How strongInfrastructurestrong Investments Support the U.S. Economy.pdfVIP

How Infrastructure Investments Support the U.S. Economy: Employment, Productivity and Growth JANUARY 2009 James Heintz Associate Research Professor Associate Director Robert Pollin Professor of Economics Co-Director Heidi Garrett-Peltier Research Assistant Political Economy Research Institute INFRASTRUCTURE INVESTMENTS AND THE U.S. ECONOMY Summary of Main Findings The United States system of civilian public infrastructure has deteriorated badly over the past generation. The breaching of New Orleans’ water levees in 2005 in the wake of Hurricane Katrina and the collapse of the I-35W bridge in Minneapolis in 2007 offered tragic testimony to this long-acknowledged but still neglected reality. After this generation of neglect, the project of rebuilding our infrastructure now needs to be embraced as a first-tier economic policy priority, and not simply to prevent repetitions of the disasters in New Orleans and Minneapolis. The more general point is that infrastructure investments are essential for the functioning of the U.S. economy. According to the U.S. Bureau of Economic Analysis, total public assets, excluding defense, were valued at $8.2 trillion in 2007. This represents approximately 50 percent of the stock of all non-residential private assets—a formidable asset base which underpins the national economy. Core economic infrastructure—in the areas of energy, transportation, and water and sewerage—is particularly important in maintaining economic performance. However, the rate of public investment in these core areas began falling in the 1970s and has not returned to its previous levels since then. As an average since 1980, the growth of infrastructure investment has lagged behind overall economic growth. The result has been a worsening infrastructure deficit and mounting investment needs. With the rapid deterioration of economi