Best of Blog: ASCE and the Infrastructure Cult

Our reporting this year on the American Society of Civil Engineers (ASCE) and their propaganda was a contribution to the public debate I am particularly proud of. What started out as frustration with my fellow bloggers -- as well as members of the traditional media -- over the mindless way they parrot the findings of ASCE, turned into something that landed us on the pages of Newsweek and the Washington Post, not to mention garnered us lots of support from engineers working in the profession.

Even today, this entire event has a surreal feeling. ASCE releases a report that projects -- in a completely bogus and inflated way -- all of these damages that will be suffered if we don't spend more money maintaining our highways. As if there weren't enough to critique with just that, the report then calls on the government to spend many multiples of the inflated "damages" to avoid all this suffering. None of this was difficult to discern for anyone willing to flip beyond the press release.

Despite this ridiculousness, the blogger world along with the traditional media outlets ran with ASCE's propaganda. The unwritten premise of the report -- that spending money on highways is ALWAYS a positive investment -- is so strong that nobody even bothered to question the numbers. There was only one word to me that described this reaction.

Cult; a group or sect bound together by veneration of the same thing, person, ideal, etc..

When ASCE "revised" their report, I sensed we had exposed a truth they hadn't even questioned themselves. When ASCE president Kathy Caldwell suggested to Neal Peirce of the Washington Post that Strong Towns made "misstatements" in how we characterized the "purpose of the study" (not any of our facts), I knew we had changed the debate.

In their report, ASCE indicated that there would be three subsequent studies released in the coming months on other parts of America's failing infrastructure systems. I anticipate that, should they proceed with releasing those publications, they will be subject to some actual scrutiny from more than just Strong Towns.

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The ASCE Infrastrcture Cult

The American Society of Civil Engineers has just released a report that should be titled, "Pretending it is 1952." Like a broken record, ASCE is again painting a bleak picture of the future if American politicians -- as if they need to be plied -- won't open up the checkbook for our noble engineers. And in a way that the Soviet Central Committee would have expected from Pravda, the media and blogger world is sounding the alarm. This feels more like a cult than a serious discussion on America's future.

In the Long Depression of the 1870's, the railroads found they had over-invested in transportation capacity. Speculating on future growth and the returns on land development, they collectively built more rail lines than could be put to productive use. The result was a huge financial correction in which the private-sector railroads consolidated their routes, down-sized their unproductive infrastructure and put their reserve capacity into endeavors that had a higher rate of return. This was a painful, but necessary, correction.

The parallels to 2011 are obvious. We've built out the interstate highway system as it was originally envisioned -- although we opted to go through cities instead of around as planned -- and then we built some more. We poured money in highways, county roads and local streets. We have so much transportation infrastructure -- a huge proportion of it with no productivity -- that every level of government is now choking on maintenance costs.

While originally conceived in the name of "national defense," these investments were made in the service of "growth" and the belief that all increases in mobility, no matter how insignificant, would add to the overall prosperity. We've spent trillions to save seconds in the first and last mile of each trip, and what we've gotten is the fake prosperity of a land use pattern that is bankrupting us, housing bubble and all. This is the essence of the financial correction we are experiencing.

But there is one huge difference between today and 1873. Back then, while the railroads received government subsidies, they were still private businesses. They had to face financial reality. Today, our transportation systems are a public good funded through government spending. The only reality check on this system is financial collapse.

We have a government that can borrow and tax as much money as needed and a Federal Reserve to print whatever Congress lacks the "courage" to raise. Combine that with a cult-like belief that the path to prosperity in America is to create more growth through more infrastructure spending, and you have a recipe for financial disaster. There is no negative feedback loop here that will slow this madness. Even Tea Party darling Michele Bachmann is a shill for massively unproductive transportation projects in her own district.

