Infrastructure Spending Is Not The Holy Grail

Politicians of all stripes (including Clinton, Sanders and Trump) seem to believe that more Federal spending on infrastructure is essential to increasing economic growth and creating attractive employment opportunities. In a recent lengthy article in City Journal, economist Edward Glaeser begs to differ. Glaeser, author of The Triumph of The City, recognizes that much of our infrastructure needs attention due to deferred maintenance, but that Federal money devoted to large scale infrastructure projects tends to be both inefficient and inequitable. Below are a summary of a few of his observations. I encourage you to read the entire article.

1. Many projects serve very few people; some have been described as “bridges to nowhere.”
2. Funding tends to follow political influence rather than economic need.
3. Most projects do not come close to passing any type of benefit-cost test.
4. Although projects in the late 1800s and the first half of the 20th century did lead to both increased productivity and employment, later 20th century projects and 21st century projects tend to generate neither increased productivity nor employment opportunities, especially for areas with high unemployment rates.
5. Consistent with point 2, many projects involve subsidies from poorer to richer parts of the country.
6. Both efficiency and equity would be improved if infrastructure projects, especially those related to transportation, were funded locally by users.