As President Biden seeks to reach a consensus on his $2 trillion plan to rebuild infrastructure and reshape the economy, he faces objections from those who say it is too expensive and contains elements that exceed what historically has been understood as infrastructure.
However, the business and investing communities welcome the federal government finally making good on long-deferred infrastructure promises. A 2017 report by the American Society of Civil Engineers noted that almost $4 trillion in Gross Domestic Product would be lost from the economy if the U.S. did not close the $2 trillion infrastructure gap by 2025.
A team of analysts at Harvard University who specialize in infrastructure policy, budgeting, finance and economics, also welcome Biden’s initiative. They say the $2.3 trillion generational investment will pay wide-ranging dividends.
Linda Bilmes, Senior Lecturer in Public Policy at Harvard Kennedy School, an expert on public budgeting and finance, said the initiative would be a “generational” investment in the nation’s infrastructure and the largest single package since the 1960s. “As a country, we have really underinvested in our infrastructure defined broadly, and that includes the human capital,” she said.
The emphasis on sustainability and climate change resiliency is an expansion of the traditional term “infrastructure,” but the correct one, she noted. “Right now, every dollar that we spend reconstructing something that’s just going to be flooded away again is a dollar wasted,” said Bilmes. “What we need is an infrastructure that is sustainable. So, it is a redefinition, but it’s absolutely the right redefinition.”
Jason Furman, Aetna Professor of the Practice of Economic Policy at the Harvard Department of Economics, said the government could borrow about $2 trillion “without causing a whole lot of problems” to the U.S. economy. Spending on infrastructure “makes a lot of sense right now” for several reasons, he said. “First, spending would be spread out over an eight-year period. The second thing is interest rates remain really low… And finally, infrastructure spending will help, over time, the supply side of the economy so we can produce better as a country,” said Furman.
Whether the money is used wisely will be key to success or failure. The states, not Congress or the president, decide where most infrastructure funds appropriated by the federal government get spent. “It’s not possible for the federal government to micromanage where every dollar is going to go,” so having broad guidelines for how it should be used, and very comprehensive, robust oversight to make sure it is, will be essential, said Bilmes.
Wasteful spending can be greatly reduced if the plan follows a few key principles, said Stephen Goldsmith, Professor of the Practice of Urban Policy and director of the Innovations in American Government Program, who studies “smart city” technology. “One is that every layer of bureaucracy that we go through increases expense and delays application. So to the extent that, at least for our larger cities, the money can go [directly] to the cities and the regions” rather than to “state departments, I think that’s better — better for political reasons, better for effectiveness and better for speed.”
The ideal plan is one that promotes “forward-looking investments” that will create “lots of good jobs” over the next 50 years and that tackles the major infrastructure repair and replacement work that is too costly and unprofitable for anyone but government to do, like water and wastewater system upgrades and road work, said John D. Macomber, senior lecturer at Harvard Business School, who teaches infrastructure finance.
Source: Harvard Gazette