So in steps the American Society of Civil Engineers. If this is an infrastructure cult, they are the normal-looking guy that is there to reassure anyone who might think of leaving. That is probably what upsets me the most. I'm proud to be a civil engineer, but I will have nothing to do with ASCE and their self-serving, narrow view of the world. Consider the following:

  • ASCE estimated the "costs to households and businesses" from transportation deficiencies in 2010 to be $130 billion. (page 3)
  • ASCE estimated the cumulative losses to businesses will be $430 billion by 2020. (page 5)
  • ASCE estimated the cumulative losses to households will be $482 billion by 2020. (page 5)

If you add these together, the total cost to households and businesses is $1.042 trillion. Well, ASCE states that to reach "minimum tolerable conditions" (a pretty sad standard) would take an investment of $220 billion annually. Over 10 years, that's $2.2 trillion. Yeah, you read that right. The American Society of Civil Engineers wrote a report that suggested over the next decade we spend $2.2 trillion so that we can save $1.0 trillion. And you wonder why we're broke.

There are some things to understand about the $1 trillion as well. Those aren't losses to businesses and households as in money out of their pockets. This is the same old game we reported on extensively last year with our analysis of the benefit/cost analysis approach on the Staples overpass. The costs are all very real dollars that we spend. The benefits -- or in this case the losses -- are things like lost driving time and wear and tear on your car.

You work at a job making $25/hour. By ASCE math, I as an engineer spend untold sums and improve your commute by two and a half minutes in each direction. Each day that is five minutes saved. Each week it is 25 minutes. Each year I've saved you 22 hours. Over the 25 years of that road, I've saved you 540 hours which, at $25 per hour, is worth $13,500. Now, it is not just you that has enjoyed this tremendous windfall. Look around at the thousands of others on the road with you. Add them all up and, according to ASCE and the standard engineering approach, this transportation project is making us all very rich.

ASCE is touting some other GDP costs as well, although it is hard to discern them clearly since, due to the ridiculousness of the numbers, they are forced to project out to 2040. Anytime someone has to project out that far to make an economic argument they are grasping. For some context, consider that 30 years ago inflation was over 10%, interest rates were over 15%, the Internet was still a decade and a half away, Ronald Regan was president and the big event of the year was the launching of the Space Shuttle. Think they've factored in that kind of volatility? And you have to love the hubris of engineers making projections. What other profession would do a 30-year projection and come up with a precise number like $3.248 trillion?

ASCE estimated that, in a 30-year trend projection, we would have 400,000 more jobs in 2040 if we fully funded our transportation system (page 13). The ridiculousness of this number can't be overstated. NEW jobless claims last week alone were 400,000. We're supposed to make a multi-trillion dollar investment over the next three decades on a trend line projection that we'll have 400,000 more jobs? Are they serious?

One other thing in the report that made me shake my head was a table they had titled, "Top 20 Countries and Economies Ranked by the Quality of Roads and Railroads." (page 17) For roads, the United States is ranked 19th behind such countries as France (2), Switzerland (3) and Germany (5), all countries that I have driven in. Anyone who has done likewise will attest that the standard highway in Europe is like a country road here in the U.S. I agree that their freeways are awesome, but they are also designed to connect towns, not feed strip development. I would attest that the "quality" in this case is less engineering-based and more a function of their adjacent land use not messing things up as ours does.

The table itself is based on an "Executive Opinion Survey" from The Global Competitiveness Report for 2010-2011. ASCE doesn't point out that, despite the sad opinion of our roads, the report ranks the United States as the fourth most competitive economy in the world. It is not really clear how we became so competitive with an infrastructure system ASCE ranked as a 'D'. Just maybe there is more to an economy than infrastructure?

At Strong Towns, we want our infrastructure maintained. In fact, it's the common denominator of a Strong Town. But the reason why we can't maintain our infrastructure is not because we lack the money or are afraid to spend it. It is because the systems we have built and the decisions we've made on what is a good investment are based on the kind of ridiculous math you see reflected in this ASCE report. We spend a billion here and a billion there and we get nothing but a couple minutes shaved off of our commutes, which just means we can build more roads and live further away from where we work. (Or, as we call that here in America: growth.)

Sixty years of unproductive infrastructure spending later, we are awash in maintenance liabilities with no money to pay for them. This is what happens when you have a government-subsidized, Ponzi-scheme growth system that, at all times, lives for the next transaction. America is all about new growth, which is why we don't even bother to question the findings in a study like this.

