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November 2014

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Infrastructure 26 | www.cedmag.com | Construction Equipment Distribution | November 2014 should persist with the same old models. Experts continue to have interesting and important discus- sions concerning critical reforms and innovative approaches to investing, funding, delivering and operating infrastructure. We highlight four significant themes emanating from these discussions: 1. The allocation of scarce capital can be tied more effectively to an evaluation of net social benefits, with better coordination across infra- structure systems and better reliance on systematic economic analysis. 2. Economic and environmental evaluation processes need to contin- ue to be streamlined and made more efficient. This imperative applies to private infrastructure investment as well as to public projects. 3. Pricing mechanisms in appropri- ate scenarios can encourage users to make more efficient use of infra- structure when they reflect the costs of its use. The revenue generated can be reserved to finance capacity enhancements. 4. Through cooperative arrange- ments with government agen- cies, the private sector can play a greater role in the design, financ- ing, construction and operation and maintenance of infrastructure resources. Widespread access to high-quality infrastructure is indispensable to the United States' economic develop- ment and standard of living. A more focused and outcomes-driven infra- structure effort is needed, and new ideas can and should accompany any increase in investment. Strong support exists within the business and manufacturing communities for building a more competitive, nation- wide infrastructure network. n ("The Case for Catching Up" continued from page 24) No Time Like the Present The results from this study demonstrate the positive economic effects of a new commitment to public infrastructure. This includes financing coming from the private sector as well as from various levels of government. It is a good time for such investment. In the short run, spending on infrastructure can stimulate the economy and create additional activity and jobs in upstream and ancillary businesses. Moreover, because the economy remains well below its productive potential, and unemployment and underemployment remains high, the "multiplier effects" of infrastructure investment will boost activity... Calls for new, substantial and focused expansion of both public and private expenditures are coming from all corners, including calls from President Obama's former National Economic Council Director, Larry Summers (2014), and from Reagan-era budget hawks, such as Martin Feldstein (2013). Widespread access to high-quality infrastructure is indispensable to the United States' economic development and standards of living. It is possible, however, that the poor current and prospective conditions of our infrastruc- ture systems will significantly undermine prosperity in coming years. A new infrastructure effort is needed, and new ideas can and should accompany this investment. There is no better time than now to address the problem. National Association of Manufacturers | 45 Figure 5-2. Changes to Infrastructure Investment, Real GDP and Real Disposable Income, Magnitude and Effects of Higher Investment Spending, 2014–2030 (in Billions of 2009 Dollars) Source: LIFT Modeling Analysis by Inforum 36 These results are similar to estimates by the U.S. Congressional Budget Office. They found that that one dollar of infrastructure spending yields another 60 cents in economic activity, leaving GDP $1.60 higher (reported in Deloitte (2013)). Leduc and Wilson (2012) report multipliers of at least 2.0 for federal highway grants to states. The best indicator of the net welfare gain provided by enhanced investment is household real disposable income. This statistic not only includes the gain of income resulting directly from increased economic activity and efficiency (as measured by GDP), but also measures the enhancement to purchasing power due to lower prices and lower need for consumer direct and indirect expenditures on transportation, utilities and other goods and services. It also reflects the implied cost of paying for the infrastructure investment. The benefit of infrastructure spending is increased real disposable income above baseline levels, from 1.2 percent in 2015 to 3.4 percent by 2030. Net of investment, improvements to all types of infrastructure imply a gain in per household real income of $1,300 in 2009 dollars by 2020 and exceeding $4,400 per household in 2030.

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