The Antiplanner

10th December 2008

Infrastructure and the Economy

posted in Meltdown |

Many members of Congress are eager to pass an infrastructure “stimulus” bill early in the Obama administration. There are many reasons to think that this is a bad idea. Such a bill is likely to do little to stimulate the economy. But it probably will do much to prolong the recovery period.

Over at Marginal Revolution, economist Tyler Cowan worries that the added debt required by an infrastructure bill will “ruin my country and cause its economy to crumble or explode.” Even if that is not true, he says, then an infrastructure project makes sense only if either the “project worth doing in its own right” or “53 percent or more of the expenditures [will] come on-line in the next nine months.”

The Antiplanner would argue that both of those should be true. If the project is not worth doing in its own right, it won’t provide much of a secondary stimulus — it will just provide a few jobs during actual construction. If the project is worth doing but not “shovel-ready,” then funding it will increase the nation’s debt but not provide any immediate stimulus.

The truth is that various special interests were beating the infrastructure drum long before the current economic problems. Now they have jumped on the bailout bandwagon hoping to get their share of the hundreds of billions Congress is handing out.

The United States Conference of Mayors, for example, has listed more than 400 pages of projects they would like to do with someone else’s money. Reason Magazine describes this as “infrastructure flim-flam,” pointing out that many of the projects cost a lot yet provide few jobs (and therefore little stimulus).

Anchorage, Alaska, for example, wants an $8.75 million subsidy for its transit system that it promises will create 12 jobs — that’s $729,000 per job. The Antiplanner didn’t know that Gadsden, Alabama, had a trolley, but apparently few people ride it because they propose to replace their current “large trolleys” with “smaller, environmentally friendly trolleys” for $800,000. That creates 5 jobs at $160,000 per job.

Phoenix wants $110 million for park-and-ride stations for its still-under-construction light-rail system. No jobs promised. Tucson wants $110 million for a “modern streetcar” which it says will create 3,133 jobs. They must be drinking Charley Hales’ Kool-Aid. Miami wants a streetcar costing $280 million but creating only 560 jobs — that’s $500,000 per job. Miami also wants to replace doors on its peoplemover — $1 million for 1 job. But think of the secondary benefits.

I am sure there are some dumb street and road ideas on the list as well. Feel free to point them out in the comments.

The Antiplanner never really believed America has an infrastructure crisis. As Alex Tabarrok says (also at Marginal Revolution), we are already spending plenty of money on, for example, transportation; we just aren’t spending it very effectively. A new infrastructure bill is not likely to do any better.

Instead of an infrastructure crisis, what we really have is an institutional problem in which everyone wants someone else to pay for their infrastructure rather than pay for it themselves. Very little infrastructure is a true public good, that is, something that you can’t keep people from using. As non-public goods, we should be able to pay for infrastructure entirely out of user fees.

User-fee-funded infrastructure has the added virtue of providing a test of whether a project is worthwhile. If the project can be funded out of user fees, there is no doubt that it is worthwhile. If not, then it remains open to question: is it infrastructure or is it just pork?

Most of what we call “infrastructure” was once handled by private parties but, for one reason or another, taken over by government. In the nineteenth century, most roads, water supplies, sewage systems, and other infrastructure were private. Now most are public. Public ownership was supposed to save money by being more efficient, fair to users, and eliminating diversion of revenues to profits. Instead, it turned into an excuse to tax some groups of people and subsidize others. It also created wonderful opportunities for government corruption.

Economists Susan Woodward and Robert Hall make another point. Most infrastructure proposals call for such things as fixing crumbling roads or upgrading the energy efficiency of existing public buildings. Yet such projects will have very low multiplier effects. Building a new road into a fast-growing area will stimulate development in that area; replacing the pavement on an existing road will have few similar secondary effects.

One of the many reasons why our economic got so bad is because Congress and the administration let deficits go out of control. Making that problem worse is not likely to fix the economy, especially if there are low multiplier effects. If an infrastructure bill can be funded out of user fees, go for it. Otherwise, concentrate on other ways of helping the economy that may actually do some good.

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  1. 1 On December 10th, 2008, the highwayman said:

    ROT: I am sure there are some dumb street and road ideas on the list as well. Feel free to point them out in the comments.

