It’s been two years since it was my actual job to report on infrastructure spending in the United States, but had I still had the same job, I could have reported on the latest developments by cutting and pasting my stories from two or three years ago without many modifications.
Every so often, an article appears marvelling at how the world’s biggest economy can have such run-down airports, cracked roads and third-world-style overhead power distribution lines. Despite national tropes like opposition to ‘big government’, the problem comes down either to US government not being big enough, or being relied on too much.
The federal portion of funding for highways and public transport projects such as light rail and bus schemes in the US are funded by the Highway Trust Fund. Every year, (as I wrote in April 2011) the fund threatens to run out and has to be topped up with funding diverted from elsewhere. This year was the same: at the end of last month, it was bailed out to the tune of US$10.8 billion – most of which came from the US Treasury’s General Fund. Plans for a properly new funding package for transport have been put off yet again, this time until next May.
Why the need for a bailout? Because its official revenue stream, the ‘gas tax’ on petrol, is a fixed rate tax which hasn’t been raised since 1993. As such, it’s been eroded by inflation and growing fuel efficiency in cars. But Congress dare not risk arousing the ire of voters and opponents of big government by raising the tax. Meanwhile, highways continue to crumble: in 2012, over one-fifth of roads eligible for federal funding needed resurfacing or more, according to lobby group ARTBA calculated from federal figures.
The result of this inaction is not only insufficient funding but insufficient certainty. Long-term infrastructure programmes can’t be planned when government doesn’t know how money money it will have in the bank over a horizon greater than one year. Often Congress doesn’t even allow that: nine last-minute extensions to the transport budget legislation were passed between 2009 and 2012, without which funding would have been cut off. The latest extension, to a subsequent budget, lasts a mere nine months.
This deadlock over funding, and rancorous debate over how to deliver it (partly fuelled by the increased polarisation of US politics), is repeated at state level in the US. And taxes may be unpopular but tolls aren’t always less so either.
A pressure group called Texans Uniting for Reform and Freedom is currently lobbying vigorously against the tolling of existing roads – although such a measure is often used to pay for new capacity, to say nothing of the need for more funding anyway – and the use of public-private partnership contracts to finance new road projects in the state. Some of this hostility is directed at the fact that foreign firms are running the roads and making money out of them; and of course such attitudes sway local politicians. Hostility to such projects also got a toll road plan scrapped in Georgia, with the governor calling it “contracting away Georgia’s sovereignty”.
Infrastructure can be funded either through taxes or user fees – and Americans see the gas tax as a user fee – but both are politically unpalatable. Whether the president of the day is a Democrat or a Republican makes little difference; in fact George W. Bush’s transport budget was longer-term than the last one Obama managed to sign.
And all this uncertainty and short-termism makes it difficult for federal and state governments to guarantee a pipeline of steady infrastructure investment, thus pushing up the cost of new infrastructure. Incidentally, I won’t go into detail about the state of water infrastructure in the US, but it’s just as crumbling as road infrastructure if not more so – and gets less attention.