America needs to start spending on infrastructure to get out of its rut, opines former Treasury Department Chief Restructuring Officer Jim Millstein in a Washington Post editorial this week. First, he emphasizes the need:
After World War II, America’s periods of greatest economic growth coincided with a much higher level of public investment in infrastructure and research and development than has been made over the past 16 years. The persistent shorting of funds for infrastructure modernization and repair has left us with a huge hole to fill: The American Society of Civil Engineers estimates that the federal government needs to spend an additional $140 billion a year for the next 10 years to fill the gap.
Secondly, he points out the timeliness and appropriateness of debt financing for infrastructure investment, despite legitimate concerns about the trajectory of the federal budget deficit and increase in federal debt as a percentage of gross domestic product, which inevitably bog down the political process to succeeding with any major spending program. However:
Given the parlous state of America’s infrastructure, a solution cannot await some “grand bargain” that brings all aspects of the federal budget into long-term balance. Debt financing is not only needed but appropriate.
At the historically low interest rates at which the federal government can now borrow, there is no better time to incur long-term debt for the construction of long-term assets. And because of the positive effects on productivity and economic growth that public infrastructure creates, we need not worry about the implications of this spending for debt sustainability in the long run. A well-designed program of infrastructure modernization can pay for itself in economic activity and the tax revenue that results from that activity.