    THWM: Or more to the point why didn’t you point out any to begin with?

    posted on December 10th, 2008 at 12:26 am

  2. 2 On December 10th, 2008, the highwayman said:

    ROT: Most of what we call “infrastructure” was once handled by private parties but, for one reason or another, taken over by government. In the nineteenth century, most roads, water supplies, sewage systems, and other infrastructure were private. Now most are public. Instead, it turned into an excuse to tax some groups of people and subsidize others.

    THWM: ROT, this is where things are coming back to haunt you, when you attack rail lines just for being rail lines.

    Even a disgruntled foamer should see the flies in the ointment here.

    Just as with the hypocrisy of Wendell Cox.

    “What government does for one it should do for all;
    What government does not do for all, it should do for none.”

    You guys can’t cheat the system for ever!

    posted on December 10th, 2008 at 1:22 am

  3. 3 On December 10th, 2008, JimKarlock said:

    Highwayman:“What government does for one it should do for all;
    What government does not do for all, it should do for none.”
    JK: Good!
    Roads are for all, transit is not for all.

    Conclusion:
    government should do roads (as the constitution demands)
    Government should NOT do transit.

    Thanks for the tip.

    Thanks
    JK

    posted on December 10th, 2008 at 3:39 am

  4. 4 On December 10th, 2008, t g said:

    Infrastructure investment is likely to do little to stimulate the economy: agreed.

    As I’m a civil engineer who gets half my work from road projects, though, it’ll sure stimulate the hell out of MY economy.

    Karlock, AP, and others of the liberatarian fold: I was libertarian for a long time. Read Reason religiously. But I don’t recall ever seeing a reasonable proposal for a citizen opt-out movement. Surely the more radical of you libertarians have dreamt of foregoing all (most) government benefits (public roads, voting, etc) in order to be unburdened by the yoke of (unrepresentative?) taxation. Are there any serious proponents for a dual system? For it seems that the taxation for these projects is the bigger issue. Is there a possible system (and is anyone seriosuly advocating for it) where I can ignorantly pay my taxes and suffer the consequences of my conservative neighbors’ voting habits (here in AZ we are about to be yoked by J. Brewer as guv) and you and other freedom lovers can…pay as you go?

    posted on December 10th, 2008 at 6:41 am

  5. 5 On December 10th, 2008, t g said:

    Continuing from comment #4:

    It just seems that strategically speaking, attacking every little government intervention is a sisyphustic fate.

    posted on December 10th, 2008 at 6:46 am

  6. 6 On December 10th, 2008, prk166 said:

    t g –> I’m not sure what you’re getting at. There’s a big difference between government building and running roads or an airport and things like law enforcement or fire protection. There’s no compelling reason why government needs to build, manage and own roads. There are plenty of privately built and run roads, just like airports and other such things, to show that it’s not something the government needs to do (in fact, as many other commentators here have pointed out, having gov’t. in the road/highway business gives it a lot of incentive to push certain policies). Given that, I’m not sure what you’re trying to get at with your questions.

    posted on December 10th, 2008 at 7:53 am

  7. 7 On December 10th, 2008, C. P. Zilliacus said:

    Antiplanner wrote:

    > User-fee-funded infrastructure has the added virtue of providing
    > a test of whether a project is worthwhile. If the project can be
    > funded out of user fees, there is no doubt that it is worthwhile.
    > If not, then it remains open to question: is it infrastructure
    > or is it just pork?

    I tend to agree with the above. Which is why rail transit projects
    should not be funded out of these dollars, but new toll highway
    capacity can (and should be).

    Consider that the original (1940) Pennsylvania Turnpike was
    built in large part with loans from the federal government (details
    here) – loans that had to be paid back – and were.

    Compare and contrast with the one of the largest infrastructure projects
    of the 1970’s through 1990’s – the Washington Metrorail system.
    Not a dime of the billions of federal taxpayer dollars spent
    to built this system has ever been paid back to the federal treasury.

    posted on December 10th, 2008 at 9:03 am

  8. 8 On December 10th, 2008, C. P. Zilliacus said:

    the highwayman wrote:

    > Even a disgruntled foamer should see the flies in the ointment here.
    >
    > Just as with the hypocrisy of Wendell Cox.

