Pethokoukis

In one chart, here’s why taxpayers should be skeptical of more infrastructure spending

Image Credit: Third Way

Image Credit: Third Way

The think tank Third Way has put out a report on boosting long-term economic growth. It is certainly worth reading. But among its recommendations is the need to improve infrastructure, including “higher spending on capital budget items like highways, broadband construction, and power grid improvement.” (Thankfully nothing on high-speed rail.) The report nudges both Rs and Ds:

Republicans must accept increased funding and innovative financing for new investments in projects that move people, products, ideas, and power better, faster, and cheaper than the rest of the world. Democrats must accept that cost overruns from the past have hurt public support for capital projects and they must scale up Obama Administration reforms that are working effectively to reduce waste and encourage economically beneficial projects only.

The report notes that in an analysis of 27,000 U.S. federal government-funded construction projects completed between 2001 and 2005, researchers found that 30% with a price tag of more than $5 million ran at least 10% over budget. Here is TW’s solution set:

1. To turn this around and show that government can deliver on time and on budget, the Obama Administration has embraced sweeping reforms to prevent cost overruns—changes that, according to the Government Accountability Office, have brought many highway and capital projects in under budget.

2. Democrats must strongly support continued reforms, including those that ensure that projects are awarded for economic reasons, not constituent reasons.

3. Democrats should embrace and bring to scale include the transparency and compliance measures used by the Administration to monitor capital projects from the Recovery Act;  further contracting reform so that contractors and government are in agreement on who bears the burden of cost overruns; additional reforms to eliminate moral hazards in lowest priced bidding; requiring complete project designs before a contract to build is awarded; and innovative financing measures like independently funded toll roads and the President’s proposed National Infrastructure Bank.

Sounds like a start. I would also add in repealing Davis-Bacon wage rules. And what about different ways of paying for improvements such as through congestion pricing and decentralization?

 

6 thoughts on “In one chart, here’s why taxpayers should be skeptical of more infrastructure spending

  1. In addition to the cost overrun, I suspect that very few of the mass transit projects ever achieved the level of ridership/revenue that was factored into the ‘no-brainer’ decision to proceed with the project, resulting in the double whammy of more money, fewer riders.

  2. “2. Democrats must strongly support continued reforms, including those that ensure that projects are awarded for economic reasons, not constituent reasons.”

    Right, Jim. AS WE ALL KNOW, THIS NEVER HAPPENS WHEN REPUBLICAN CONGRESSMEN SEND MONEY TO THEIR DISTRICS FOR THEIR PROJECTS.

    Do you have ANY shame? You’ve become a parody of yourself.

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