Tags: infrastructure | return | value | repair | U.S.

WSJ: US Not Targeting Greatest Return in Infrastructure Repair

By    |   Thursday, 21 May 2015 04:27 PM

Federal spending on infrastructure, a subject of renewed debate after last week's deadly Amtrak derailment, has to be targeted to the places and projects where it creates the most value — and that is not happening, writes Wall Street Journal economics columnist Greg Ip.

"Federal infrastructure investment is not directed to the projects with the biggest payoff in productivity, safety or environmental protection," Ip writes, adding, "Inadequate funding, badly targeted, is a recipe for undermining the country’s long-term economic potential.

"Bridges raise productivity; bridges to nowhere don't," he writes.

But the system for doling out infrastructure money may be prone to underwriting roads, rails and bridges to nowhere, if one state-by-state survey of spending on such projects is any guide.

Federal spending per 1,000 vehicle miles travels ranges from $12 in Georgia to $98 in Alaska, Ip writes, citing a study by the Hamilton Project think tank.

The study also found that while a similar number of miles were driven, for example, in Tennessee and New Jersey, Tennessee received 42 percent more federal funding.

The apparent disconnect between funding and actual need might arise in part from the formula governing outlays from the national Highway Trust Fund: The federal government sends money to the states based on how much each collects in gasoline taxes, and even though gas taxes "are not necessarily correlated with what roads get used most," Ip writes.

Also, the U.S. has no comprehensive plan for ranking infrastructure projects according to their expected return on investment, as calculated by improvements in areas such as productivity and safety, Ip writes.

"Outside of a few very small new programs, it is nobody’s job in Washington to figure out which roads or bridges we should invest in," Aaron Klein of the Bipartisan Policy Center, a think tank, tells Ip.

So infrastructure spending flows, or doesn't, based on other, less helpful criteria, according to Ip.

"Investment in Amtrak's profitable Northeast Corridor line is compromised by the railway's congressional mandate to also operate money-losing long-distance routes," he writes.

New York's widely loathed airports, La Guardia and Kennedy, are actually profitable enough to have long since justified overhauls, but their owner, the Port Authority of New York and New Jersey, had to spend $8 billion rebuilding the World Trade Center site, Ip writes.

Infrastructure spending, according to indices including the percentage of Gross Domestic Product, has fallen in the United States, and doesn't look poised to rebound any time soon or become any more smartly targeted, Ip writes.

The barriers include caps on discretionary spending in general, competition for resources from other federal programs, a reluctance by Congress to hike gas taxes, and the failure of alternative proposals such as a "national infrastructure bank" to gain any ground, he writes.

"So for the foreseeable future, the U.S. will have to get by with constrained infrastructure budgets, badly targeted," Ip writes.

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Federal spending on infrastructure, a subject of renewed debate after last week's deadly Amtrak derailment, has to be targeted to the places and projects where it creates the most value - and that is not happening, writes Wall Street Journal economics columnist Greg Ip.
infrastructure, return, value, repair, U.S.
476
2015-27-21
Thursday, 21 May 2015 04:27 PM
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