The ASCE report is an embarrassment to the engineering profession. The fact that politicians, journalists and bloggers are all lined up to mindlessly parrot these conclusions is pathetic. If we are actually going to get this country moving in a positive direction, we need a real understanding of how infrastructure spending is used to create value. We need a new approach to land use. We need to start building Strong Towns.

ASCE "revises" report

Yesterday we wrote about the ridiculous piece of propaganda issued by the American Society of Civil Engineers and dutifully circulated by the media. The report was designed to paint a negative picture of America's future if we did not pony up trillions for engineers to build and maintain infrastructure. The central argument was that continued decline of our infrastructure systems would cost us $1 trillion over the next decade. To avoid this calamity, according to ASCE, would cost us a mere $2.2 trillion. This is modern engineer-logic, where spending $2.2 trillion to save $1 trillion is just plain common sense.

Interestingly, ASCE has now issued a statement clarifying its report. According to Brian T. Pallasch, CAE, Managing Director, Government Relations & Infrastructure Initiatives:

“ASCE is revising figures reported in the release of its recent study on the economic impact of underinvestment in transportation infrastructure.  The original report dramatically underreported the negative effect of Americans’ personal income due to failing transportation infrastructure. The report shows a clear and rapidly-expanding negative impact on Americans’ pocketbooks in both the near and long term, and a dramatically accelerating negative effect on GDP in the near- and long-term. Our original release projected that Americans’ personal income would drop by $930 billion by 2020 but recover slightly in 2040. The data clearly show that the effects will be dramatically more negative, with $3.1 trillion in personal income losses by 2040. The negative effects on American GDP will also expand dramatically over time, with a near-term loss of $897 billion and a near-tripling of that loss to $2.6 trillion by 2040.”

Ostensibly they want to be taken seriously.

Let's focus on the revised GDP number of $2.6 trillion by 2040. Last week we talked about budget projections in our Monday piece, Downgraded. We pointed out how the Federal government is using overly-optimistic projections of GDP growth and how just slight changes downward in those projections would mean trillions in lost GDP. In fact, a minor drop in the growth rate from 4% to 3% would cut $2 trillion out of the GDP by 2020.

Sometimes when you are throwing around a trillion here and a trillion there, it all gets kind of lost in translation. So, what I did to clarify this is to start with the 2010 GDP of $14.7 trillion and project out three different growth rates through 2040, ASCE's study window. I then compared that to ASCE's projection for cumulative lost GDP. When you bring these projections out to 2040, here is what it looks like:

This illuminates the absurdity. Even in the scariest scenario envisioned by ASCE's report, GDP loss amounts to a fraction of the estimation error between the different assumed rates of growth. When you get to 2040, the $2.6 trillion in cumulative loss pales in comparison to missing the overall growth rate in the projection by just 1%. This is statistic silliness.

This also shows how ridiculous 30-year projections are. Do we really have a clue as to what our economy is going to look like in 30 years? Yesterday I looked back to 1981 in an attempt to point out how much change has taken place in the last 30 years. The hubris involved in making a projection like this, with the precision they offer, is laughable.

Just for the mental exercise, let's take ASCE at their word and assume we lose $2.6 trillion cumulatively in GDP. Since we tax at roughly 20% of GDP, that would mean the U.S. Treasury would lose out on $540 billion in revenue over the next 30 years. Contrast that with the $6.6 trillion they are suggesting we spend over that same period and you start to get a sense for how backward this logic is.

When I said yesterday that this felt like a cult, this is what I meant. We have collectively believed for so long that spending on infrastructure is the key to prosperity that we don't even bother to check if it is. I don't think ASCE even checked their own numbers. They simply looked at the estimates for lost GDP, etc... and said, "That sounds pretty bad." Then they looked at their projection for how much money they and their allies wanted to shoot for in the appropriation and said, "That sounds right."

They are all so brazen they didn't even bother to notice that the amount they wanted to see spent was more than the amount they claimed we would lose!

Or did they notice but thought we would be too stupid to figure it out? If they did, it worked. I've searched all over Google news and can't find a single story or blog that did anything but parrot this report's findings. Just like in a cult, nobody questions this stuff.

