The Half-Truth on Infrastructure at the Heart of the American Jobs Plan
This article is the second in a five-part series that Strong Towns founder and president, Charles Marohn, has shared in response to the American Jobs Plan. Read part one here, or download the full series here as a booklet.
“Public domestic investment as a share of the economy has fallen by more than 40 percent since the 1960s.”
There is a near-universal consensus among policymakers, pundits, and professionals that the United States has long underfunded infrastructure. It is the prevailing narrative throughout dominant media outlets (The New York Times, The Washington Post, The Wall Street Journal, CNN). It is the established sentiment among industry professionals (ASCE, AASHTO, ARTBA, APTA). And it is difficult to find a prominent economist who doesn’t reflexively extol the virtues of infrastructure spending.
Here’s a quiz to test your understanding: The American Jobs Plan states that “public domestic investment as a share of the economy has fallen by more than 40 percent since the 1960s.” Does this mean:
a. The U.S. spends less money on infrastructure today than it did in the 1960s.
b. When adjusted for inflation, the U.S. spends less money on infrastructure today than it did in the 1960s.
c. The U.S. spends more money on infrastructure today than it did in the 1960s, even when adjusted for inflation, but that amount has not kept up with the size of the economy.
d. The U.S. spends more money on infrastructure today than it did in the 1960s, even when adjusted for inflation, even as a portion of the size of the economy, but all that old infrastructure is depreciating more quickly than we are increasing new infrastructure spending.
The answer is d, which is likely to surprise most people who consider themselves informed on this issue. Overall, the U.S. spends more money on infrastructure today than we did in the 1960s. That is true even when adjusted for inflation. And the U.S. overall is even spending far more on infrastructure as a percent of GDP than it was in the 1960s. So what’s going on?
Image via Jacobin.
To the right is a chart of the data that the American Jobs Plan is referencing when suggesting we are spending less now than in the 1960s. I wrote about this in a 2017 article and again in my book, Strong Towns: A Bottom-up Revolution to Rebuild American Prosperity. The common use of this chart by proponents of more infrastructure spending is deceiving—some might even say deceptive.
Images like this are powerful because they are easy to interpret. Without much effort, we see that public investment peaked in the 1960s and is at its lowest level since then. That’s what we see, but that is wrong.
What you are seeing here is NET public investment. For those of you who don’t routinely deal with budgets and finance, a “net” number is always the difference of two other numbers. For example, net revenue (also commonly called “profit”) is the difference between gross revenue and expenses. Net public investment is the difference between gross public investment and depreciation.
I’m going to simplify this way down, to the point where I might be accused of oversimplification. In my defense, I am not going to oversimplify this nearly as much as the American Jobs Plan has, and I’m going to do it in a way to help you understand what is really going on, not obscure reality with a clever truth (or half-truth, if you prefer).
Every year we invest in infrastructure. That is our gross public investment. Every year some of our infrastructure falls apart. That is our depreciation. The net of those two numbers, investment minus depreciation, is what has been falling relative to GDP.
There are two ways for this number to fall. The first is if we are spending less on infrastructure than in prior years. That is what the half-truth seems to suggest, an impression that is viral because it is not only repeated everywhere without context, but it comports with what many of us see and experience. When things in your community are falling apart, it’s not a leap to conclude we’re cutting back on spending, especially when someone credible seems to suggest it.
The other way for the net number to fall is for depreciation to rise. Said another way, if a whole lot of stuff is falling apart, it’s going to make our net spending look small even when we’re spending a lot. This is what is actually happening: we’ve built a ton of infrastructure, almost all of it with very poor financial returns, and now even though we keep increasing spending, it’s a financial hole we just can’t fill.
Imagine one of those jesters who spins plates. They start out with one plate spinning. Then another. Then another. It’s really impressive because at some point they have this bizarre number of plates in the air, all spinning, and it’s hard to fathom how it’s even possible.
The way you and I would describe the extent of this feat is by counting the number of plates spinning. The way the American Jobs Plan describes the trick is by counting the number of new plates being added relative to the number of plates already spinning. Sure, you have 20 plates in the air, but you just added two new plates and that’s only a 10% increase, which is far lower than the 100% increase back when you went from two plates to four. So, not impressed.
To keep the analogy going, the reality is we have 20 plates spinning. Six of them fall and break, but we add eight more, so we end up with 22. This is looked at as insufficient by the American Jobs Plan because it is only 10% growth while back when we were starting out, we were able to double the number of plates (100% growth) from two to four.
The math is true, but the core tension is that we have too many plates in the air, not that we are not adding plates quickly enough. And understand that those six plates that broke represent failing infrastructure that serves real people—their homes, their businesses, their hopes for the future all in decline—and that is a real failure to meet our public obligations. The eight new plates we add might represent new growth, but it is largely for corporations and franchises plugged into the centralized growth machine our economy has become. This is what makes the sales job here so seductive. The distress is real and the response can look like progress, if only the cure wasn’t also the disease.
The problem we’re struggling with today is not how little we’re spending, it is how much we built and now have to maintain, and how little we got for those investments. We’re struggling with how many plates we have in the air.
Consider this statement from the American Jobs Plan:
“After decades of disinvestment, our roads, bridges, and water systems are crumbling.”
We’re meant to read these shortcomings as a consequence of disinvestment. They’re not. They are a consequence of overinvestment, of decades of unproductive infrastructure spending accumulating to crowd out good investments today. It’s true that you don’t have to pay for road maintenance if you don’t build the road, but once you build the road, you are committed. Forever.
More money is needed, but more money alone won’t fix this. We need a new approach to infrastructure, one that doesn’t just create financial transactions but builds lasting wealth and prosperity within our communities.
The financial hole we have dug is so big we can’t fill it in, but the American Jobs Plan, by its own admission, doesn’t even try. That is what I’m going to show you tomorrow.
In the meantime, if you’re new to Strong Towns, we recognize that you might be struggling with some of this. When you first recognize that the “green space” between the Walmart and the Chipotle is actually a six-figure investment in public infrastructure that is creating no meaningful value, or that an affluent suburb with large homes spread far apart is being subsidized by the poor neighborhood in town with the small houses, it can be a lot to take in.
To help with the transition, we created a Strong Towns 101 course that is free for you to take. We also have an email list we use to share these insights and more. And, of course, you can check out the book Strong Towns: A Bottom-Up Revolution to Rebuild American Prosperity for the full story.
Read Part 3: “When it Comes to Infrastructure, the American Jobs Plan is Business as Usual”
MoDOT recently put out a tweet celebrating the 50-year anniversary of a highway that tore up Kansas City’s downtown. Here are just some of the (rightfully) angry reactions they got.