Public Infrastructure: Avoiding the Bridge to Nowhere

By Clint Ormsby

“You and I come by road or rail. But economists travel on infrastructure.”

- Margaret Thatcher

This June, PWBM’s First Spring Policy Forum discussed what real world evidence has to say about public infrastructure policy. PWBM’s Jon Huntley looked at how infrastructure plans can be designed to maximize growth while Ernst & Young’s Mike Parker shared a broad picture of the impact of federal spending on infrastructure. Watch the entire session below.

Jon Huntley described PWBM’s analysis of the effects of various infrastructure plans and their potential to boost the economy. He found that the most effective infrastructure plans lower the cost of infrastructure investment for state and local governments through loan programs and tax credits. In addition, infrastructure programs financed by user fees are more effective than those financed by deficits. Huntly found that a $500 billion program of loans and tax credits funded by user fees increases GDP by 1.5 percent in 2032 and 2.9 percent in 2042 compared to current policy.

Why is investing in public infrastructure effective at boosting the economy? Huntley said that public projects, “can be in the pipeline for a very long time so that may mean that there’s some effective projects out there that have not yet been realized.”

Mike Parker agreed that well designed infrastructure programs can lead to growth. He stated that programs need incentives for both short and long run performance. Parker showed that currently, most public infrastructure is owned by states, not the federal government. Further, less than 30 percent of state infrastructure spending is funded by the federal government. He pointed out that, “infrastructure is local and the needs in different places are commensurately me if there is state and local participation in a project, it’s a good signal at a certain level, or if there’s private participation in the project, that the project has merit to somebody and it’s less likely to be a bridge to nowhere.”