Wednesday, May 25, 2016

The Crumbling State of the Union

by B. Lana Guggenheim, Staff Writer

It’s accepted as a universal truth: America’s infrastructure isn’t doing too well. If the New York City subway isn’t undergoing renovations for technology that is already decades out of date, the DC Metro is on fire. Chicago isn’t doing any better (and has gone 11 months without a budget to boot.) Bridges are crumbling, roads are in disrepair, and waterways aren’t in much better shape. You don’t need to look farther than Flint, Michigan for proof.

Nor is this problem new. Politicians, laymen, and the American Society of Civil Engineers (ASCE) have been sounding the alarm about this for years. Every four years, ASCE release a comprehensive report card on the nature of this country’s infrastructure, maintenance, and improvement thereof. The last one was 2013, which means we are due for another next year, right after what’s looking to be a very heated general election. Whoever sits in the White House will have to make good not just on campaign promises, but the dire engineering needs of the nation. And while President Obama has talked a lot about revitalizing our crumbling thoroughfares, very little progress has been made; that means that the next President will inherit a pretty messy situation.

The 2013 ASCE report card is pretty damning. Overall, we received the stellar score of D+. That’s up from the D- we had four years prior, so I suppose we can applaud minor improvements. A breakdown shows that we received D’s in everything from aviation, dams, and schools, to roads and hazardous waste. Our roads have actually fallen from seventh to fourteenth place in the past decade, as ranked by the World Economic Forum, although the ASCE report card rated them as improving from a D- to a D+. Our bridges, ports, railroads, and public parks range from C- to C+, and only in solid waste management did we receive the grade of B-.

Roads in some places are so bad, that smart cars can’t even drive on them, because they can’t find the lane markings. Shoddy infrastructure is forcing developers to create more sophisticated maps and sensors to compensate, driving up the price of the car when it is made available to the public by about $4000 - and leaving the roads in their same sorry state. On the other hand, the data provided by these maps and sensors could help pinpoint the areas most in need of immediate patching, although they have not yet done so.

The economic implications of this infrastructure issue are staggering. While it is generally accepted that investing in infrastructure will be better for the economy, the reality is even worse: We are paying more to patch our failing infrastructure than we would have had we enacted the upgrades and repairs actually needed. And when we don’t even do that, our infrastructure becomes unusable to the point of being unsafe. And when that happens, people die. The combined total monetary cost for failures to act results in suppressed GDP of $897 billion by 2020, a loss of over 2 million jobs, and a drop in personal income of $3,400 for most households across America. And there is a projected funding gap of $1.44 trillion through 2025 - only 56% of what the US needs to spend to adequately address its needs (in the report card, that would get the US to a score of B). This means, paradoxically, that the US needs to spend more on infrastructure, but also less.

Some have raised the argument that America’s infrastructure isn’t nearly as bad as most make it out to be, and that the warnings from the ASCE are mostly self-serving, as civil engineers have a vested interest in maintaining their necessity, and thus continuous employment. Patrick Brennan argues that the ASCE rating bridges deficient doesn’t mean they are unsafe. And he is correct. Many deficient bridges are perfectly safe, but they aren’t operating at maximum capacity. The result of deficient-but-safe infrastructure isn’t catastrophic bridge collapses, but increased traffic, increased expenditure, and increased frustration. That’s not ideal either.

How did it come to this?

Lack of money, for one thing. In part, it is because the Highway Trust Fund is pretty much done for. Set up initially in 1956 to build and maintain transportation infrastructure, it is spending more money annually than it is taking in. Its income is from a gasoline tax which hasn’t been raised since 1993. The FAST Act was passed in 2015, and while this provides five years of increased federal funding, it doesn’t provide a long-term solution for lack of funding for critical needs.

While federal funding is necessary, it isn’t the whole story. Most infrastructure funding comes from local government’s coffers, and that’s not a bad thing, as it takes local eyes to really figure out which needs are most pressing, and which projects are most profitable. The only exception is transportation, where federal funding accounts for 30% via the HTF. But local spending has declined in the past decade, and it shows. Partially due to the recession, states are spending most of their efforts to close out their existing debt, and any new debt is taken on to fill existing obligations, such as pensions and benefits, rather than engaging in new projects. Moreover, acquiring new debt often means raising taxes, and most states are cutting them instead. Municipal bonds, usually used to finance construction projects, are now more often used for refinancing. And the problem is worse in municipalities that have shrinking economies paired with high expenses, such as high expenditures in pensions and health care. Locales like upstate New York, Illinois, and Michigan are thus left with little financial room to take on major projects, no matter how desperately they are needed. And while patching roads and bridges might offer a temporary boost to the local economy, reviving the local economies to be able to maintain their existing infrastructure is a taller order. Considering how many Americans are suffering from the pinched economy, living paycheck to paycheck, it’s not exactly hard to see why politicians promise lower taxes, even if the state continues to crumble around them.

Things are probably the worst in the poorest areas of the country. The average family of four spends nearly a fifth of its budget on transportation. But the poor spend more than that, as they can’t afford cars, yet live in places that are not adequately served by public transportation. And the transportation that exists continues to fail. Those who have cars will drive them, increasing congestion and therefore, fuel costs, delays, and wear and tear. But those who don’t will be even more stranded than before, denying them access to jobs, education, and opportunity. This will leave them in poverty, unable to pay the taxes needed to fund the services they need.