    Please elaborate, and provide some details to back-up your
    assertions above.

    posted on December 10th, 2008 at 9:06 am

  9. 9 On December 10th, 2008, the highwayman said:

    JK: Good!
    Roads are for all, transit is not for all.

    THWM: That’s still a double standard. Just any body can use transit, not every can drive(for your perspective).

    Conclusion:
    government should do roads (as the constitution demands)
    Government should NOT do transit.

    THWM: Speciba komrad Karlock!

    posted on December 10th, 2008 at 9:12 am

  10. 10 On December 10th, 2008, Dan said:

    Interesting recent analysis of life-cycle costs of various transpo infra:

    The report Life-cycle Environmental Inventory of Passenger Transportation in the United States* bills itself as “the first comprehensive environmental life-cycle assessment of automobiles, buses, trains, and aircraft in the United States.” The report, by Mikhail V. Chester of the Institute of Transportation Studies at Berkeley, goes far beyond counting the fuel consumed by vehicles. It considers the energy and materials used to build stations, terminals, roadways, runways, tracks, bridges, tunnels and parking, as well as maintenance, heating, lighting and more. A full life-cycle accounting of travel modes has been a long time coming; it is critically needed and tremendously welcome.

    The findings on life-cycle energy use are summarized in this chart.

    One feature that stands out is the wide range in bus performance, depending on how full the bus is. During peak hours the bus ridership is assumed to be 40 passengers and energy efficiency beats all other modes handily. During off-peak hours ridership is assumed to be five passengers and energy efficiency is the worst of any mode.

    In fact, the efficiency of all modes depends on how full the vehicles are. The study included a calculation of low and high ridership for each mode so that the energy use ranges could be compared.

    What’s interesting here is even when the transit systems are assumed to have low ridership, they all perform better than the car and light trucks do with their average number of passengers. Similarly, when the California High Speed Rail system is assumed to have low ridership, it still performs better than the SUV or pickup with an average number of passengers.

    Another aspect of the results is that the transit systems have a common characteristic. A large percentage of their lifetime energy use goes into construction, particularly the construction of underground stations built of concrete (concrete is very energy-intensive to make). This points up at least one advantage of simpler, surface-running transit: It does a better job of saving energy, compared to elaborate transit systems with large underground stations.

    The role of context

    As welcome as the analysis is, it has several shortcomings that derive from an important absence: There is no consideration of urban context. Context is essential to energy and pollution impacts, especially for a report that considers 50- and 80-year time horizons.

    Looking at the life cycle energy results, one might be tempted to say that SUVs use three times more energy to move riders than the BART system. But modes are not directly comparable in that way, because urban context — the way street networks and land uses are configured — plays a large role in transportation energy use.

    An APTA study on transit and land use quantified that effect. APTA found a “primary effect” of energy savings when people switched from cars to transit. But APTA also found a “secondary effect” of transit enabling built environments where people drove less, walked more, and used transit more. The secondary effect was twice the magnitude of the primary effect.

    In other words, switching from an auto trip to a transit trip saves a certain amount of energy, but the presence of transit itself creates efficient neighborhoods that save twice as much energy. The 50-year time frame is certainly long enough for these secondary effects to develop.

    [...]

    [emphases added]

    DS

    * Mikhail V. Chester, “Life-cycle Environmental Inventory of Passenger Transportation in the United States” (August 1, 2008). Institute of Transportation Studies. Dissertations. Paper UCB-ITS-DS-2008-1.
    http://repositories.cdlib.org/its/ds/UCB-ITS-DS-2008-1

    posted on December 10th, 2008 at 10:44 am

  11. 11 On December 10th, 2008, the highwayman said:

    C. P. Zilliacus wrote:

    > User-fee-funded infrastructure has the added virtue of providing
    > a test of whether a project is worthwhile. If the project can be
    > funded out of user fees, there is no doubt that it is worthwhile.
    > If not, then it remains open to question: is it infrastructure
    > or is it just pork?

    I tend to agree with the above. Which is why rail transit projects
    should not be funded out of these dollars, but new toll highway
    capacity can (and should be).

