Getting Infrastructure Investment Right
One of the few things Hillary Clinton and Donald Trump agreed on was the need for infrastructure spending. During the campaign, Trump pledged to double Clinton’s call for “$250 billion in infrastructure spending over the next five years.” He subsequently upped that to $1 trillion over ten years. Meanwhile, Bill Clinton’s one-time Treasury secretary, Larry Summers, has been calling for up to $2 trillion.
What’s Trump’s business case for spending $100 billion a year for ten years on infrastructure?
Trump advisor and mega-investor Wilbur Ross explains:1
“Today, much of America’s infrastructure is crumbling. Much more needs to be built anew.
“The U.S. ranks ninth in roads investment as a percent of GDP and twelfth on the Global Competitiveness Index in infrastructure. More than 60,000 American bridges are considered “structurally deficient.” Traffic delays cost the U.S. economy more than $50 billion annually.
“Meanwhile, our iPhones are smarter than many of our air traffic control computers. The water in cities like Flint, Michigan is unfit to drink, and over 6 million Americans are potentially exposed to contaminated water.
“An investigation by USA Today “identified almost 2,000 additional water systems spanning all fifty states where testing has shown excessive levels of lead contamination over the past four years.”2 This included 350 systems that supplied drinking water to schools or day care facilities. Furthermore, 237,600 water mains break each year and 46 billion gallons of water are lost each day due to pipe leaks.
“Building new infrastructure is a critical part of any growth strategy. Every $200 billion in additional infrastructure expenditures creates $88 billion more in wages for average Americans and increases real GDP growth by more than a percentage point. In turn, each GDP percentage point creates 1.2 million additional jobs across the economy.
“Remember too that with the decline of manufacturing in our country, infrastructure projects are one of the few high-paying jobs that could employ the less well-educated segment of our population. At present, one-sixth of the 18-to-34-year-old prime working- age population is either unemployed or in prison and the minority group statistics are even worse. Infrastructure could help solve this sociological tragedy.”
Unfortunately, recent history makes one skeptical about government-backed infrastructure spending...
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