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Government a Partner in Wealth Creation

July 29, 2009 By Conrad deFiebre, Transportation Fellow
A new interchange at Interstate Hwy. 94 and Brockton Lane in northwest Hennepin County is the key to a huge planned real estate development that's just waiting for freeway access - 1,000 housing units and up to 1.8 million square feet of commercial space - according to local and federal officials.

Rep. Erik Paulsen has won U.S. House approval of $700,000 for environmental review, design and right-of-way acquisition, and he has requested $10 million more toward construction of the long hoped-for project, which has a total price tag of $29 million.

Another case of government overreach on the way to tax-and-spend oblivion? Rep. Paulsen, a self-proclaimed fiscal conservative, begs to differ.

The Brockton Interchange will provide "numerous public benefits," including congestion relief and economic opportunities for surrounding communities, he said in a news release last week. "Federal funding for this project will pay off several times over."

Once again, this puts the lie to the familiar right-wing canard that government cannot create wealth. Nothing could be further from the truth, although anti-government types repeat it so often that many have come to believe it.

In fact, according to U.S. Bureau of Economic Analysis figures published last September, federal, state and local governments held more than $9.2 trillion in fixed assets at the end of 2007. This wealth, far beyond anything even Bill Gates has dreamed of, includes more than $3.1 trillion in streets, highways and other transportation assets, $1.6 trillion in public schools, $1.2 trillion in military and public safety facilities and $900 billion in water and sewer systems.

All this is shared wealth, most of it bequeathed to us by earlier generations of taxpayers. It doesn't approach the $33.4 trillion in fixed private holdings found in the same report, but the public assets are highly productive.

A 2005 study sponsored by private-sector members of the American Public Transportation Association found that businesses and commuters reaped $788 billion in economic benefits from public highways and transit in 2003. This was derived from an annual public investment of $185 billion, producing $603 billion in net yearly gain - private wealth created by government action.

"Investment in public infrastructure as a whole has generally produced higher returns than private investment as a whole," wrote the study's co-authors, Kevin Hassett of the conservative American Enterprise Institute and Robert J. Shapiro, CEO of an economic consulting firm. "Economists have ... consistently found that surface transportation systems increase economic output, reduce prices and raise incomes and profits."

They also said their $603 billion estimate of annual private return on public transportation investment "substantially understates the full net benefits," because it takes no account of the value of getting people to schools, doctors, shopping and other non-work destinations.

This is not to say that the revenues needed to build and maintain this mighty economic engine can't be raised more equitably. Policymakers should make sure those who get the most benefit from transportation system pay their fair share. Ideas in this area include public-private development agreements, tapping windfall profits of property owners near new roads and transit lines, and user fees that accurately reflect the damage vehicles of various weights inflict on pavement.

Justice demands this, but just as important is continued bipartisan support for transportation investments that build a vigorous economy, no matter the protests of extremists who acknowledge only the worth of private enterprise.

Paulsen said he has teamed up with U.S. Sen. Amy Klobuchar to seek federal funding not only for the Brockton Lane project, but extension of Hwy. 610 (also expected to spur hundreds of millions in new private development) and expansion of the I-494-Hwy. 169 interchange (a major southwest metro congestion bottleneck that drains private time and money).

Meanwhile, in Greater Minnesota, the Minnesota Department of Transportation has just committed $14.56 million to a new Hwy. 52 interchange at Pine Island needed to support a large biotechnology business development.

All these projects will build our shared wealth while paying handsome returns to the private sector. It's time for the extremists of the right to recognize that a strong public sector is a necessary precondition of a prosperous private sector.

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