    THWM: Then why would you need public funds in your toll road case?

    posted on December 10th, 2008 at 11:35 am

  12. 12 On December 10th, 2008, the highwayman said:

    t g Says: Karlock, AP, and others of the liberatarian fold: I was libertarian for a long time. Read Reason religiously. But I don’t recall ever seeing a reasonable proposal for a citizen opt-out movement. Surely the more radical of you libertarians have dreamt of foregoing all (most) government benefits (public roads, voting, etc) in order to be unburdened by the yoke of (unrepresentative?) taxation. Are there any serious proponents for a dual system? For it seems that the taxation for these projects is the bigger issue. Is there a possible system (and is anyone seriosuly advocating for it) where I can ignorantly pay my taxes and suffer the consequences of my conservative neighbors’ voting habits (here in AZ we are about to be yoked by J. Brewer as guv) and you and other freedom lovers can…pay as you go?

    Well even the Reason Foundation isn’t about being reasonable.

    They want their cut of pork spending too.

    posted on December 10th, 2008 at 11:16 pm

  13. 13 On December 11th, 2008, prk166 said:

    It’s not just a matter of the low marginal gains from “upgrading” these projects, it’s a matter if they should be done at all. Much of this road system was built at a time when rural areas had much more political power and many more people living there. The first thing is to question if all of these roads are actually needed. There’s a good chance that many of these state highways, or at least sparsely used sections of them, should be downgraded to state-assisted county roads. And some state-assisted country roads should lose their state help. And some county roads should be dropped and maintained by the townships. And the townships, well, it sucks to be at the bottom but if you help them too much they won’t make the tough decisions to downgrade or even all out drop some roads. Not a very politically sexy message for the voters, though.

    posted on December 11th, 2008 at 8:10 am

  14. 14 On December 11th, 2008, Dan said:

    prk, I see your point but that’ll never fly. Rural areas feed us, after all, and you need to get food to market. It’s not about sheer numbers of humans, its about food/feed.

    A major issue is that these subsidized highways are nearing the end of their designed lifespans. We haven’t been maintaining them to standard, so what to do? One wonders where all the wealth went that was invested in the deferred maintenance…

    DS

    posted on December 11th, 2008 at 8:31 am

  15. 15 On December 11th, 2008, the highwayman said:

    A chain is only as strong as it’s weakest link.

    posted on December 11th, 2008 at 9:21 pm

  16. 16 On December 12th, 2008, Kevyn Miller said:

    JK, The constitution only demands that government should do post roads, roads for postal purposes, there is no reference to roads for other purposes.

    In a 1907 case, Wilson v. Shaw, Justice David Brewer wrote that Congress had the power “to construct interstate highways” under the constitutional right to regulate interstate commerce.

    Thus the constitution “allows” government to do roads but it only “demands” that government do post roads. There is a sector in a chapter in US law that authorises the US Postal Service to determine which roads are post roads and which are not.

    A good article on the reluctance of Congress to become involved in the provision of roads can be found here:
    http://www.tfhrc.gov/pubrds/summer96/p96su2.htm

    posted on December 12th, 2008 at 6:11 am

  17. 17 On December 16th, 2008, the highwayman said:

    Thanks Mr.Miller for that great link.

    It’s interesting to see how far roads and big government go back.

    Though the same could be said about the Roman Empire too.

    http://www.historic-uk.com/HistoryUK/England-History/RomanRoads.htm

    posted on December 16th, 2008 at 7:57 pm

  18. 18 On December 18th, 2008, Dan said:

    Athens had roads going out to resources – forests, fields, quarries.

    The road leading to a key quarry was paved with limestone blocks and people back then complained about it’s disrepair and poor drainage.

    DS

    posted on December 18th, 2008 at 8:08 am

  19. 19 On December 20th, 2008, the highwayman said:

    Well Dan, the good roads movement was started by bicyclists, it was only later on that it was hijacked motorists.

    Good roads are an important thing for city along with good public transit, such as trams and suburban trains.

    The big problem with people like O’Toole, Cox & Karlock is that they don’t want people to have other viable options of mobility.

    When automobiles are the only choice, that isn’t really a choice.

    Sounds so very Orwellian, doesn’t it.

    posted on December 20th, 2008 at 7:24 pm

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