You'll note ASCE never took the annual transportation appropriation they were calling for and ran that dollar amount out to 2040. That would not have been good propaganda. 

ASCE's report is an embarrassment to the engineering profession. This revision merely adds insult to injury.

ASCE claims we made "misstatements"

My Google Alert just sent me this piece from the Seattle Times written by Kathy J. Caldwell, president elect for ASCE, responding to Neal Peirce's column in the Washington Post. Caldwell indicates that we at Strong Towns made "misstatements" in that we got the "purpose of the study wrong". Here is what she wrote:

Neal Peirce chose to trumpet the misstatements made in the “Strong Towns” blog about American Society of Civil Engineer’s “failure to act” report instead of looking into the report’s intent himself [“Prioritizing the nation’s infrastructure investments,” Seattletimes.com, Aug. 20].

If he had, it would have been clear that the study’s purpose was to show the expected negative effects of America’s current level of investment in surface-transportation systems, not prescribe ways for infrastructure dollars to be spent.

My critique of the ASCE report was that it was a ridiculous piece of propaganda that (1) intentionally distorted the numbers by projecting the "negative effects" cumulatively over 30 years and the needed "investments" in single year increments, and by doing so it (2) actually didn't recognize the fact that the "investments" had a far greater cost than the "negative effects" and thus (3) failed to provide any relevant information to decision-makers and policy advocates. 

My critique was also of the polticians, media and bloggers who blindly parroted the ASCE narrative in a call for more spending.

While it is true that the ASCE report does not, as Caldwell indicated, "prescribe ways for infrastructure dollars to be spent" in that it does not recommend specific projects or appropriation methods, it pretty clearly follows the bad-things-will-happen-unless-we-spend-more-money approach.

I urge everyone here to read the press release from ASCE and the report and see for themselves. In fact, here are the headings from the different sections of the press release. Read these and ask yourself if ASCE is playing the role of truth-seeker or propagandist.

  • American businesses and workers will suffer
  • Families will have a lower standard of living
  • Modest investment needed

In fact, just read the heading of their press release:

American Society of Civil Engineers releases first-ever report on how U.S. economy and family budgets will fare if America fails to fund surface transportation improvements

Caldwell and ASCE are adding insult to injury if they are going to try and say now that their intent was solely to point out the problem but had no suggestion as to what the policy response should be. Clearly, the response for a country that "fails to fund" is to fund, is it not? What are they trying to suggest by saying that only "modest investments" are needed to forestall "suffering" and a "lower standard of living"? Why include the "modest investments" at all if their only intention was to point out the problem?

The reality is, we've been pointing out this same problem for years: The United States has more infrastructure than we have the money to maintain. And as ASCE's report so vividly demonstrates, the public's return-on-investment for this system is horrendous. What we have built is simply not productive enough -- it does not generate enough prosperity -- to sustain itself.

Where we break from the propaganda machine at ASCE is in pointing out that "modest investments" are needed to keep this Ponzi scheme going. Overlooking the fact that the cost of the so-called "modest investments" exceed the cost of the estimated "suffering", Strong Towns is not calling for "modest investments", implied or otherwise. We're calling for an entirely different approach.

In fact, Kathy J. Caldwell provides a perfect analogy for a different approach in a statement she makes on her website. In response to a question about ASCE's focus for the year ahead, she states:

Many of our members are suffering from the impacts of the current recession, which impacts ASCE as an organization.  Consequently, our members rightfully expect ASCE to make similar tough financial, operating, and management decisions.  We must systematically review every element of the Society, going beyond the work of the Program Committee, which looks at only 10% of our overall budget.  A benefit-versus-cost analysis must be performed to identify areas of the Society that are underperforming or unproductive and, therefore, should be corrected or suspended.  We need to trim the trees and weed the garden, without destroying the landscape. 

Hopefully Caldwell will apply her organizational philosophy to the conclusions contained in the next ASCE report instead of promoting -- implied or otherwise -- a mindless continuation of the status quo.

 

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Charles Marohn