Infrastructure Spending – What’s Not to Like?
Economics / Infrastructure Oct 02, 2011 - 03:57 AM GMTBy: Asha_Bangalore
The American Society of Civil Engineers (ASCE) published a study last month pointing out the cost of failure to address the infrastructure needs of the nation. The study concludes that failing to invest in America’s roads, bridges, and transportation system would cost the nation $3.1 trillion in lost GDP, 877,000 in lost jobs, and a significant reduction in productivity by 2020. The graphic below is a summary of the impact of the failure to address the nation’s surface transportation infrastructure.
The obvious question is the about the dollar cost of updating the nation’s transportation system. There is ample good news for taxpayers as the cost of borrowing for the U.S. Treasury is at multi-year lows. The inflation adjusted cost of funds is at 16 bps for 10 years (see Chart 2). Surely there are infrastructure projects that would yield more than 16 bps and enhance the transit system of the nations. President Obama’s American Jobs Act includes provisions for spending $90 billion for infrastructure. The ASCE study estimates that policymakers will need to invest roughly $1.7 trillion in the next ten years to improve the nation’s highways and transit system.
The U.S. is on track to spend only close to half of this, implying that there is a big gap between what is needed and what will be accomplished. The infrastructure provisions of the bill provide a much needed avenue to ignite economic growth and create jobs. The main takeaway is that putting tax payer dollars to work in infrastructure repair and development is a win-win proposition at the moment. Will Congress seize the opportunity?
http://www.northerntrust.com
Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.
Copyright © 2011 Asha Bangalore
The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.
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