The High Cost of Ignoring America’s Infrastructure

The transportation and energy networks are the lifelines of the U.S. economy, powering factories, enabling the delivery of goods and materials, and sustaining quality of life. But investment in our nation’s infrastructure has fallen perilously low, and the economic repercussions could be disastrous.


Infrastructure investment is vital. The American Society of Civil Engineers (ASCE) recently warned that unless the U.S. devotes an additional $1.57 billion per year on infrastructure through 2020, the country will lose $3.1 trillion in gross national product (GNP) and $1.1 trillion in trade. On an individual level, the average American will lose $3,100 each year in personal disposable income, resulting in $2.4 trillion in lost consumer spending in the next seven years and the subsequent elimination of 3.1 million jobs.

Infrastructure constitutes “the physical framework upon which the U.S. economy operates and the nation’s standard of living depends … including transporting goods, powering factories, heating and cooling office buildings, and enjoying a glass of clean water,” the ASCE explains.

Discussions of public infrastructure often focus on safety issues, such as the danger of deteriorating bridges. However, allowing infrastructure to decline also has a cascading impact on business productivity, gross domestic product (GDP), employment, household incomes, and the country’s competitiveness on the world stage.

Neglect in one area can affect performance in another. For example, “regardless of how quickly goods can be offloaded at the nation’s ports, if highway and rail infrastructure needed to transport these goods to market is congested, traffic will slow and costs to business will rise,” the ASCE notes. To calculate the true economic losses of deteriorating infrastructure, it’s necessary to consider these kinds of chain effects.

The cumulative need for infrastructure investment will come to $2.7 trillion by 2020 and rise to $10 trillion by 2040. However, current funding plans only cover 60 percent of the 2020 requirement and 53 percent of the 2040 requirement. Thus, the investment gap comes to $1.1 trillion by 2020 and $4.7 trillion by 2040.

“Travel times will lengthen with inefficient roadways and congested air service, and out-of-pocket expenditures to households and business costs will rise if the electricity grid or water delivery systems fail to keep up with demand,” the ASCE warns.

Goods will be more expensive to produce and more expensive to transport, and the costs will be passed along to consumers and business customers. Business-related travel, as well as personal travel, will also become more expensive. As a consequence, U.S. companies will become less efficient and suffer in global competitiveness.

The overall effects of degrading infrastructure will cost $611 billion for households and $1.22 trillion for businesses, for a total of $1.83 trillion by 2020. Unless addressed, these figures will rise by 2040 to $2.85 trillion for households and $5.81 trillion for businesses, totaling $8.66 trillion in costs.

These findings are supported by other key research. The McKinsey Global Institute estimates that keeping pace with projected growth in global GDP will require approximately $57 trillion in infrastructure investment worldwide between now and 2030. Taking practical steps to improve infrastructure performance today could provide a major payout, yielding annual savings of $1 trillion – the equivalent of paying $30 trillion for $48 trillion worth of infrastructure – over the next 18 years.

McKinsey points out that additional funding is not the only requirement for improving and repairing infrastructure. Equally important is finding ways to add more and better-quality infrastructure for less money. Its report outlines how governments and the private sector can work together to greatly bolster infrastructure productivity by:

  • Improving the selection of projects and optimizing infrastructure portfolios;
  • Streamlining project delivery through better processes for land acquisition, project approvals, early-stage planning and design, and structuring of contracts; and
  • Getting the best use out of existing infrastructure assets instead of always investing in costly new projects.

ASCE’s report is the last in a five-part Failure to Act series and paints a grim picture of America’s future without an aggressive program of infrastructure improvement. The authors emphasize that their findings “are analytical and do not offer policy or funding prescriptions.” But the implication seems clear.

As Janet F. Kavinoky, a U.S. Chamber of Commerce executive, asserts: “The ASCE report cites large needs and the numbers can seem daunting, but they can be met if our elected and appointed officials are willing to show leadership and address revenue needs as soon as possible instead of waiting for the next infrastructure crisis.”

 

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Comments:
  • Lou
    February 12, 2013

    Bull! the problem is the current adminstration and higher cost of doing buisness (unlawful regulations mandated health care) and uncertanty in US policies. Its seems the Federal Goverment has no limits on what they want to stick their fat noses in and screw up. Infrastructure shovel ready jobs what a joke! They still have money allowcated from the highway funds they didnt use. Lower taxes elimnate regulations (if it isnt specifically passed in congress its not the law) or let the states take care of it stop the FED from being a barrier to doing buisness. The country turnig into commy red mess. Oh yeah Dems stop selling guns to Mexican drug cartels and lying to the american people!


    • Hans
      February 19, 2013

      You are not too paranoid are you? Because you think the world appears to be closing in on you, and it’s all because of THEM!


    • Mike
      February 20, 2013

      Beck likes to connect everything bad to everything bad and then blame the liberals and the government–is he your mentor? Or is this a Charlie Sheen rant spoof? Let’s blame the government for those darn freeways and national parks. And let’s blame the darn government for stopping drilling on our watershed, I love drinking polluted water. Hey, the world isn’t black and white, as O’Reilly and Faux News would like you to think. Fortunately, most of us don’t buy the endless spin from the right.


  • Mike
    February 13, 2013

    Excellent article and message from the US C of C exec. I only wish it could be grasped by the Republicans in the US Congress. Our present path will be costing us big time in the future, as other countries who know better will have already built out their infrastuctures. And we’re talking about something that can NOT be done overnight!

    This is not about the 99%, this is about the 100% of Americans.


    • Hans
      February 19, 2013

      Odd, that the one organization closely allied with the Republican party, cannot manage them to do something constructive.


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