How The US Can Avoid the Looming Deficit in Infrastructure Spending

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US Infrastructure Estimates by 2040

  • Investment Current Trends:
    $8.5 Trillion
  • Investment needed:
    $12 Trillion
  • Investment Shortfall:
    $3.8 Trillion

Source: Global Infrastructure Hub, a G20 initiative

The US is looking at a whopping $3.8 trillion shortfall in infrastructure investment, ranking last place among any nation in the world. That’s according to Global Infrastructure Hub, a G20 initiative aimed at increasing the flow and quality of private and public infrastructure projects around the world.

Global Infrastructure Hub CEO Chris Heathcote discusses the current logjam in the US infrastructure sector with Gargi Chakrabarty, director – content, Icons of Infrastructure, stressing the need now to start planning and kick-starting projects before the US falls further behind.

Gargi Chakrabarty: According to Global Infrastructure Hub’s proprietary data, the US is forecasted to spend $8.5 trillion on infrastructure, but it actually will need to invest $12 trillion to meet infrastructure demands by 2040, implying a $3.8 trillion shortfall. Can you explain how you calculated this shortfall?

Chris Heathcote: When we estimate how much infrastructure investment any nation will need by 2040, we consider the growth in its population (how many people would use its infrastructure), its rate of urbanization (how many people would want to live in cities), and a reasonable rate of growth in its economy that would have to be supported by infrastructure. We looked at the infrastructure investment in the US over the past 10 years and, assuming the same level of investment occurs going forward, we found a backlog of $3.8 trillion to maintain existing infrastructure and build new assets for the US to have the best infrastructure in the world.

Gargi Chakrabarty: So infrastructure is the need of the hour?

Chris Heathcote: It’s absolutely the case that infrastructure is not being built in the US anywhere near as quickly as it should be. If you look at China, it’s forecasted to spend $26 trillion based on current trends. In fact, China is already at a level where the investment meets their needs. The US, which is projected to invest only $8.5 trillion, which is much lower than China’s level. I believe that infrastructure in the US is at a time-critical stage. You can no longer afford to say “Let’s do nothing and wait for the next election cycle”. I think this administration understands that in order to stay competitive in global markets, the US needs to invest in its infrastructure.

See G20’s infrastructure investment forecast.

Gargi Chakrabarty: What’s the cause of this infrastructure logjam?

Chris Heathcote: The US is very capable of closing the projected shortfall, except that it has weaknesses in a couple of areas. The first area is weak planning. Because there’s no long-term plan at the federal, state or city level, there’s a tendency to look at the repair of existing infrastructure as the main priority. The US needs to do better than that to support its economic growth going forward. The second area is weak governance – there are no clear procurement rules or governance rules with respect to infrastructure projects. In the planning arena, there’s a real need to create long-term plans that extend out over the next 10 to 20 years, not just the duration of the next election cycle.

Gargi Chakrabarty: Which countries have successfully planned for their infrastructure needs?

Chris Heathcote: You could look at Canada and Australia, which take long term views of infrastructure beyond their electoral cycle. For example, Australia has planning at the federal, state, and city level that provides a framework for investment. It is hard to raise money for infrastructure if you don’t have a clear plan. You have to have a clear plan for maintaining, renewing, and building infrastructure to keep up with economic growth. Once you have the plans, it’s easier to go out and raise money for the expensive projects.

Gargi Chakrabarty: Despite the weaknesses, are you familiar with any successful infrastructure initiative in the US?

Chris Heathcote: Yes, Pennsylvania’s bridges project used private sector money successfully. The state has hundreds of structurally deficient bridges and any plan using taxpayer money to fix them would have taken 30 years. The state took the PPP approach (public private partnership) instead of the taxpayer-funded approach, which gave it the freedom to propose how the bridges would be repaired or replaced. The winning bidder realized that these aging bridges could be replaced with a standardized model, and he built 400 to 500 standard bridges at an investment of $900 million against an estimate of $1.4 billion under the taxpayer approach.  It was an innovative funding option and cost effective, too.

Gargi Chakrabarty: Do you see pockets of disruptions despite the pervasive status quo?

Chris Heathcote: We are seeing many disruptive technologies, especially in the energy sector, including cost-effective batteries that allow homes and entire villages to electrify and leapfrog the large grid network approach. We are seeing how sensors on existing infrastructure are enabling massive amounts of data that can be analyzed for actionable insights, leading to timely repairs or rebuilds. Similarly, we are seeing the potential of driverless cars and how we can use our roads and highways to meet the needs in the next 10 or 20 years.

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