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Take Infrastructure Back from Politicians

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Michael Beitzel
A view of the Huey P. Long Bridge Rehabilitation in New Orleans.
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As money and power grow more concentrated in Washington, the line of supplicants stretches all the way to Monticello. That has created a "barbarians at the gate" mentality among conservatives and budget experts who guard the Treasury. Infrastructure advocates claim great benefits from public investments, but so do many others.

Peter Ruane, CEO of the American Road and Transportation Builders Association, calls Washington a "fact-free zone." The firewall that for 56 years has protected the federal Highway Trust Fund from being used for deficit reduction is in grave danger of being breached. "We're going to be fighting for every penny," he says.

The battle lines will be drawn next November. If the "no compromise" wing of the Republican Party gains ground, then the "starve the beast" option will be on the table, and nothing is sacred. Certainly not the Highway Trust Fund, which conservative activist Grover Norquist views as a deep barrel of pork.

 

REINHARDT
If not direct federal investment, then what about tax credits and other leveraging tools? Advocates for these programs have been pulling their hair out for years over how tax credits are scored for infrastructure programs. There is no acknowledgement of the federal revenue upside created by public investment in mobility, safe water, etc. That's not going to change easily because those rules are embedded in the federal budget bureaucracy.

Because so much is political, the members of the elite infrastructure technocracy in the U.S. too often are forced to bow to the politicians who dispense the subsidies. Compliance with unending regulations is seen as a cost of doing business, but taxpayers, not contractors, pay full price.

U.S. construction companies are carrying a much heavier regulatory burden under the Obama administration than ever before. EPA is an untethered driver of regulations. Owners, public and private, are as likely to find themselves in court as under construction.

Enforcement actions under federal set-aside programs are up by 10 times in the past three years, and U.S. Dept. of Labor audits are up by 25 times. "There is a huge new regulatory component to our work and more political impact," says Bruce Grewcock, CEO of Kiewit Corp., whose managers generate 50 million man-hours of craft labor a year. "The Obama administration is listening to a different audience," he says.

Social Goals Over Roads?

Powerful advocates for smaller government charge that the federal public-works budget is so skewed toward social goals and political insiders that any increase in taxes or user fees should be opposed as wasteful. They have a large and growing audience of believers because they are partly correct.

Consider this from the director of a major U.S. infrastructure investment fund: "Every big transportation project in America is political now. It has very little to do with delivering infrastructure projects when there's big money involved."

He continues, "Lobbyists have found out that the money is at the project level, not in Washington. They add a political tone to everything, and they've convinced local governments that they need political influence to get anything done." Too little gets built because decisions are not made based on merit.

Ever-growing competition for scarce public investment capital is embedded in our social contract. In a study last year, venture capitalist Mary Meeker noted that, since 1965, the GNP grew by 2.7 times and entitlements grew by 11 times. Frighteningly, Meeker identified an 82% correlation between rising entitlement spending and falling personal savings rates. Posterity is rarely mentioned these days.

So, we are at a crossroads. No amount of "needs" surveys will spur voters or politicians to support a major commitment to meet future demands for transportation, water, public buildings and other critical infrastructure services.

The best hope is for public and private planners, designers, builders and operators of these facilities to convince a skeptical public that it is getting the services it pays for at a fair price and without political favoritism. Build local support for good projects. A good place to start is for the infrastructure technocracy to take back its industry from the political operatives who promise subsidy but deliver mainly invoices. 

William G. Reinhardt is the founder and editor of the Public Works Financing newsletter (PWFinance.net). He can be reached at pwfinance@aol.com.

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