Washington Post: Infrastructure Spending Can Pay for Itself

Larry Summers recently wrote an article in The Washington Post outlining the importance and simplicity to the issue. In the article Summers cites a study by a transportation research group named TRIP showing that driving on roads in need of repair costs drivers $109 billion annually. Summers points out that this figure is only additional vehicle repairs and operating costs; this estimation excludes the cost of delays, which was previously discussed on this blog. Summers then aims to look at what effect infrastructure spending would have on the average American. In this exercise, he accepts that no policy could fix all road problems and thus takes an intentionally overly conservative figure for savings of $54 billion, or half of current additional spending. A policy which made such fixes could therefore cost up to $54 billion without hurting consumers. Such an expenditure represents 40 cents per gallon of gas spent in the US. Therefore, Larry Summers concludes that raising the gas tax by 40 cents would, by this conservative estimate, have no effect on American wellbeing. However, as this is based on spending only reducing the cost of road damage by 50% and it is unlikely that the savings would be this low, most Americans would likely benefit much more.

The report referenced by Summers gives even more information about the importance of infrastructure spending. For instance, it points out that when all cost factors are included such as reduced road maintanence, delays, accidents, and all other costs not addressed, every dollar spent on infrastructure returns $5.20. One of the crucial costs here is delays, delays cost Americans $121 billion a year in wasted fuel and time. When considering these statistics, Summers estimate of $54 billion looks less conservative, as he intended, and more grossly low. While a small $54 billion infrastructure wouldn’t solve all of these problems, according to this report’s claim that every dollar returns $5.20, it would generate $280.8 billion. Now Larry Summers’ $54 billion is quite a small number, the report finds that the current backlog in needed road, highway, and bridge repairs is $740 billion. If the $5.20 dollars return on investment holds then filling that backlog would be a tremendous boom to our economy. But as Summers shows we don’t need to do that big of a infrastructure program to gain a benefit, we just need an infrastructure policy not determined by underfunded short term proposals. The article can be found on The Washington Post’s website and TRIP’s report can also be found online.

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