Infrastructure in Crisis?

Making the case that American infrastructure is in crisis is a reasonably straightforward proposition. While infrastructure outlays have been relatively strong in recent quarters, including in terms of roadbuilding and water systems, this strength is largely a reflection of a time when state and local government finances were in better circumstances. The pandemic has undone much of that as rainy-day funds have been expended, revenues have become less stable, and many policymakers have become less confident about their community’s financial future and the wisdom of taking on additional debt in order to expand infrastructure spending.

According to the Center on Budget and Policy Priorities, collectively, state tax collections from March through August 2020 were 6.4% less than during the same months of 2019. Under normal circumstances, one would have expected growth of 2-3%.

But even prior to the pandemic, American infrastructure suffered its challenges. According to the World Bank, as of 2018, America no longer ranked at the forefront of nations in terms of infrastructure, ranking behind Germany, Japan, Sweden, the Netherlands, and Austria and just ahead of the U.K. and France.

This ranking may be too kind. According to the most recent report from the American Society of Civil Engineers (ASCE), the nation’s infrastructure earned a D+, with categories like drinking water, transit, roads, and aviation receiving especially low grades. According to the ASCE, “over the next 20 years, America’s overdue infrastructure bill will cost the average American household $3,300 a year.” To close America’s infrastructure gaps, the nation will need to increase investment in infrastructure by $2 trillion over the next decade, which appears problematic given the economic damage done by the pandemic and the massive deficits the federal government has accumulated to mitigate negative public health and commercial outcomes.