It’s the Roads, Stupid (Part II)
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by Chip Krakoff

Nearly two years ago I wrote a blog post in which I argued that Africa’s enduring poverty is attributable in large part to its awful roads, which make it cost roughly three times more to move a shipping container by truck the 750 miles from Kampala, Uganda to Mombasa, Kenya, than the equivalent distance from Portland, Maine to Cleveland, Ohio. It turns out, though, that the quality of American and African roads is converging faster than I knew, and not because Africa’s have become so much better.

Last weekend I drove from Boston to Utica, New York, to pick up my daughter who goes to college nearby. Much of Interstate 90 in New York State runs parallel to the Erie Canal, arguably the first major public infrastructure project in the United States, begun in 1817 and opened in 1825, which connected the Great Lakes to the Hudson River, and from there the Atlantic Ocean. The canal today carries mostly recreational traffic, though there has been a recent uptick in commercial use. The bridges that cross the canal, and the locks and the tidy white lockkeepers’ cottages spaced at intervals along its length, create a pleasing impression of efficiency, order, and purpose.

It took the canal’s backers ten years to assemble the financing. The U.S. Congress refused, questioning the constitutionality of using federal funds, and Presidents Thomas Jefferson and James Madison both considered it a lunatic scheme. New York State, under Governor Dewitt Clinton, stepped into the breach and issued $7 million in bonds – around $130 million in today’s money – representing about one percent of U.S. gross domestic product of $700 million. The equivalent expenditure today would be $150 billion out of a GDP of around $15 trillion. But the tolls levied on canal users repaid the initial investment in less than 30 years, and generated a surplus that funded much of the state budget until 1882, when the tolls were abolished.

The canal transformed New York City into the premier port and the economic and business capital of the United States, and helped make the United States a world industrial, commercial, and political power.

We don’t do those kinds of grand projects anymore. Not only that, we don’t even maintain the infrastructure we have. According to the American Society of Civil Engineers (ASCE), which periodically puts out a report card on America’s infrastructure, we are flunking, with grades ranging from C+ (solid waste management) to D- (roads, wastewater, drinking water, levees, and inland waterways). The ASCE estimates the U.S. would need to spend $2.2 trillion over five years just to bring its transport and water infrastructure back up to a passing grade after years of under-spending. That’s about $440 billion, or 3% of GDP, annually. Right now, total U.S. public spending on infrastructure is about 2.4% of GDP, or $360 billion. In contrast to Europe, which spends much more on maintenance and repair, nearly half that amount goes to new construction. There is more political mileage to be gained from building a new bridge than from filling 10,000 potholes. Also in contrast to Europe and much of the developing world, where private capital has filled a big part of the funding gap, Americans on both left and right oppose public-private partnerships with equal fervor.

To climb substantially above our current 23rd place in the World Economic Forum international ranking of infrastructure quality and to accommodate the expected 40% rise in the U.S. population over the next 40 years, we would probably need to spend at least four, if not five, percent of GDP each year, or between $240 and $390 billion more than we do now. The European Union countries already spend about five percent, and China nine percent of GDP, on infrastructure.

What does this mean in concrete terms? According to the ASCE, one in four of the nation’s bridges are either structurally deficient or functionally obsolete. One-third of America’s major roads are “in poor or mediocre condition,” and highway congestion is a growing problem. In the ASCE’s words, “The current spending level of $70.3 billion per year for highway capital improvements is well below the estimated $186 billion needed annually to substantially improve the nation’s highways.”

President Obama was wrong when he said, recently, that the U.S. needs to “out-invest China.” China and India, rapidly developing countries with awful infrastructure, ought to spend far more, proportionally, than the U.S. We already have interstate highways and sewage systems, and they don’t. But how far are we willing to let our existing assets crumble? Shouldn’t we spend at least enough to prevent our roads from turning into the potholed nightmares of Tajikistan or Haiti?

In today’s political climate the question can’t even be asked.

Paul Krugman, on his blog and in his New York Times op-ed column, has referred to the federal government as “an insurance company with an army.” It’s a picturesque image and true, though awfully sad. Our country’s founders surely had loftier ambitions when they cast off British rule to usher in a “Novus Ordo Seclorum,” a new order for the ages.

Sadder still is that so few mainstream politicians have questioned this state of affairs. Instead, they argue about cutting $8 billion out of foreign aid and State Department budgets – a whopping 0.3% of the $3.7 trillion budget – while ignoring the entitlement programs and invasions of other countries that are bankrupting us.

Fuel taxes support the Federal Highway Trust Fund, but the fund will become insolvent in 2012, largely because the tax of 18.4 cents on gasoline and 24.4 cents on diesel hasn’t gone up since 1993. Congressional transfers have kept the fund afloat for the past several years, but with a $1.5 trillion budget deficit those transfers will end next year, and with gas at $4 a gallon it would be political suicide to suggest raising the tax.

So, in the likeliest scenario, we will continue to stumble along in the same direction until we discover, as we must, that sometimes things get so badly broken no amount of money or effort will ever put them back together.

Posted 06-01-2011 10:04 AM by Charles Krakoff