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December 13, 2011

Infrastructure 'Crisis' is About Socialism

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We constantly hear that America has an infrastructure crisis and that calamity will result if we don't address it. Inevitably the solution involves the investment of vast sums of taxpayer money. Not surprisingly, most estimates of how extensive the crisis is, and how much it will cost to fix, come from what Washington euphemistically calls "stakeholders": the trade associations whose members would benefit financially from the prescribed remedy.
Sen. John Kerry's bill to create a federal infrastructure bank cites the American Society of Civil Engineers' estimate that $2.2 trillion in infrastructure spending is needed over the next five years to bring us up to an "adequate" condition. At $400 billion per year, the engineers would have us spend on infrastructure about what we spend each year on all of the federal, nonsecurity, discretionary programs — an amount equal to 20 percent of all federal tax collections in FY 2011.
Is it really this bad? With the American economy still struggling, the infrastructure stakeholders have rebranded their effort as a jobs program. But there is little evidence to suggest it will provide the promised boost.
However,this rebranding effort has had some success in influencing disparate organizations: In November members of Occupy DC rallied at the 89-year-old Key Bridge "to highlight their contention that repairing aging infrastructure will create jobs," and House Republicans renamed their highway bill the American Energy and Infrastructure Jobs Act.
Infrastructure is defined as long-lived physical assets that provide a flow of valuable services to people over time. It includes such things as residential housing, roads, power plants, telephone poles, railroads, manufacturing facilities, office buildings, hotels, shopping centers, transit systems, water supply and treatment systems, airports, airplanes, cars, public housing, trucks, farms and buses, to name just a few.
All of the above are of considerable value, obviously. But not all of them belong on the infrastructure crisis lists. And the fact that the Occupy DC people chose a bridge — not a car dealer, a shopping center, pizza parlor or freight railroad — to protest disrepair and poor service suggests that the real crisis is not one of infrastructure per se, but of the parts that are government-owned and operated with a degree of mismanagement familiar to the millions of Russians and East Europeans who decided to junk such a system in the late 1980s. As such, our infrastructure crisis is really a crisis of monopoly socialism.
By contrast, those important elements of infrastructure that are not in "crisis" are those in private hands and subject to market forces. They, more often than not, experience the crisis of overproduction, the opposite problem confronting public infrastructure. Who would argue that we have too few cars on the road? The main farm policy conundrum is too much food production. And we can trace the recent collapse of the housing market and the subsequent decline in home prices to having more new single-family homes than qualified borrowers.
Obviously, none of the proposed government infrastructure initiatives have identified a shortage of privately provided infrastructure as a cause for concern. Instead, they focus on areas that have been government's responsibility for as far back as a century. But in doing this neither the president nor a bipartisan majority in Congress have yet to experience their Pogo moment and discover that the problem stems from the public sector's mismanagement of our accumulated wealth.
Privately provided infrastructure is abundant and well maintained because of the competitive market's incentives and signals. By contrast, the public provision of infrastructure is wholly detached from anything the consumer might actually want.
Instead, public sector investment is determined by a lethal combination of stakeholder influence and competing demands on public resources.
Sure, some would argue that in the pseudo-market of a democratic system consumers- voters can demand higher taxes to fund public infrastructure, and their leaders would provide it. But in today's America the consumers know better. Whereas a competitive, private restaurant chain would respond to an increase in sales of apple pies by providing more apple pies, the same chain managed by a congressional transportation committee would respond by providing more salad, albeit with a few apple bits in the dressing.
Looking for ways to privatize elements of the current state- and federally controlled infrastructure system is a good place to start. But most public officials would see this approach as too risky and controversial. Alternatively, governments might, as an important first step, look for ways to "commercialize" their surface transportation programs by better connecting user fees to places and modes of travel that provide those fees. Until the early 1980s that was pretty much the way it worked with the highway trust fund and the construction and improvement of the interstate highway system.
If it worked then, why not look for ways to apply those principles to the transportation problems that now confront us?

Ronald Utt is the Herbert and Joyce Morgan Senior Research Fellow for the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

First appeared in The Modesto Bee

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