If the US economy hopes to remain competitive globally, it needs to spend an additional $1.4 trillion on infrastructure improvements between now and 2025, and another $5.2 trillion by 2040, according to a report issued last week by the American Society of Civil Engineers.
The report, called “Failure to Act: Closing the Infrastructure Investment Gap for America’s Economic Future”, contends that the US will fall behind China and other countries unless local, state and federal governments drastically increase the amount they spend on railways, highways, bridges and other critical infrastructure projects.
Shrinking Economy, Job Losses
If the additional spending doesn’t happen, the US economy could lose nearly $4 trillion and 2.5 million jobs in the next decade, and $14.2 trillion and 5.8 million jobs by 2040, according to the group.
“The cost of deteriorating infrastructure takes a toll on families’ disposable household income and impacts the general quality and quantity of jobs in the US economy,” the report’s authors wrote in its Executive Summary. “From 2016 to 2025, each household will lose $3,400 each year in disposable income due to infrastructure deficiencies.”
Supply Chain Affected
Because the highways, trains, airports, bridges and other infrastructure the nation’s supply chain relies on are in such a sorry state, businesses have to spend substantially more to get their products to consumers. That expense is passed along in the form of higher prices, according to the report. And when people have to spend more for basic goods and services, they have less money left over to spend on things like better TVs, fancier cars, and bigger houses.
The US economy is sort of like a house of cards, according to the report. When there’s a weakness in one sector, it can have a profound effect on the entire structure. For example, when businesses themselves also have to spend more for the basic raw materials they use to build their products, it can cause a structural inefficiency in the system.
“As a consequence, US businesses will be more inefficient,” the report stated. “As costs rise, businesses productivity falls, causing GDP to drop, cutting employment, and ultimately personal income.”
Tangible Consequences
There also are practical consequences to the US’s crumbling infrastructure. Drivers have to spend more time sitting in traffic jams, which leads to higher shipping costs and reduced productivity for US workers.
Then there are competitive issues to consider. The US’s leading trade competitor, China, recently announced plans to invest more than $700 billion in infrastructure products over the next three years.
While the US Congress recently passed a new five-year, $305 billion highway spending bill, it doesn’t come close to matching China’s infrastructure spending.
In 2013, the group issued an “infrastructure report card” that gave the US a grade of “D+”.