some projects that justify additional federal spending — which, at about $100 billion per year, already covers about a quarter of American infrastructure costs — but most infrastructure improvements can and should just be left to state and local governments. These entities can decide for themselves whether to pony up, and with an overly generous handout from the COVID bill, they’re in good financial shape.
Meanwhile, there is no guarantee that infrastructure will “pay for itself” any better than tax cuts do. One can find studies claiming that every dollar of infrastructure investment creates several dollars in economic growth, but as Duranton et al. explain, the overall literature is “mixed,” with results that are sensitive to the statistical techniques used.
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But free-market conservatives might not have a veto here. In that case, what should they do with what leverage they have?
As much as they possibly can, they should seek to include reforms that bring prices down. Infrastructure is way too expensive in this country, and if conservatives can’t prevent trillions in new spending, they should at least try to make the spending more efficient.
Toward that end, Alon Levy’s new report for the neoliberal Niskanen Center is a must-read. His core message is pretty simple.
Infrastructure costs in the U.S. have been rising for a long time, and they’re much higher than what other countries pay. And if you look at the countries with low infrastructure costs, you notice something shocking: When these countries want to build infrastructure, they pretty much just build some infrastructure. Their bureaucracies are both allowed and able to quickly design and implement projects.
Here, by contrast, any infrastructure project is stifled under layer upon layer of costly and time-consuming review, including cumbersome environmental assessments and even private lawsuits. Some states don’t have the staff they need to manage big projects, hiring people only after federal funding has been secured. And there’s incompetence everywhere, from deciding exactly what to build, to procurement practices, to project management.
We need to plan these projects carefully and take the environment into consideration, but we can’t take forever, especially if we’re trying to stimulate the economy as quickly as possible. Following the 2009 stimulus, for example, many of the funded projects didn’t get fully underway for another half-decade.
Levy suggests flexibility and competence are the key. Contracts shouldn’t simply go to the lowest bidder; the decision should take into account the quality and speed of the work offered. A team of civil servants should work with the contractors to quickly review any changes needed later. And both states and the federal government should hire more people capable of overseeing these projects. They might even send some staff to get experience in countries that do this stuff far better than we do.
There are other ways to minimize costs and improve efficiency as well — things that conservatives have advocated for years, such as repealing regulations that force federal projects to pay “prevailing” wages and buy American-made products. “Public-private partnerships” are useful as well, because they can add some market incentives: A private company might shoulder the financial risks associated with delays, or receive bonuses based on when the work is completed. Further, funding projects with user fees, as well as “congestion pricing” that encourages people to use infrastructure during off-peak times, can help to limit taxpayer spending and make the most of existing infrastructure.
As more details come out, we’ll get a better sense of where things stand — whether the Democrats can ram something through on a party-line basis, and whether there are good ways for Republicans to improve the bill in exchange for their votes. Until then, conservative policymakers should be brainstorming ways to bring lower prices and more competition to the nation’s infrastructure, in case the situation calls for them.