SUMMARY

  • Infrastructure Indigestion
  • Making More Of American Minds

Editor’s Note: This week’s edition concludes our series examining key economic issues surrounding the 2020 U.S. election.

As the pandemic continues, we reflect on fond memories of experiences not available to us at the moment. Restaurant patrons may recall the challenge of visiting an eatery and finding the menu to be too long. Page after page of appetizers, entrees, desserts and drinks all sound tempting, but there is only so much room on the table. The longer the menu runs, the harder it is to choose.

That same feeling of paralysis has held back investment in infrastructure. A wide range of elements falls under the umbrella of “infrastructure,” including the water supply, waste management, electrical generation, transportation and telecommunications. Each has scores of subcategories underneath. It’s quite a menu, which is why it has been hard to design a way forward for America’s infrastructure. The next administration will be forced to choose among a range of interesting alternatives.

The benefits of infrastructure investment are clear. Maintenance of existing facilities reduces the risk of unfortunate occurrences that range from the inconvenient (like heavy traffic and electric brownouts) to the catastrophic (like collapsed bridges). Spending on infrastructure accrues directly to local employment and economic growth. And well-designed infrastructure can boost productivity, which has grown sluggishly in recent years. The Economic Policy Institute estimates that each $100 spent on infrastructure increases private sector output by $17.

Weekly Economic Commentary - 10/30/20 - Chart 1

Given its broad benefits, wide scope, and essential nature, infrastructure investment sounds like a slam-dunk proposition for government investment. Yet substantial progress on this front has been elusive for the current administration, as with many before it. Infrastructure programs are not cheap, and this may have dissuaded some members of Congress from supporting them. The president’s first term priority was a tax reduction that will significantly increase the size of the federal deficit over time.