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Governor Deval Patrick has signed a new state budget, after taking the maximum 10 full days to
review spending for the next fiscal year. The budget totals $32.5 billion, and includes a 4.5%
increase in public school funding from last year. In fact, it provides for the most money that
the Commonwealth has ever spent on education. 21 | P a g e States CP BDL
Article: Federal Infrastructure Investment By Chris Edwards, http://www.cato.org/publications/congressional-testimony/federal-infrastructureinvestment?print
Joint Economic Committee
United States Congress
Joint Economic Committee United States Congress
Added to cato.org on November 16, 2011
This testimony was delivered on November 16, 2011.
Mr. Chairman and members of the committee, thank you for inviting me to testify t oday. My
comments will examine the federal role in the nation's infrastructure.
In the description of today's hearing, the committee asked how infrastructure helps to promote
growth, jobs, and manufacturing. The short answer is that we can spur growth by e nsuring that
America's infrastructure investment is as efficient as possible. Infrastructure funding should be
allocated to the highest-value projects, and those projects should be constructed and maintained in
the most cost-effective manner. My testimony will discuss why reducing the federal role in
infrastructure will help to increase the efficiency of our investment.
The first thing to note about America's infrastructure is that most of it is not provided by the
government, but by the private sector. A broad measure of private infrastructure spending — on items
such as buildings, factories, freight rail, pipelines, and refineries — is much larger than government
infrastructure spending on items such as roads and airports. In Figure 1, data from the Bureau of
Economic Analysis show that private gross fixed investment was $1.7 trillion in 2010, which
compared to gross fixed investment by federal, state, and local governments of $505 billion. 1 W hen
defense investment is excluded, government infrastructure spending was just $388 billion, or less
than one-quarter of private infrastructure spending.
One implication of this data is that if Congress wants to boost infrastructure spending, the first priority should be to make
reforms to encourage private investment. Tax reforms, such as a corporate tax rate cut, would increase the net returns to
a broad range of private infrastructure investments. Regulatory reforms to reduce barriers to investment are also needed,
as illustrated by the delays in approving the $7 bil lion Keystone XL pipeline from Alberta to Texas.
Despite its smaller magnitude, public-sector infrastructure spending is also very important to the U.S. economy. But the
usual recommendation to simply spend more federal taxpayer money on infrastructure is misguided. For one thing, the
government simply can't afford more spending given its massive ongoing deficits. More importantly, much o...
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This document was uploaded on 02/06/2014.
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