Want Economic Growth? Study Says To Build Bridges

Author: December 2, 2012 3:47 pm

The infrastructure across the United States is in a state of near collapse. Due to the cuts from the federal budget for the past 40 years, we have failed to maintain our aging infrastructure. Now 1 in 9 bridges in the United States as structurally deficient, requiring extensive repair or complete replacement. And some are actually failing. The costs to both lives and productivity from the failure to support these are outweighing the money saved in the federal budget.

A new paper from the Federal Reserve Bank of San Francisco (FRBSF), goes into detail on the economic benefits of infrastructure construction and repair. From highways to bridges to rail, the economic impact of these systems they found to be huge, far outweighing the up front costs.

The common argument against such projects has been that they are too long-term, and would not have sufficient short-term growth to address any economic crisis. However, this has not been studied in the past, and lacked evidence. The FRBSF report is one of the first to thoroughly study this, and its results are remarkable in that they fly in what is considered “common knowledge.”

What they found was that within the first year of any infrastructure project, a solid 10% GDP growth grew out of that project. Within 10 years, the project had not only paid for itself, it had a huge return on investment in GDP growth. Every dollar spent resulted in 2 dollars of GDP growth. That is money directly in people’s pockets, directly improving their way of life.

They conclude with this:

Infrastructure investment gets a good bang for the buck in the sense that fiscal multipliers—the dollar of increased output for each dollar of spending—are large.

Of course, the Republicans in congress don’t care about this. They are fighting to make huge cuts to infrastructural improvements, part of the “Paul Ryan Budget” which is just the same old failed economic policy repackaged all over again. They just hope nobody pays attention to the man behind the curtain.

If one seeks a conservative viewpoint, it is hard to find one more conservative than the Federal Reserve. It remains one of the dullest, most conservative departments of government imaginable, making even the IRS look like party animals by comparison. When the Federal Reserve is telling you that money should be spent on infrastructure, it is high time for the Republicans in Washington DC to listen. It was through gigantic projects like Hoover Dam and the Interstate Highway System that the United States grew into the world power it is today. A similar program today could restore us, and it is Republican Obstructionism which is holding back the economy. If they do not change their tune, they will be decimated in 2014.

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