Roads, bridges and other infrastructure in the United States are steadily growing older and weaker. Given low interest rates and elevated unemployment, this is an ideal moment to invest in fixing them.
Does age matter? Unfortunately, with infrastructure it does.
A December 2010 report from the Department of Homeland Security underscores the threat. “Age,” it says, “often acts together with and may reinforce the effect of other factors such as design, maintenance and operation in increasing the vulnerability of infrastructure.”
Consider the situation in New York State, where about 10 percent of the roughly 22,000 bridges were built before 1930. More than 10 percent of these old bridges have a superstructure rating of poor or worse, compared with less than 5 percent of the bridges built during the past four decades.
As my former colleague Larry Summers has written, “No one who travels from the United States abroad can doubt that we have an enormous infrastructure deficit.”
The 2009 stimulus bill helped a bit – it allocated about $100 billion to infrastructure investment. But that was not sufficient to address the growing problem.
Steps are needed now.
First, we need to couple immediate federal spending on public assets with substantial, credible deficit-reduction measures that are scheduled to take effect later on. Such a “barbell” approach to fiscal policy would require that Republicans acknowledge the value of additional stimulus while the unemployment rate is high, and that Democrats see how Medicare, Medicaid and Social Security could be preserved and strengthened through certain cost-saving measures over time.
Second, we should bring back Build America Bonds. The traditional approach to state and local infrastructure financing allows the interest on the bonds to be excluded from federal taxation. That approach has been shown to provide undue benefit to purchasers in the top marginal-tax bracket. Build America Bonds, in contrast, provide a direct subsidy to the borrowers, and thereby deliver more of the federal subsidy to the state and local governments.
Finally, federal, state and local governments alike should expand the use of pricing to get the most out of existing roads, bridges and the like and to finance improvements. User fees for transportation, for example, should be expanded.
In the absence of such steps, our infrastructure will only become less safe and less productive. Although we may not be able to do much about our own aging, there’s plenty we could do to keep public infrastructure young. •
Bloomberg View columnist Peter R. Orszag is vice chairman of corporate and investment banking at Citigroup Inc., and a former director of the Office of Management and Budget in the Obama administration.