In his speech to Congress last night, President Donald Trump once more promised to rebuild America with $1 trillion of repairs and construction. As he and his aides have indicated before, he said that much of the money won’t actually come from taxpayers but from private investors. But will the effort be worth it for the American economy? A Washington Post analysis of some other countries’ infrastructure binges suggests it won’t:
China spent more than $1.4 trillion on infrastructure in 2016, splurging on railroads, bridges, road and telecommunications. Over the past decade, it has invested $11 trillion on these kinds of projects; economists say it will need to continue investing about $2 trillion a year to maintain economic growth at today’s rates. These projects have been important — they’ve added more than 12,000 miles of high-speed rail (China is home to 60 percent of the world’s high-speed rail) and 30 new airports since 2011.
Those are impressive figures. But it’s not clear that the building binge has had much effect on the economy. One study out of Oxford University found that half of China’s infrastructure investment destroyed economic value rather than creating it. (Think of ghost cities full of empty apartments and offices.) Additionally, it found that the vast majority of projects are delayed and over budget. This, even though China’s autocrats can seize property and disregard regulation pretty much with impunity. “Unless China shifts to fewer and higher-quality infrastructure investments the country is headed for an infrastructure-led national financial and economic crisis, which is likely to spread to the international economy,” the study’s authors concluded.
That’s a facile comparison. The United States is not China, to put it bluntly. Moreover, while it may be true that spending a lot of money on new rail and bridges isn’t smart, there are still plenty of areas ripe for investment. A report by Aaron Renn of the Manhattan Institute finds that while building lots of new roads doesn’t make much sense (in part because driverless cars could alter traffic dramatically), investing in maintenance and repair can deliver significant benefits. As Renn notes, 20 percent of our roads and bridges are in poor condition. Fixing them should be a priority. (The Post does argue that Western Europe’s infrastructure strategy might be better to emulate than China’s, particularly the Continent’s heavy reliance on public-private partnerships. On that point, we couldn’t agree more.)
But the biggest problem with American infrastructure today isn’t actually the amount we spend; it’s how we spend it. Far too much money for highway repairs and mass transit upgrades goes to consultants and lawyers who help navigate costly environmental and safety reviews that often simultaneously occur in multiple layers (state, local, federal) of the government. These can take years to complete, adding significant cost to the overall project. Meanwhile, mandates imposed by the Davis-Bacon Act force the government to pay prevailing union wages for all projects. Additional union-related restrictions often mean more workers on each project than should be necessary, more overtime pay, and other costly impositions. Add all this up and, as in health care and education, the country spends multiple times what anyone else does even for simple construction projects like paving highways.
Trump actually seems to understand this. As his criticism of the new Air Force One program indicated early on, he believes the American people are getting a raw deal. In general, he’s absolutely right. If we’re going to have an infrastructure plan that delivers real results on some kind of reasonable timeline, we’re going to need to negotiate better terms with contractors and consultants. Does President Trump have what it takes to pull that off? It’s what he has repeatedly campaigned on as his special competence, but only time will tell.