Best Principles for Infrastructure Investment | Citizens Against Government Waste

Best Principles for Infrastructure Investment

The WasteWatcher

After President Trump signed the largest stimulus package in history on March 27, 2020, talk in the nation’s capital shifted to the next big legislative response to the coronavirus pandemic.  To that end, on March 31, 2020, President Trump called for a new stimulus package that would include money for infrastructure and match the $2 trillion provided in the CARES Act. 

His proposal was immediately challenged by Senate Majority Leader Mitch McConnell (R-Ky.), who stated on April 1, 2020 “it would take a lot of convincing to convince me that we should do transportation in a way that’s not credibly paid for.” However, given that the administration and congressional Democrats nearly agreed on a $2 trillion infrastructure bill in April 2019 before talks fell apart at the last minute, momentum might build quickly.

Should an infrastructure stimulus package be considered by Congress, it must incorporate several core principles that Citizens Against Government Waste has proposed to ensure the best value for taxpayers and avoid the mistakes made in both the $862 billion American Recovery and Reinvestment Act (ARRA) of 2009 and the $305 billion Safety, Accountable, Flexible, Efficient Transportation Act of 2005. 

First, Congress should limit the federal role to interstate highways and devolve control of funding to the states.  Funding infrastructure projects at the federal level does not always reflect state and local government priorities.  The existing process creates perverse incentives for members of Congress:  the benefits of such projects are concentrated locally, and the cost is spread out across the country, meaning legislators are not induced to control costs or oppose nonessential projects.  This is one of many reasons why earmarks are almost always included in major highway bills.  The 2005 bill had $24 billion in earmarks, including the infamous Bridge to Nowhere in Alaska, and that money was disproportionately directed to the state and districts of members of the Senate and House transportation committees.     

Second, infrastructure funding must be closely scrutinized and controlled, since these projects are routinely over budget.  A 2002 report in the Journal of American Planning Association, “Underestimating Costs in Public Works Projects,” analyzed 258 such projects over 80 years and found average cost overruns of 44.7 percent for rail projects and 20.4 percent for road building.  Overall, projects cost 27.6 percent more than originally anticipated. 

Elected officials must also take greater responsibility for ensuring that the money is spent wisely.  Thorough transparency and the empowerment of inspectors general must be crafted into any legislation.  Failing to do so will contribute to substantial cost overruns. 

This is best illustrated by former California Assembly Speaker Willie Brown, who stated in July 2013 in regard to the $300 million cost overrun for San Francisco’s Transbay Terminal, “We always knew the initial estimate was way under the real cost.  Just like we never had a real cost for the Central Subway or the Bay Bridge or any other massive construction project.  So get off it.  In the world of civic projects, the first budget is just a down payment.  If people knew the real cost from the start, nothing would ever be approved.  The idea is to get going.  Start digging a hole and make it so big, there’s no alternative to coming up with the money to fill it in.”

Third, reduced revenue from the federal gas tax creates a perfect opportunity to fundamentally shift infrastructure spending back to the states.  The current tax of 18.4 cents on gasoline and 24.4 cents on diesel has been in place since 1993.  Increased fuel economy and inflation has resulted in diminished returns.  Elimination of the fuel tax and full devolution to states and local governments would reduce the cost and improve the efficiency of infrastructure spending. 

Fourth, increased use of private-public partnerships (PPP) would also provide a high return on investment for taxpayers.  Funding mechanisms such as toll roads on highways in such agreements would mean that those who use the finished result of an infrastructure project pay the cost.  Other user fees should be included whenever possible.

Fifth, regulations must be cut in any infrastructure deal.  Infrastructure projects must comply with both federal and state rules, which may be in conflict with each other.  Federal projects must comply with the Davis-Bacon Act, which requires prevailing wages to be paid, and states have their own prevailing wage laws.  Both laws prevent the utilization of less-skilled labor and preferential treatment for in-state firms when other options might cost less.  Decreasing regulations would also help facilitate increased use of PPP agreements to provide funding for projects.

Finally, new thinking about infrastructure must exclude old, ineffective programs, like the Essential Air Service, subsidies for Amtrak, and parochial, low-impact, high-cost projects.

While not considered infrastructure in the traditional sense, broadband funding is likely to be included in the infrastructure legislation.  In the 116th Congress, legislation has been introduced, and another bill passed to make “Dig Once” or “Build Once” requirements for the installation of broadband conduits in infrastructure projects.  The effort to include such provisions in infrastructure bills has been ongoing since a June 2012 Government Accountability Office study found that when “conduit and fiber installation is coordinated with a road or utility project, savings range from 25-33 percent” in urban regions, and approximately 16 percent in rural areas.  To the extent that broadband enters the larger infrastructure debate, “Dig Once” policies make economic sense.  However, other proposals like expanded funding for government-owned (municipal) broadband should be rejected.

The lessons provided by the shortcomings of the ARRA and the 2005 highway bill must be accounted for during any debate over an infrastructure stimulus bill.  This type of spending inevitably entails messy, politically oriented decision-making, and vast sums of money.  By devolving the process to the states, deregulating, and increasing the role of the private sector, members of Congress can most effectively safeguard against wasteful spending and ensure the highest value for the taxpayers’ investment.

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