The Economist - USA (2021-11-13)

34 United States The Economist November 13th 2021

Infrastructureyear

Unlocked

L

ockanddam 25 ontheupperMissis­

sippiRiveristestamentto how good

Americaninfrastructurecanbe.Stretching

nearly1,300feet(400metres)acrossthe

water,theconcrete­and­steelstructureisa

cruciallinkinthesystemthatconnects

MidwesternfieldstoSouthernportsand

thencetoAsianmarkets.Roughly60%of

America’s corn and soy exports pass

throughiteveryyear.Butitisalmost 100

yearsold,andengineerswagea constant

battleto keep it operational. Ithas the

samecapacityaswhenitwasbuilt,while

boatshavegrownbigger.“Howmanyhigh­

waysbuiltinthe1930sstillhavethesame

numberoflanesnow?”asksAndySchimpf,

a manageratthelock.

Salvationmaybeathand.OnNovember

5ththeHouseofRepresentativespasseda

five­year,$1trnbill torepairandupgrade

America’s ageing infrastructure. About

$2.5bnhasbeenallocatedtoinlandwater­

ways,  and  Mr  Schimpf  is  optimistic  that

some will go towards rebuilding Lock and

Dam  25,  doubling  the  size  of  its  chamber.

Today,  workers  sometimes  need  to  break

apart barges to get them through, and then

reassemble them on the other side, which

can  take  up  to  three  hours.  A  bigger  lock

could reduce transit time to 30 minutes.

Hundreds  of  similarly  delayed  and  ne­

glected  public  projects  around  America

will get a big boost from the infrastructure

bill,  which  President  Joe  Biden  will  soon

sign  into  law  (it  long  ago  passed  the  Sen­

ate). It includes $40bn of new funding for

fixing bridges, the largest investment since

the construction of the interstate highway

system. There will be nearly $70bn for pas­

senger  rail,  aimed  both  at  clearing  years­

old  maintenance  backlogs  and  bringing

service  to  new  areas.  Another  $65bn

should ensure that every American has ac­

cess  to  high­speed  internet.  And  the  list

goes on and on, from highways to airports

and the electricity grid to water pipes.

For  years  American  infrastructure  has

suffered from under­investment. It would

take  $2.6trn  over  the  next  decade  to  get  it

up  to  scratch,  according  to  the  American

Society of Civil Engineers (asce), a profes­

sional body (albeit one with an interest in

spending more).The bill will not fix every­

thing.  But  it  could  be  the  beginning  of  a

process that will make a real difference.

How big a difference? Roughly half the

headline amount would have been expect­

ed  as  part  of  regularly  budgeted  mainte­

nance,meaningthatabout$550bnactually

constitutes new spending, to be disbursed

over five years. That might not sound like

much, but it is. From 2022 to 2026 federal

infrastructure  spending  will  rise  from

about  0.8%  of  annual  gdpto  1.3%,  well

above  the  trend  of  the  past  four  decades.

Adie Tomer of the Brookings Institution, a

think­tank, says that is nearly the same av­

erage level as during the New Deal, which

helped  lift  America’s  fortunes  after  the

Great Depression.

As a rough rule of thumb, an additional

$100bn  per  year  spent  on  infrastructure

could  boost  growth  by  about  a  tenth  of  a

percentage point when the digging actual­

ly begins, and potentially more if it cataly­

ses  additional  private­sector  investment,

notes  Ellen  Zentner  of  Morgan  Stanley,  a

bank.  In  the  longer  term,  she  estimates,  a

sustained  expansion  of  infrastructure

spending  could  support  productivity  and

raise  America’s  potential  growth  by  as

much as a fifth of a percentage point, a big

deal  for  a  large,  mature  economy.  “That’s

why whenever you talk to economists, in­

frastructure is the stuff that we go to bed at

night dreaming of,” says Ms Zentner.

Getting a positive return will, of course,

require  the  money  to  be  allocated  well.

Considering  the  shortfalls  in  investment

over the years, it should not be hard to find

good  projects.  On  average  a  water  main

breaks  every  two  minutes  somewhere  in

America, while nearly half of all roads are

in  bad  shape,  according  to  the  asce.  In

some cases the investments will not gener­

ate new growth so much as defend Ameri­

ca’s  existing  strengths.  Take  the  locks  on

the upper Mississippi: they help American

soyabeans compete against Brazilian ones.

Labour is much cheaper in Brazil, but tran­

sportation  is  better  in  America.  Keeping

the locks in good shape underpins that. “If

you  were  to  close  any  of  them  down  for  a

few  months,  it  would  cost  us  billions  of

dollars,”  says  Steve  Censky,  ceo of  the

American Soybean Association.

Just about doubling the federal govern­

ment’s expenditure on infrastructure over­

night  could  lead  to  waste,  however.  Cost

overruns  often  bedevil  American  infra­

structure  projects.  It  is  more  expensive  to

build  rail  in  America  than  in  almost  any

other  country,  according  to  Transit  Costs

Project,  a  research  group.  The  price  of

building  highways  has  also  soared.  That

just about anyone can mount a legal chal­

lenge against public works in their vicinity

is  part  of  the  problem,  leading  to  delays

and missed budgets. And the current back­

drop  is  hardly  propitious,  with  supply­

chain  congestion  affecting  even  the  most

basic home­building projects.

On  the  positive  side  of  the  ledger,  the

bill  creates  space  for  private  investors  to

join the government’s efforts, which could

both  enlarge  total  spending  and  impose

more financial discipline. Any city or state

seeking federal funding for transport pro­

jects  costing  more  than  $750m  will  be  re­

quired  to  evaluate  whether  partnering

with private­sector investors would deliv­

er better results. Some projects, such as the

development of the first­ever national net­

work of chargers for electric vehicles, nat­

urally  lend  themselves  to  co­operation

with the private sector, given that is where

the  technology  resides.  The  government

also wants companies to pitch in to make

infrastructure  more  resilient  to  climate

change.  Grant  programmes,  useful  in  at­

tracting  private  investment  in  water  sys­

tems,  are  likely  to  be  expanded.  “This  bill

can potentially create a framework for on­

going and necessary public and private in­

vestment  in  infrastructure,”  says  Aaron

Bielenberg of McKinsey, a consultancy.

But a dose of scepticism is also useful.

Ultimately,  the  amount  that  America

spends  on  infrastructure  is  a  direct  result

of  the  amount  that  Americans  are  willing

to  be  taxed.  And  that,  by  the  standards  of

other  rich  countries,  is  not  very  much.

“Ten  years  from  now,  I  think  we  will  look

back and say that this bill was a historic in­

vestment,  a  great  expansion  of  invest­

ments  that  were  neglected,”  says  Austan

Goolsbee,  an  economist  at  the  University

of  Chicago  and  a  former  adviser  to  Presi­

dent  Barack  Obama.  “But  people  are  still

going to be saying, well, why don’t we have

high­speed rail all over thecountry?” Even

so, better to fix roads, expandports and lay

broadband cables than not.n

WINFIELD, MISSOURI

Joe Biden’s infrastructure bill will boost competitiveness for decades to come

Aconcrete achievement