The Largest Infrastructure Bill in American History

Or Is it?

On August 10, 2021, the U.S. Senate approved a bipartisan $1 trillion infrastructure bill. White House officials, Republicans, and Democrats quickly proclaimed the package the largest in history. It encompasses $450 billion in renewed funding for existing programs and $550 billion in new federal spending.

Unfortunately, one could easily argue that the claim is false. As indicated by journalist Linda Qui writing for the New York Times, the package certainly is large. Analysts at the Brookings Institution, a nonpartisan think tank, conclude that the package represents a “generational investment” and is “easily the largest infrastructure package in decades.” However, the package does not quite match the size of several federal investment projects that transpired over the course of the 20th century, at least if one uses certain metrics.

The infrastructure package would bring federal spending to approximately 1.25 percent of gross domestic product. By comparison, infrastructure spending under Franklin D. Roosevelt’s New Deal between 1933 and 1936 averaged close to 1.4 percent of GDP according to an analysis by Adie Tomer, a senior fellow at Brookings focused on metropolitan policy. Federal infrastructure spending fell during ensuing decades before rising again during the 1970s and 1980s to approximately 2 percent of GDP. It was at that time that the public sector repaired and added miles to the Interstate Highway System and supplied billion of dollars in grants to water utilities.1

That would seem to settle the question of whether this will be the largest infrastructure package in history except for one additional consideration. Congress is also considering another package. While that one is largely focused upon social spending and climate challenges, it could also encompass additional infrastructure spending including upgrading Veterans Affairs hospitals, creating additional affordable housing units, and investing in energy efficient buildings and cleaner ports.2

As of very-late October, the deal wasn’t done and political uncertainty remained elevated. In October, Congress passed emergency legislation to extend federal highway and transit program funding authorization, giving legislators a 30-day window to put together an actual highway spending bill.

A survey conducted by the American Association of State Highway and Transportation Officials determined that the lack of secure federal funding is hindering long-term planning. Respondents from Texas stated that “Short term extensions and the uncertainties they create make it very difficult to plan for the future.” Those from Vermont, while thankful for the short-term extension, stated, “Partial year funding can delay advertisement of new projects and slow down phases of ongoing projects.” Missouri officials stated that due to the lack of long-term certainty, they have to “pull back on planning and project development of large projects and our program becomes a month to month commitment.”3

What’s in the Package

One of its primary goals is to renovate and rebuild the nation’s roads, bridges, and highways. The latest report card from the American Society of Civil Engineers gave the nation’s bridges a C and its roads a D.

Indeed, data indicate that the amount of money spent on highway construction has leveled off in recent years. According to the U.S. Census Bureau, total spending on highway and street construction stood at $62.7 billion (seasonally adjusted annual rate; SAAR) in January 2002, the earliest month for which there are data. Spending rose steadily during the years that followed, but leveled off during the Great Recession. After stagnating around $80 billion from late-2008 to mid-2014, total construction spending began to rise, peaking at $114.2 billion in April 2019, a historic high. Following the pandemic, spending fell and then leveled off again, reaching $100.2 billion in September 2021.

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About the Author

Anirban Basu

Anirban Basu is Chairman & CEO of Sage Policy Group, Inc., an economic and policy consulting firm in Baltimore, MD. He is one of the Mid-Atlantic region’s most recognizable economists in part because of his consulting work on behalf of such clients as prominent developers, bankers, brokerage houses, energy suppliers, and law firms.

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