Infrastructure a Panacea for Economy?

Once upon a time, the infrastructure project was the heart of every political stump speech: it was the tangible means by which politicians could impress his or her constituents, including those in the business community, with how hard they were working for them. These projects provided jobs and, theoretically, opportunities for further economic development. In the days of "pork barrel" legislation and earmarks, there were also a lot of projects of questionable real value. Those days have not ended completely, but the mood now is one of fiscal prudence or at least the appearance of frugality.

Though political interest regarding important infrastructure improvement still exists, funding for these projects has become ever more challenging. Scarcely a day goes by that somebody is not pointing out that infrastructure development and repair is badly needed and that turning the nation’s attention to this need would be a great way to get the economy rolling again. The problem is that not every infrastructure project is created equal, and some will do more to develop the economy. The least exciting project, but perhaps the most important, is the one focused on maintenance and repair. The existing infrastructure is already in use; business and the public has already adapted to it. The deterioration of these roads, bridges and other facilities will mean that patterns will alter and existing business activity will be disturbed. The problem is that maintenance is not very sexy and is hard to take credit for as a politician. It gets overlooked in favor of something new and splashy that can be named after the leader that got it developed. The Highway Trust Fund was designed to handle this kind of routine maintenance of the national highway system but, in the last decade, the money contributed to that fund by the federal gas tax has been woefully insufficient with no real momentum to bolster its size via additional taxes or other funding.

Project carrying the most economic merit and that will trigger the most development should be the ones that get the most attention, but that is rarely how this works out. The projects that are selected are those that have the most political importance. The more power a lawmaker has, the more likely it is that his or her state will get the lion’s share of funding. This is why there have been those “bridges to nowhere” more often than should be the case. It would be ideal if there was some semblance of a master plan for the national infrastructure that concentrated on what would be the most useful for the economy.

Unfortunately, this is unlikely.

- Chris Kuehl, Ph.D., NACM economist and co-founder of Armada Corporate Intelligence

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