Does America really have an infrastructure crisis?

Why Biden's American Jobs Plan is the wrong approach to strengthening the economy

Biden infrastructure.
(Image credit: Illustrated | Getty Images, iStock)

President Biden's monster new spending proposal, the $2.3 trillion American Jobs Plan, promises to "reimagine and rebuild a new economy." That's a tall order, even if you intend to spend a couple trillion dollars trying over the next eight years. The current American economy is a technologically advanced, $21 trillion behemoth. And most of it isn't the government doing stuff but rather the ordinary business of life created by gazillions of daily decisions made by all of us. Politicians, whether in Washington or in statehouses around the nation, should remember that.

So before Biden and congressional Democrats embark on such an ambitious and expensive undertaking — and the proposal is hardly a done deal, politically — it's probably worth asking whether the American economy needs to be reimagined and rebuilt.

The most literal manifestation of that bold aspiration is the infrastructure portion of the plan, a big chunk of which aims to "rebuild" the nation's transportation, water, and electrical systems. But do they need to be rebuilt or otherwise dramatically upgraded? Granted, the American Society of Civil Engineers says they do. In its 2021 report, the group gives U.S. infrastructure a lousy C- grade and warns of a nearly $3 trillion investment shortfall over the next decade.

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Then again, why should we let any advocacy or lobbying organization determine national priorities? While the Biden White House is correct in saying that public domestic investment as a share of the economy has fallen by more than 40 percent since the 1960s, that doesn't mean U.S. infrastructure is crumbling. Former Obama administration economist Jason Furman has noted that compared to other rich countries, "The low levels of public investment [in the U.S.] do not appear to translate into worse outcomes, at least in key measurable aspects of transportation infrastructure." Indeed, in a 2019 paper from the Brookings Institution, analyst Matthew Turner contends that the nation's infrastructure is in as good a shape as it has been for decades — or even better. "There are surely potholes, old buses and decrepit rail cars," he writes, "but this situation is not obviously worse than it was 20 years ago. In fact, there are fewer potholes on the interstate."

America doesn't have an infrastructure crisis. Nor does it have a job crisis, even though Biden chose to put that in the name of his plan. If current economic forecasts are anywhere close to being correct, the story of 2021 will be one of rapid economic growth and plunging unemployment. Don't forget that before the pandemic, the unemployment rate was at a 50-year low, and wages were rising fastest for lower-income workers. The economy didn't look in need of reimagining just over a year ago. It just needed a tight labor market. That might well be where we are headed again thanks to both the reopening economy and a tsunami of already approved federal spending. By the way: It's kind of a red flag when politicians talk about infrastructure in terms of jobs created. The goal of an infrastructure program should be to create better infrastructure. Government at all levels should focus on building and maintaining the most compelling projects.

None of this means Washington should do nothing. American infrastructure does need an upgrade. Research firm Moody's Analytics thinks U.S. productivity growth is finally headed higher after a more than decade-long slump, thanks in part to new federal investment (along with more of us working from home and businesses adopting more labor-saving technology). America should also be spending more on science research, which is another part of the Biden plan.

But all these ideas should be vetted for the value they will potentially generate. More spending is not always better. Economist Edward Glaeser notes how Japan spent massively after the bursting of its 1980s bubble economy, spending lavishly on bridges, tunnels, highways, trains, and new airports. But that largess failed to reignite growth. "Japan is less, not more, dynamic after its infrastructure bonanza," he concludes.

The Biden plan should also be paid for in the most efficient way possible. Raising corporate taxes by $2 trillion risks penalizing business investment in America at a time when we need more investment from public and private sources. Now is the time for more creative options such as a carbon tax that would nudge businesses and consumers to favor less carbon-intense forms of energy. After all, this is supposed to be a climate bill, too.

Maybe Biden should reimagine and rebuild a new plan.

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James Pethokoukis

James Pethokoukis is the DeWitt Wallace Fellow at the American Enterprise Institute where he runs the AEIdeas blog. He has also written for The New York Times, National Review, Commentary, The Weekly Standard, and other places.