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infrastructure spending carried out by Washington would be more efficiently handled by devolving it to state and lo cal
governments and the private sector.
Notes on Government Infrastructure
Many types of current government infrastructure used to be owned and financed by the private sector. Before the 20th
century, for example, more than 2,000 turnpike companies in America built more than 10,000 miles of toll roads. And up 22 | P a g e States CP BDL
3 until the mid-20th century, most urban rail and bus services were private. W ith respect to railroads, the federal
government subsidized some of the companies building railroads to the West, but most U.S. rail mileage in the 19th
century was in the East, and it was generally unsubsidized. The takeover of private infrastructure activities by
governments in the United States and abroad in the 20th century caused many problems. Fortunately, most governmen ts
have reversed course in recent decades and have started to hand back infrastructure to the private sector.
Let's look at current data on infrastructure spending. Interest groups complain that governments in the United States
aren't spending enough on infrastructure, and we often hear that U.S. roads and other assets are crumbling. However,
Figure 2 shows that while federal, state, and local infrastructure spending in the United States has dipped a little in recen t
decades, U.S. spending has closely track ed trends in other high-income nations. The figure shows gross fixed investment
as a share of gross domestic product in the United States compared to the average of countries in the Organization for
Economic Cooperation and Development. In 2010, U.S. infrastructure spending by governments was 3.5 percent of
GDP, which was a little higher than the OECD average of 3.3 percent. Let's take a closer look at just U.S. federal infrastructure spending using data from the Bureau of
Economic Analysis.5 Figure 3 shows that federal nondefense infrastructure spending declined
somewhat during the 1980s and 1990s, but started to rise again during the 2000s even before the
recent "stimulus" spending. Spending in recent decades was generally above the levels of the 1950s,
but below the high levels of the 1960s. The high federal infrastructure spending of the 1960s was unique. A large share of that spending was
for building the Interstate Highway System, which is now complete. Also note that substantial federal
infrastructure spending at that time was misallocated to dubious or harmful activities. For example,
federal funding of urban redevelopment and high-rise public housing schemes often had damaging
social and economic effects. Also, federal spending on water infrastructu re, such as dams, peaked in
the mid-20th century, and a substantial part of that spending made little sense from an economic or
an environmental perspective.
Thus, the important thing about infrastructure is to focus on allocating funds efficiently, not to
maximize the amount of government spending....
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This document was uploaded on 02/06/2014.
- Spring '14