The case for infrastructure spending? Our future depends on it | Opinion

With one major piece of legislation to his credit, the $1.9 trillion American Rescue Plan, President Joe Biden has set out to pass another massive spending proposal. This time, it is a $2.65 trillion infrastructure bill called the American Jobs Plan.

Do we need to invest significantly in infrastructure? Absolutely. Will it be hugely expensive? There is no choice. Can we afford it? Again, we have no choice as modern infrastructure is the backbone that makes the economy efficient and globally competitive.

For the first time in more than a decade, major infrastructure legislation may be signed into law this year. The strange reality is that investing in infrastructure is one of those things that politicians in all parties talk about doing but never manage to do.

Why? Democrats have been willing to spend the money and pay for it with taxes, a nonstarter for Republicans. Republicans usually considered the costs too high or would spend the money only if they could also cut spending, which, of course, was a nonstarter for Democrats.

The net result: Not nearly enough has been spent to maintain, improve or expand the nation’s physical infrastructure. The American Society of Civil Engineers’ “2021 Report Card for America’s Infrastructure” estimated that there is a shortfall of about $2.6 trillion in funding for needed projects through 2029. And that doesn’t include a lot of nontraditional infrastructure spending.

Which brings us to what we mean by “infrastructure.” Most people think of it as the nation’s physical fabric: the transportation network, water and sewer facilities, the communications network, and the power grid. But we can no longer exclude those aspects of the modern economy that affect human capital, such as the health and education systems, the mechanisms of government, the social network, and even the financial system.

The fraying of any of those elements leads to lower productivity and growth and a reduced standard of living. And all of those components have been allowed to deteriorate.

Infrastructure’s importance to growth has intensified over the last few decades. In the 1950s and ’60s, the U.S. had a significant competitive advantage because much of Europe and Asia’s infrastructure had to be rebuilt after World War II.

At the same time, the U.S. embarked on a major transportation construction program: the interstate highway system. The network was designed to streamline the way goods and people moved across the nation. It opened up suburban and rural areas to economic development, helping make the U.S. the leading economy in the world.

But conditions began changing in the 1970s. While the rest of the world was rebuilding and modernizing its infrastructure, the U.S. concentrated on maintaining what had been built.

Today, the world’s fastest growing economies are powered by massive investment in infrastructure and technology, while our funding has lagged. That has made their companies and economies major competitors with the U.S.

The result is that we are in a battle for not only economic supremacy, but in many ways, economic survival.

We need to invest as heavily as possible in infrastructure that not only improves our present productive capacity, but also positions the nation to lead in what will be the future world economy. How do we do that? By investing in human productivity, technology and structural improvements.

For example, ubiquitous, state-of-the-art broadband and internet service may be one of the most critical areas of spending. Universal geographical coverage enhances business competitiveness and flexibility, makes workers more efficient (think work-from-home) and expands educational opportunities, further improving worker productivity.

So, how does the Biden bill address the needs of an economy facing growing international competition and deteriorating domestic infrastructure?

Put simply, it is a good start that begins addressing most of the key issues facing the nation. Money is spent not just on traditional, physical capital projects, but on human capital needs and technology. By doing so, it hopes to, in the administration’s words, “reimagine and rebuild a new economy.”

Here are some of the highlights of the $2.65 trillion, eight-year plan:

To pay for this, a major tax reform package that includes increases and restructuring has been proposed. The nonpartisan Committee for a Responsible Federal Budget estimates that “over the traditional 10-year budget window, … the net increase in the deficit would be approximately $900 billion. The plan appears deficit-neutral over 15 years and it would reduce deficits over the long term.”

Who will benefit from this plan? Almost everyone. It was not a surprise that Amazon CEO Jeff Bezos supports the plan, including the tax increases. The future of the distribution economy requires improved and modernized transportation and communications systems.

But it doesn’t stop there. Companies involved in the global economy would see their competitiveness improved as their goods would be produced and shipped more efficiently. Investment in communication technology and training programs improves service firms’ productivity. Manufacturers have programs directed specifically toward them and gain from the improvements in transportation, human capital, and communication technology and coverage. Rural areas and center cities, small towns and big cities all would have expanded capacity to grow.

Yes, the cost is massive. But the rest of the world is not sitting still. We need to get busy meeting the challenges of the future and to do that, we must find the money to pay for a new, future-looking infrastructure.