The United States Senate just passed their version of the stimulus package. They will now send a group of negotiators to meet with a similar group from the US House of Representatives and work out a compromise between the two bills. Whatever your opinion on stimulus, spending, tax cuts, etc..., the infrastructure component of this is revealing.
For background, a recent report by the American Society of Civil Engineers grades America's infrastructure as a "D". They indicate that $2.2 trillion in repairs and upgrades are needed over the next five years. In rather cute fashion, ASCE categories different types of infrastructure and grades them separately. "Roads" get a "D-", for example. Like my undergraduate advisor told me in civil engineering school, "a D is not failing." (For the record, I got one D as an undergraduate, but hydraulics was tough and my professor was terrible).
For those who either don't like to read or just have mild ADD, here is CNN's summary of the report:
The story in perspective here is that we have a lot of investment needed just to keep up. The $2.2 trillion does not include major investments in infrastructure - intelligent transportation systems, smart-grid, high-speed transit, improved wireless - but only what should be called maintenance with some modest improvement. Treading water kind of stuff. Not the kind of investments that transform economies. Not even the types of investments that induce new investment. Just treading water.
So here we are today with a near-term maintenance liability of nearly $20,000 per family for the nation's infrastructure. Let's look at what the stimulus package contains for infrastructure.
Highways and Bridges
High Speed Rail
Energy Efficiency Block Grants
Water and Waste Water
Federal Green Buildings
Either way you look at it, the current proposals would spend less than $50 billion on infrastructure.
Let's put that in context. Assume for the sake of discussion that our infrastructure systems, once upgraded, can be properly maintained over time at current spending levels. In other words, assume that after a $2.2 trillion investment, our infrastructure becomes economically sustainable. All we have to do is catch up (stimulus spend) to get to a point where we can cash-flow an overall maintenance program.
At our current rate of stimulus spending, it will take us 44 years to catch up.
Of course, this is silly. Infrastructure wears down and needs to be maintained. We can't just catch up in 40-years because each day infrastructure is used, it deteriorates and our maintenance needs grow. Not only do we need the $2.2 trillion now, but we're falling further and further behind each year. We economically can't maintain all of the infrastructure we have built.
The civil engineers have an answer for this. They have five solutions, actually.
- Increase federal leadership in infrastructure.
- Promote sustainability and resilience.
- Develop federal, regional and state infrastructure plans.
- Address life-cycle costs and ongoing maintenance.
- Increase and improve infrastructure investment from all stakeholders.
Look at #2 and #5 more closely. We do need sustainability, but when you read what the engineers believe that is, they are talking all of the politically-correct stuff. From ASCE:
"Infrastructure systems must be designed to protect the natural environment and withstand both natural and man-made hazards, using sustainable practices, to ensure that future generations can use and enjoy what we build today, as we have benefited from past generations."
And we also need to address life-cycle cost and ongoing maintenance. Again, from ASCE:
"As infrastructure is built or rehabilitated, life-cycle cost analysis should be performed for all infrastructure systems to account for initial construction, operation, maintenance, environmental, safety and other costs reasonably anticipated during the life of the project, such as recovery after disruption from natural or manmade hazards."
What is missing from this is any connection to financial sustainability. For ASCE and the engineers it represents, "sustainability" and "life-cycle cost" means making sure we do the right things so as to not run afoul of politicians while also making sure there is ever more money to spend on infrastructure (see also "solution" #1 and #5). This misses the mark wide.
Sustainability and life-cycle cost should mean funding only those projects where the tax base and economic development generated by it can financially sustain that project. I'm sure engineers would argue that they do that, but that is absurd. Look around. We are awash in old, deteriorating infrastructure - by the ASCE's own numbers we are getting a "D" grade and there is $2.2 trillion needed just to catch up. The only way to pay for this today is to spend money we don't have (stimulus), and even that is not enough. If engineers have been doing financial analysis, they have failed miserably and need to admit their model is broken.
When is someone (besides us) going to step back and say, instead of borrowing money to ever-expand our infrastructure to induce more growth, perhaps we should be finding better ways to use the investments we already have. It would be helpful if ASCE and other engineering organizations would realize that we have built beyond our ability to maintain and that a "road-to-nowhere" is only the tip of the iceberg.
A system that relies more on national politicians and not local markets to set spending priorities will inevitibly create massive financial waste and inefficiencies. Unfortunately, both engineers and politicians benefit from this system. So does society for a while, as with any Ponzi-scheme.