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Unformatted text preview: If infrastructure funding flows to low-value activities, it
doesn't aid economic growth, nor does it help industries such as manufacturing. Experience shows
that Washington often does a poor job at allocating infrastructure spending, in part because its
decisions are far removed from market-based demands and price signals.
Most federal nondefense infrastructure spending today is for activities that are state, local, and private
in nature. Federal budget data for fiscal 2011 show that nondefense infrastructure spending was
about $162 billion, including both direct spending and aid to the states. 6 Some of that spending which
was state, local, and private in nature included: $42.0 billion for highways, $16.8 billion for water and
power projects, $14.3 billion for urban transit, $12.5 billion for community development, $12.5 billion
for housing, and $3.5 billion for airports.
Problems with Federal Infrastructure Investment
There are calls today for more federal spending on infrastructure, but advocates seem to overlook the
downsides of past federal efforts. Certainly, there have been federal infrastructure successes, but
there has also been a history of pork barrel politics and bureaucratic bungling in federal investmen t
spending. A substantial portion of federal infrastructure spending has gone to low-value and dubious
23 | P a g e States CP BDL I've examined spending by the two oldest federal infrastructure agencies — the Army Corps of
Engineers and the Bureau of Reclamation.7 While both of those agencies constructed some
impressive projects, they have also been known for proceeding with uneconomic boondoggles,
fudging the analyses of proposed projects, and spending on activities that serve private interests
rather than the general public interest. (I am referring to the Civil Works part of the Corps here).
Federal infrastructure projects have often suffered from large cost overruns. 8 Highway projects,
energy projects, airport projects, and air traffic control projects have ended up co sting far more than
originally promised. Cost overruns can happen on both public and private infrastructure projects, but
the problem is exacerbated when multiple levels of government are involved in a project because
there is less accountability. Boston's Big Dig — which exploded in cost to five times the original
estimate — is a classic example of mismanagement in a federal-state project.9
Perhaps the biggest problem with federal involvement in infrastructure is that when Washington
makes mistakes it replicates those mistakes across the nation. Federal efforts to build massive public
housing projects in dozens of cities during the 20th century had very negative economic and social
effects. Or consider the distortions caused by current federal subsidies for urban light-rail systems.
These subsidies bias cities across the country to opt for light rail, yet rail systems are generally less
efficient and flexible than bus systems, and they saddle cities with higher operating and maintenance
costs down the road.1...
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This document was uploaded on 02/06/2014.
- Spring '14