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How the USA Infrastructure Gaps are Hurting Economic Development

Updated on June 4, 2012

USA Infrastructure Investment Requirements

The US Government and Infrastructure
The US Government and Infrastructure | Source

A lack of investment in infrastructure hinders investment in the USA


Amidst the euphoria of his election, President Barack Obama promised to boost the failing economy through a series of investments. One of the priority areas was the dilapidated infrastructure. The first two years of his first time offered an opportunity but the unsure Democrats failed to capitalize. They were replaced by an intransigent GOP-dominated Congress in 2010.

Now that we are in the official campaign for the Presidency, Mitt Romney is broadly supportive of spending cuts on the GOP side. Barack Obama takes the classic Liberal approach of advocating for government investment. Meanwhile the country’s infrastructure continues to struggle after years of under-investment and a growing population in the USA.

The investment disincentive associated with poor infrastructure

It is estimated that inland waterways transport about $180 billion worth of steel, coal, chemicals and other goods on an annual basis. [1] This represents 1/6th of the US freight load. 38 states are benefitting from the presence of these waterways but unfortunately the system is largely antiquated. Locks and dams have not been updated and this means that delivery timescales are compromised.

The high incidence of breakdowns is frustrating to entrepreneurs but also costs the economy quite a lot of money. The main chamber at a lock in the Ohio River near Warsaw recently broke down and is being prepared. At one point the delay timescales were increased from 40 minutes to 20 hours! No economy can sustain such inefficiencies especially if it is competing against manufacturing giants like China.

Marty Hettel is the AEP Senior Manager and he estimates that about $5.5 million is being lost to the organization and its customers due to outages. The American Electric Power company needs to ferry coal and other supplies to its customers. Business costs are one of the main reasons why some companies are choosing to outsource rather than staying in America. Poor infrastructure is only going to make matters worse.

Is there any hope for better infrastructure in the future?

Dan Murray of the American Transportation Research Institute believes that things are getting better economical but investment in infrastructure is required: "The good news is, the economy is turning…The bad news is, we expect congestion to skyrocket." [1]Therefore government policies that advocate for the wholesale reducing in infrastructure investment are going to be necessarily counterproductive.

According to the Building America's Future Educational Fund, freight bottlenecks are costing the economy $200 billion a year. This is about 1.6% of the total output from the US economy. Even as a divided congress attempts to deal with a $1.3 trillion federal deficit, the issue of infrastructural development will have to be dealt with. It is not a matter of cutting everything in sight and hoping for the best.

The chamber of commerce puts the costs even higher at 7% of the economy or $1 trillion annually. In this climate government investment in infrastructure has fallen each year from 2008. This year the drop is 4.4% and next year it is going to be about 3%. Only half of the $2.2 trillion needed over a five year period to repair the infrastructure is being spent. In 2010 80,000 hours of lock outages were lost as a direct result of low investment.

The dangers of unfettered austerity politics

Greece is a prime example of how a nation can collapse even as free capitalists attempt to help it out of its problems. America is different but the lack of investment in infrastructure is likely to cost it in the future. Nobody wants to invest in a nation where delays are the routine and efficiency is the exception. The lack of competitiveness will mean that other global players come in and snap up the market.

Ideological battles over spending are good for the pundits but they do not offer practical solutions to the problem of a nation that is attempting to get out of a recession. Money that is ostensibly saved through spending cuts may end up stopping further growth. America’s infrastructure is too important to play games with. The politicians need to smarten up.

Resources:

  1. P. Davidson,”USA's creaking infrastructure holds back economy”, 20th May 2012, USA Today,http://www.usatoday.com/money/economy/story/2012-05-20/creaking-infrastructure/55096396/1

The author recommends alternative topics including Presidential Politics and the global economy.

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Comments

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    • Johnkadu123 profile imageAUTHOR

      Johnkadu123 

      6 years ago from Toronto, Canada

      I agree with you about a 'do nothing government'. Hopefully the current wave of negative campaigning is going to stir some people in Washington.

    • Johnkadu123 profile imageAUTHOR

      Johnkadu123 

      6 years ago from Toronto, Canada

      Thanks for the comment CHRIS57. Its all a matter of prioritization, something the the USA government refuses to do. They will only realize their mistake when China has better infrastructure.

    • CHRIS57 profile image

      CHRIS57 

      6 years ago from Northern Germany

      Whenever i travel through the United States it amazes me how much was constructed and built during the 30ties and during the 50ties and early 60ties.

      Not much can be seen which originated in the last decade. That includes roads, railways and waterways. Of course you don´t need a new road atlas if nothing changes.

      I share your thoughts on the "do nothing" policies of the current administration.

      Every fairly successful economy must take care of its infrastructure before it can prosper. That is so with China (i had the privilege to participate in dam gate and ship lock projects for the Yangze river some 20 years ago) and with Germany (the first thing done after reunification was to rebuild all infrastructure in East Germany).

      It is a sad story that not much is happening in the US.

    • Johnkadu123 profile imageAUTHOR

      Johnkadu123 

      6 years ago from Toronto, Canada

      Thanks for commenting Schneider. Although I am not party to all the compromises required, I feel that president Obama was too willing to suppress the liberal agenda in the hope of reasoning with his GOP opponents. The recent SuperPAC adds are an indicator that he got it all so wrong.

    • Johnkadu123 profile imageAUTHOR

      Johnkadu123 

      6 years ago from Toronto, Canada

      Thanks for commenting Schneider. Although I am not party to all the compromises required, I feel that president Obama was too willing to suppress the liberal agenda in the hope of reasoning with his GOP opponents. The recent SuperPAC adds are an indicator that he got it all so wrong.

    • profile image

      Howard Schneider 

      6 years ago from Parsippany, New Jersey

      You are right Johnkadu. The U.S. is not doing enough to fix our infrastructure. There was a golden opportunity to do that in 2009 but the Republicans watered the stimulus bill down so much, it was rendered ineffective.

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