Before We Jump: A Compelling “Vision” for our Infrastructure Future
With the Biden Administration on the cusp of unveiling a giant and highly touted new infrastructure investment plan, we think it is worth highlighting a just-released new book that provides an unusually thorough and compelling overview of America’s infrastructure needs, options and challenges. This isn’t just a book about technology or policy, about commuting patterns and drone deliveries or the need for broadband. Instead, it looks at all of that – but also provides statistics about the pace at which infrastructure innovation is occurring outside the US and what that means for US competitiveness, at the financing and (crushing) regulatory challenges to infrastructure development in the US, and at how infrastructure financing has changed and will (or could) continue to change going forward. For anyone who cares about the infrastructure development and finance arena, or US competitiveness, we think it is a “must read”.
In “Vision: Our Strategic Infrastructure Roadmap Forward”, the authors Norman F. Anderson and Seth Kaufman lay out a compelling case as to why infrastructure matters, how critically important it is to any economy, and why finally getting this current round of investment ‘right’ is so vital right now. They discuss our aging, crumbling infrastructure built for the early 20th century, and why it can’t simply be rebuilt but must be completely reimagined. Now. They describe a future focused on massive electrification of energy and transport sectors, data digitization, future decisions based on big-data and leveraging machine learning, build-out of the 5G eco-system, expanding high-speed communication networks, designing industrial and transport systems that leverage artificial intelligence, and creation of highly efficient multi-modal transcontinental transport networks, and a new era of manufacturing in the us. The authors compare our existing systems to international competitors, most particularly China, and the enormous infrastructure investments being made globally that have left the US literally in the dust. They provide compelling and sobering comparisons of our antiquated systems with those being built elsewhere, and how that undermines economic competitiveness, supply chain resilience and national security.
Addressing the huge investments that will be required to accomplish all this, they detail the nation’s infrastructure financing transition – from a period 40 years ago when 70% of infrastructure funding came from federal government transfers and 30% from states, to a situation today which is almost the complete reverse -- where only 30% of that investment comes from federal sources and the remainder from states and other sources. They cite needed infrastructure investment of $7.7 trillion through 2030, or some $700 billion annually, and the challenge that level of investment poses in a country with $27 trillion (soon to be $28 trillion) in national debt and a current annual spend on infrastructure of $280 billion (or some 40% of what we need). Moreover, they quote government officials lamenting that significant portions of our current “infrastructure spending” simply goes into maintaining existing systems rather than building for the future. Hence, nothing new gets built.
The authors describe a range of financing alternatives and what they believe is a vastly under-tapped reserve of pension funding and other more ‘patient’ money that could be invested in tomorrow’s infrastructure needs. Mechanisms for that investment could, they write, include direct investment, asset privatization, asset recycling, performance contracting, land value capture, public-private partnerships, special purpose user fees, and long-term asset leases. They describe the potential for both national and state “infrastructure banks”, as well as why some pension and other investment platforms would welcome greater access to investment in this category. Development practitioners as well as policy professionals should find this financing discussion especially helpful, and although some may have alternatives to the solutions they propose, the authors have made a valuable contribution simply by raising the many issues and putting forth positive ideas on possible courses of action. What likely deserves greater consideration is the challenge of attracting investment into greenfield investments. There is no dearth of investment interest in projects once they are operational or nearly-so. Incentivizing investors to take greenfield risk remains a huge challenge, though, and some sharing of that risk will likely be a requirement if that hurdle is to be overcome.
Equally compelling, but no surprise, is the discussion of the regulatory obstacles which almost cripple infrastructure development in the US – stopping projects, leading to unimaginable time-delays, and discouraging private investment in new projects. The authors describe NEPA documents the length of “War and Peace”, and the years required to build a few miles of high-speed rail line, that can be built in China in a fraction of that time. This, they argue, is a leading factor in the staggering cost of projects in the US and is a problem that absolutely must be solved.
Our new Secretary of Transportation, Pete Buttigieg, has touted the Administration’s infrastructure plan as both fostering job growth and “reimagining” our cities. “This isn’t going to be a replay of a 1950’s version of what infrastructure needs to be”, he is quoted as saying. This new book by Anderson and Kaufman certainly adds lots of very thoughtful detail around what that infrastructure transformation might look like, why it is so necessary, and some of the tools that we’ll need to wield to get there. Let’s hope all those tools are on the table as decisions are getting made.