Mind the Infrastructure Gap

This is a piece I wrote on how much money is needed to fix up America. It originally ran on Huffington Post.

Closing The $1.5 Trillion "Fix-Up" Gap in Obama's Economic Plan

By John F. Wasik

Let's face it. America is one giant fix-up project. Bridges are crumbling. Public transportation systems are rusting. Water mains are leaking. Getting everything repaired and modernized is perhaps the largest and most expensive "honey do" list imaginable.

As I discovered in researching my new book Audacity of Help: Obama's Economic Plan and the Remaking of America (www.audacityofhelp.net), there's a large dollar gap between what was committed in the American Recovery and Reinvestment Act and what needs to be done.

While it's undeniable that the stimulus funds are slowly trickling into communities and creating jobs -- although not enough to offset the employment lost in the past year -- the actual amount of money needed is far short of what's needed. The infrastructure repair bill is estimated to be more than $1.6 trillion, according to the American Society of Civil Engineers, which published a report card on infrastructure conditions a few weeks after Obama took office. So the stimulus plan comes up about $1.5 trillion short.

What about all of those annoying barricades you see everywhere for road construction? Crumbling or inadequate roads cost American motorists some $67 billion a year or $710 per motorist -- that's just to fix the highways and bridges. We collectively lose the equivalent of 4.2 billion hours just sitting in traffic, costing the economy about $78 billion a year in terms of lost working hours (not to mention lost family time).

Are you a conscious commuter and take public transportation? Federal spending on public transportation systems lags the amount needed by about $6 billion annually. That makes the highway repair number loom even larger since nearly half of Americans don't have access to public transportation.

You don't need to go far to notice that America's skeleton has some major osteoporosis. New York's water tunnels are leaking millions of gallons of precious water. Los Angeles can never seem to get enough of this elixir of life. Chicago's ancient "El" elevated-rail system is rusting away. Just miles from the White House, suburban Maryland's 5,500-mile system of water pipes sprang a few leaks -- more than 4,000 over the past two years (252 leaks were reported just a few days before the inauguration). Nearly every municipality has something that needs to be fixed or updated.

The Obama Administration's stimulus plan set aside about $100 billion for infrastructure improvements. Of the $48 billion for all transportation projects, $27 billion of that has been allocated to the US Department of Transportation for mostly road/highway improvements.
Here's a more detailed breakdown:

*$30 billion for electrical system improvements. This money would be divided between modernizing and creating a "smart" grid, advanced battery technology and energy-department grants.

*$29 billion for public works. This covers everything from street repairs to bridge reconstruction.

*$18 billion. More funding for public works that will cover toxic waste clean-up, municipal water systems and flood prevention.

*$8.4 billion for Public Transit. Sorely needed by cities, this will help repair and upgrade public transportation systems.

*$8 billion for High-Speed Rail. This was a long-sought down payment on creating intra-state systems to reduce the reliance on air travel.

One glaring subject that Obama avoided in the campaign and early days of his presidency is how to pay for infrastructure over time and how it will dovetail with an overall strategy to address climate change. While conservative Democrats and Republications generally object to increasing the federal deficit, they also oppose taxes. Unless huge cuts are made to other large budget items -- unlikely during a recession -- the Treasury will need to sell more notes to pay for the new spending, most likely to the Chinese, Japanese and Europeans.

At a certain point, investors in our debt may decide that the the political benefits don't outweigh the paltry after-inflation returns. No one knows when that day will come, but it will happen and may shut down the debt-financing juggernaut that's keeping the world's largest economy afloat.

There may be no way of getting around the fact that gasoline taxes (or carbon-based levies on fuel, vehicles or buildings) need to be added or raised. The 18.4-cent levy on gasoline on 24.3-cent surtax on diesel fuel has been unchanged since 1993. That brought in about $39 billion in 2007. The CBO projects an economically justifiable investment of $132 billion in highways alone. Filling this funding gap will have to involve some sacrifice and extra dollars from those using the roadways. A $44 billion kitty could be created annually by boosting the fuel tax by 25 cents a gallon. The money has to come from somewhere. Plunging the nation ever further into debt and saddling future generations with it just isn't sustainable.

A national infrastructure bank or trust fund, as proposed in the 2011 budget, could become a permanent institution overseen by trustees who are independent of Congress. This entity, if managed prudently and free of political earmarking, might be able to avoid the pork-barrel process of awarding federal dollars to the well-heeled few. Until then, the first wave of federal dollars may be a short-term boost, but won't address the long-term aging of the nation's backbone.

John F. Wasik, author of "The Audacity of Help: Obama's Economic Plan and the Remaking of America," is the author of twelve books, including "The Cul-de-Sac Syndrome" and "The Merchant of Power." He speaks widely and writes a weekly Bloomberg News column that reaches readers of five continents and which earned him the 2009 Peter Lisagor award for journalism. He lives in Chicago.

For more information please visit www.audacityofhelp.net.