Why there are renewed hopes for infrastructure investments
November 1, 2008
November 1, 2008
Transportation stakeholders south of the border have long been clamoring for much greater investments in infrastructure. Should the Democrats prevail in bringing a fitting end to 8 years of what many consider the worst presidency in US history with resounding victories in both the Senate and Congress, those investments may very well happen.
Several prominent Democrats, including presidential candidate Barack Obama, have gone on record as supporting a second bailout package which could include investments in infrastructure as an economic stimulant.
Canadian transportation stakeholders who are just as fed up with our own government’s gross negligence of infrastructure often point to the investments made south of the border. Yet the Americans consider their own investments to be way short of the mark.
Investments in infrastructure were at the core of the growth in the US economy from 1950 to 1970. But according to Dr. Peter Ruane, president and CEO of the American Road & Transportation Builders Association, it’s appalling just how much the infrastructure in the US has been neglected in recent decades. I heard Dr. Ruane speak at the recent American Trucking Associations annual conference in New Orleans. He said one quarter of the bridges in the US are either obsolete or structurally deficient while more than 17% of the paving is considered to be of poor to mediocre quality.
Nearly $500 billion would need to be invested just to address the backlog of needed repairs, Dr. Ruane said.
But is spending big on infrastructure realistic considering the financial mess the US is currently mired in with a trillion-dollar deficit? Dr. Ruane counters that the current economic crisis should be seen “as an incentive to do something, not just sit there and do nothing,” emphasizing the stimulative effect infrastructure spending can have on the economy.
He also stressed that the US is falling behind its international competitors when it comes to infrastructure investments. For example, he said, while China will add 53,000 miles of road by 2020 and India 25,000, the US will only add 1,130. And while the emerging markets spend about 6% of their GDP on infrastructure, the US spends just 2%.
Bob Costello, chief economist and vice president of the American Trucking Associations, adds that continued infrastructure deficiencies may lead manufacturers to resort to the costly practice of holding larger amounts of inventory once again because they can’t count on timely deliveries.
Much has been made north of the border of turning to the private sector to fund new infrastructure projects. But Dr. Ruane argues that privatization is not the magic bullet for infrastructure projects but rather only part of the solution.
He characterizes privatization of infrastructure as a “weapon of mass distraction” for politicians who are unwilling to put in the work necessary to find the funds – through raising taxes, charging user fees, etc. – and just decide to hand entire projects over to the private sector.
“We need all the solutions at the table,” Dr. Ruane believes.
With more than 25 years of experience reporting on transportation issues, Lou is one of the more recognizable personalities in the industry. An award-winning writer well known for his insightful writing and meticulous market analysis, he is a leading authority on industry trends and statistics. All posts by Lou Smyrlis