Some states are raising gas taxes alongside the federal FAST Act, and they will kick in in the coming year in Michigan, Nebraska, and Washington. Similar tax hikes are under debate in Alabama, Hawaii, and Louisiana. Still, both the federal and state gas taxes are fixed in nominal terms, which means that inflation will erode the value of the tax over time. Combined with the increase in car’s fuel efficiency and American’s move away from cars as the sole mode of transportation (or barring that, carpooling and using services like Uber or Lyft), this is a stopgap measure at best.

The age of the systems in place are also part of the problem. In short, they’re old, and they were built for different needs and a much smaller population. The systems we have have been performing beyond their parameters, some of them for decades (or more), now. For example, nearly all American Congressional districts have structurally deficient bridges, the Northeast Corridor Amtrak trains run through tunnels dug just after the Civil War and across century-old bridges that sometimes jam when they swing open to let through boat traffic. Hundreds of miles of electric wire date back to the Great Depression. The folks running BART in San Francisco are pretty frank about the declining state of their trains, and the huge increase in ridership on top of that. That’s pretty impressive, but it’s also ultimately untenable.

Others have suggested that over-reliance on outside consultants, overly ambitious architecture, and a legal system that favors contractors and local property owners over the agencies paying for construction as factors that exacerbate an already bad situation. Political fragmentation also doesn’t help. Rails and roads cross city and state lines, and governments don’t tend to coordinate well; regional authorities created to solve those issues create new issues of their own. Yet others argue that labor laws create yet more obstructions. This seems odd, as America’s labor laws are much weaker than Europe’s. Yet, union rules in the MTA require higher train staffing than necessary, and the cost of health and retirement benefits which are not provided by sovereign governments as they are in London or Paris. In the US, national policy on health care and pensions is weaker than in other countries, but unions are weak except for state and local government employees and government-funded parts of the construction industry. Their strength in one sector and weakness everywhere else leads to the perverse result that infrastructure that everyone needs isn’t getting built in part because of those costs.

The situation is urgent, but most aren’t treating it as such. Politicians prefer sexier, shinier projects that make them look good, but necessary road repair requires annoying motorists with orange cones and clogged lanes. Citizens whine about potholes, but rarely vote based on them. Combined with anti-government predilections so common these days, there is a bias against government spending on public goods, especially if they “look expensive.” This means that not only is there a bias that makes good maintenance seems like a luxury, it also means that both politicians and citizens lack a compelling vision  and a sense of shared common fate for the future of this nation’s infrastructure. Without a goal to strive for, many efforts among the general populace remain lifeless. We need a message along with money and method.

Even in cities attempting to address the problem, the outcome looks lackluster at best, and the rhetoric about it isn’t any better. The DC Metro is engaging in massive shutdowns just to keep its system barely functioning. The final projected cost of this project isn’t even known, though it’s claimed that the Metro already has the funds socked away. But it is known that in addition to plain old inconvenience, this will hurt commuters and businesses alike. And while it’s “tough medicine for tough times,” much of this money, anguish, and annoyance could have been spared by not neglecting the system for decades at a time. And all of this won’t even improve the system: it’ll just get it back to capacity as a 40-year-old system operating within safe parameters. The New York subway too, while not as in bad shape, is also getting slowly worse over time, as shutdowns become more frequent, fares rise, and commuter tempers fray.

On the other side of the spectrum, you have engineers working on hyperloops that would zoom commuters through a tube at nearly the speed of sound. They likely won’t be the trains of the future for reasons of physics, cost, and NIMBY-ism, but the fact that our engineers can create such cutting edge technology means that we do not lack the ingenuity, means, or talent. What we really lack is the money and political will.

So what are our options?

It’s not as simple as throwing money at the problem and hoping it will go away. Most of us don’t have money to spare, and the money we do have ought to be spent wisely. And public goods like roads and streets often appear free, even if they aren’t, nor do people like paying higher tax on land that has raised its value precisely through tax-funded infrastructure, making tax hikes doubly unattractive.

In addition to the FAST Act, the federal government could take point by offering tax breaks to states to better stabilize their pensions. This would create more fiscal space for other projects. Additional tax breaks or other incentives would strengthen the links between local universities and businesses, start-ups, and local hiring pools. This would help revive local economies, creating a stable tax-base to finance more construction over time. As far as local governments go, reducing the tax rates on building values and increasing the tax rate on land values makes buildings cheaper to build and maintain, while keeping land prices more affordable by reducing speculation, and this in turn helps make building infrastructure more financially feasible and self-sustaining.

Reconsidering our infrastructure not as liabilities, but as assets to be managed for increased value and increasing returns would help sell the issue to politicians and citizens alike. Engaging with the private sector can help defray the cost of asset management. Collaboration via public-private partnerships can also tap diverse sources of expertise - and this collaboration is probably what brought us our modest improvement between 2009 and 2013.

Cross-sector innovation could also provide relief. Oregon is experimenting with a fee for miles traveled to replace gasoline taxes, anticipating the speeds of electric vehicles that use roads, but not gas. Congestion pricing, where users are charged a higher fee at peak travel times, also helps incentivize changing behavior to benefit of all. Whether that results in alternate routes or varying travel times, congestion is decreased, and fuel cost is reduced for everyone overall. Combining this with driverless cars for commuting and other transportation needs would mean less cars on the road, as well.

One thing is for certain: there is no easy fix. This situation was a long time building, and rectifying it will take many years, and a multi-pronged effort, not least of which will be the mass mobilization of civil engineers. But that doesn’t make the challenge an impossible one, only a difficult one. But the sooner we start, the better off we all will be.

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