Coming Soon, Economists Hope: Big Spending on Roads, Bridges and Ports

Source: By CONOR DOUGHTY, New York Times • Posted: Monday, September 19, 2016

OAKLAND, Calif. — The docks at the Port of Oakland are a tangle of cranes, shipping containers, railroad tracks and snaking lines of trucks waiting to load and unload cargo.

Streamlining this kind of traffic is one of the few ideas Donald J. Trump and Hillary Clinton agree on.

Mrs. Clinton has said that if she is elected president, her administration will seek to spend $250 billion over five years on repairing and improving the nation’s infrastructure — not just ports but roads, bridges, energy systems and high-speed broadband — and would put an additional $25 billion toward a national infrastructure bank to spur related business investments. Mr. Trump said he wanted to go even bigger, saying his administration would spend at least twice as much as Mrs. Clinton.

Mr. Trump, taking a page from liberal economists, said he would fund his plan by borrowing several hundred billion dollars, but has offered no specifics. Mrs. Clinton’s more detailed proposal, by contrast, would be paid for by a business tax overhaul aimed at collecting additional revenue from companies that have parked assets abroad.

These are only plans, of course. Either would have to get through Congress and the inevitable acrimony over any proposal to raise taxes or add to the national debt.

Still, the candidates’ agreement, combined with growing accord among economists that increased spending on infrastructure could invigorate the American economy and raise overall living standards, has led to a cautious optimism that some sort of big public works push is coming, regardless of who is elected.

“The next administration will be in prime position to deliver on a comprehensive infrastructure plan,” said Tom Jensen, vice president for transportation policy at UPS.

Infrastructure spending, unlike many other forms of government outlays, holds the power to give the economy a sustained lift for decades down the line.

First comes the addition of jobs — particularly the kinds of higher-wage blue-collar jobs that have been lost in recent years — and spending on products like concrete and steel to build new roads and repair worn-out bridges. After that initial jolt, the economy would continue to reap the important but harder-to-measure benefits of fewer delays, faster internet connections and more reliable power.

In one of the few things they agree on, both Donald J. Trump and Hillary Clinton have said they would spend billions more on America’s aging roads, bridges, hospitals, schools and public transportation systems.

Weakness in those kinds of business investments is one reason the current economic recovery has been so sluggish. Companies’ spending on new buildings and equipment, which depends in part on improvements in the nation’s transportation network and energy and digital pipelines, has been a persistent weak point throughout the nation’s recovery from the Great Recession.

The federal government, with its wide latitude to spend on ambitious projects, is in a singular position to make investments no one else will.

But the government’s power to act has also set off a robust debate about how much more it should spend on infrastructure and how it should be funded. Spend too little, and the nation’s backbone deteriorates and the cost of future repairs mounts. Spend too much too fast, and the government could crowd out private investment, possibly leading to higher inflation and pushing up interest rates.

Today, with maintenance lacking and interest rates low, a host of influential economists, including Lawrence H. Summers, who served as Treasury secretary under President Bill Clinton, argue that America’s need for better infrastructure is so great that it could increase its debt load and still come out ahead.

In a telephone interview, Mr. Summers laid out his case: The federal government can borrow at something like 1 percent interest a year, and through enhanced productivity it would reap something like 3 percent a year in higher tax receipts.

“I am as worried about the debt burden on my children’s generation as anybody, but deferring maintenance on the foundation of our economy is a much greater risk to them,” Mr. Summers said.

Others argue that any rise in infrastructure spending should be paid for through a tax increase or budget cuts elsewhere. That view was bolstered by a recent report by the Congressional Budget Office, which concluded that while federal investment increased productivity, that did not automatically mean the nation would be better off by borrowing to fund such investment.

Decades ago, the federal government spent big. The Interstate System of highways spawned new suburbs, and transportation grants helped build rail networks like the Bay Area Rapid Transit System, whose commuter trains hum past the Port of Oakland as they travel to and from San Francisco.

Now the United States has more people and a bigger economy. But relative to its gross domestic product, the nation spends only about half as much on infrastructure as it did during the 1950s and ’60s.

The result is that, like the population itself, America’s roads, bridges and power plants are aging. That’s one reason the American Society of Civil Engineers, in its most recent report card on infrastructure, gave the United States a D-plus despite the extra infrastructure spending that flowed from the big 2009 economic recovery act.

The costs are substantial, if hard to see. Neglect the water system, and you may have leaky pipes and larger bills, or even lead contamination. Rough roads equal more flat tires. Substandard internet connections add to the isolation of rural communities.

Each day, UPS drivers in northern New Jersey and New York City lose an average of 16 minutes — often much longer — to heavy traffic. Six years ago the company started dispatching an additional 61 drivers to make sure everyone hit their stops, and it would need more drivers if traffic got worse.

Of course, even if tens of billions of dollars more were set aside for road improvements, that would not on its own guarantee that traffic congestion would ease. Infrastructure may be among the most bipartisan of federal spending areas, but politics in general can be a problem. One of the persistent criticisms from economists is federal lawmakers’ tendency to spread cash across the country instead of focusing on places where the economic payoff would be greatest.

And apart from the debate over how to pay for national upgrades, there is the question of how much can be gained from additional infrastructure spending versus how much can be gained by making better use of what is already in place. Clifford Winston, an economist at the Brookings Institution and a longtime critic of how the government builds and runs the nation’s transportation infrastructure, laid out a long list.

An increase in infrastructure spending would still lift the economy, Mr. Winston said, “but my God, wouldn’t it be so much better if we were more thoughtful about what we do with the money we have?”

This, at least, is where the nation’s D-plus grade turns out to be good news. Economists say infrastructure’s productivity lift is greatest when investment is being raised from low levels. Put another way: The more broken down the nation becomes, the harder it is to find something that does not need to be fixed.

“We’re not talking about bridges to nowhere,” Mr. Summers said. “We’re talking about bridges that are on the verge of collapsing.”