In the last few posts, I have examined the impact of infrastructure spending on a country’s overall productivity and wages. We also looked at data that showed America’s investments in infrastructure are way down over the last few decades. It may be no surprise then that the growth in productivity over that time span has been sluggish and we have seen wage growth also stall, at a time when an increasing percentage of the nation’s economic output has gone to the corporations. So why is this increasingly bright outlook for corporations not translating into higher wage growth for employees? There are many factors for this and we will tackle this at some point but needless to say that lower growth in productivity of those workers is one factor. And, worsening overall infrastructure of the country contributes to that.
Earlier this year, a large infrastructure plan passed in the congress and was signed into law by President Biden. This is long overdue and is a major step forward in addressing these issues with lower productivity and sluggish wage growth. Obviously, just throwing money at a problem doesn’t solve it. We tackled this issue when we discussed the US education system. Although our spending on education is toward the top end of the OECD countries, our outcomes are near the bottom. So, it’s essential to maximize every dollars in this infrastructure bill. We should be spending the money on the most critical issues and make sure each dollar buys as much as possible. This graphic from an earlier post shows that the cost of infrastructure has increased dramatically in US vs. its peer countries.
The recently passed infrastructure plan has many parts to it and much of it is directed at the most critical needs at this time. The $1 trillion infrastructure plan has money for roads, bridges, ports, rail transit, safe water, the power grid, broadband internet and more. It’s a historic investment that can be compared to the building of the transcontinental railroad and Interstate Highway System. It is projected that the investments will add, on average, about 2 million jobs per year over the coming decade. Let’s look at the physical infrastructure part of the bill:
Roads and Bridges
The bill would provide $110 billion to repair the nation’s aging highways, bridges and roads. 73,000 total miles or nearly 280,000 kilometers of America’s highways and major roads and 45,000 bridges are in poor condition. The almost $40 billion for bridges is the single largest dedicated bridge investment since the construction of the national highway system.
The $39 billion for public transit in the legislation would expand transportation systems, improve accessibility for people with disabilities and provide dollars to state and local governments to buy zero-emission and low-emission buses. The Transportation Department estimates that the current repair backlog is more than 24,000 buses, 5,000 rail cars, 200 stations and thousands of miles of track and power systems
Passenger and freight rail
To reduce Amtrak’s maintenance backlog, which has worsened since Superstorm Sandy nine years ago, the bill would provide $66 billion to improve the rail service’s Northeast Corridor (457 miles, 735 km), as well as other routes. It’s less than the $80 billion originally sought by Biden — who famously rode Amtrak from Delaware to Washington during his time in the Senate — but it would be the largest federal investment in passenger rail service since Amtrak was founded 50 years ago.
The bill would spend $25 billion to improve runways, gates and taxiways at airports and to improve terminals. It would also improve aging air traffic control towers.
Next, let’s look at what the bill does for non-transportation infrastructure.