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Lagging Investment Hobbles our Economy

November 14, 2013 By Conrad deFiebre, Transportation Fellow

For a nation that has been aptly described as the only one on earth founded as a business proposition, the United States has grown strangely averse to investing in itself.

U.S. public investment has hit its lowest level since the late 1940s, reports the British-based Financial Times, "because of Republican success in stymieing President Barack Obama's push for more spending on infrastructure, science and education."

Gross public sector investment now stands at 3.6 percent of U.S. economic output, the FT calculated, well below a post-World War II average of 5 percent. Meanwhile, net government investment, factoring in depreciation, which peaked at 4 percent of GDP in the early 1950s, has dipped to the immediate postwar demobilization range of 0.5 percent of the economy, according to an FT chart based on U.S. Bureau of Economic Analysis data.

Investment in transportation infrastructure alone typically exceeds 3.6 percent of GDP in Europe and stands near 10 percent in China, which is fast overtaking us in the contest for global economic preeminence.

"Austerity bites in the world's largest economy," FT notes, "threatening future growth as the axe falls heavily on federal investments that boost output, rather than tranfers such as pensions and health care for the elderly."

While it makes no moral sense to slash the safety net in an American society hurtling back toward Gilded Age inequality, it's economic folly to starve the public investments that can raise all boats, from dinghies to yachts. But right-wing ideologues seem to be insisting on the former as ransom for the latter.

According to FT, "the biggest falls are in infrastructure, especially construction of schools and highways by states and municipalities. Federal funding for research and development has only fallen modestly so far but will decline much further under any budget path that continues sequestration," the automatic, across-the-board cuts mandated in Washington's last big fiscal deal.

When it comes to surface transportation, we've been severely hamstrung by federal fuel-tax funding that hasn't been adjusted for inflation in 20 years and keeps losing even more as the U.S. auto fleet heads toward 54.5 miles per gallon by 2025. But with driving on a long decline and millions of miles of U.S. roadways already built, where's the problem?

I'll tell you: The overwhelming share of U.S. travel is still by car and truck, enough alternatives don't yet exist and pavement doesn't last forever. "A road is never, ever paid for," the libertarian Reason Foundation's Leonard Gilroy told Pew Stateline. Or, as a Minnesota county engineer once told me, "Bridges last a long time, but roads are just a snapshot in time."

Minnesota took some important steps to ensure the safety, efficiency and economic boost of its transportation network in the wake of the 2007 collapse of the Interstate Hwy. 35W bridge in Minneapolis. More investment, widely supported by our state's businesses and labor is needed soon to close a $50 billion funding gap over the next 20 years. The Legislature has an opportunity next year to enact measures that will build our long-term competitiveness.

Federal policymakers have a long-shirked responsibility to do their part as well. Current U.S. House-Senate negotiations over a waterways bill with broad bipartisan support will signal whether there is willingness to compromise on much bigger needs for roads, bridges, transit and nonmotorized mobility. Current status-quo funding for that segment runs out in less than a year.

On that issue, business is already marshalling forces beyond the familiar lobbying from road builders and transit advocates. "Let the manufacturers be the face upfront," Bill Shuster, the conservative chairman of the House Transportation and Infrastructure Committee told Politico. "Let the truckers. Let the bankers."

The U.S. Chamber of Commerce, the National Association of Manufacturers and the tripartisan Building America's Future are taking the lead. The latter two recently released a survey of manufacturers that reflected wide concern that the nation's infrastructure isn't keeping up with business needs. Two-thirds majorities called for improvement of roads, but significant percentages also noted deterioration of energy, transit, aviation and rail systems.

He's said it before with little positive response from conservatives, but President Obama keeps delivering the same message. "Rebuilding our transportation and communications networks is one of the fastest ways to create new jobs," he said at a speech last week at the Port of New Orleans. "So why wouldn't we put people to work upgrading them?"

Conservatives may not heed this from Obama, but maybe they will from the manufacturers, the truckers and, most of all, the bankers.

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