Economic Perspective: The Decline in Infrastructure

MARY WALDEN:

“Today’s program looks at decline in infrastructure. Mike, infrastructure is a term that describes investments that support the economy by moving people, materials and services; included are: highways, airports, ports, railroads and the electric grid. Infrastructure must be expanded as the economy expands, as well as maintained and improved. Are we doing that?”

MIKE WALDEN:

“The short answer is no. In fact, we now have a new study that clearly shows the United States has fallen behind both in building new infrastructure, as well as maintaining its existing infrastructure. We’ve fallen behind many countries, but I think most importantly China which is now viewed as our major economic rival.”

“Now it’s interesting this study pinpointed a year in which there was this shift, and they say the year was 1970. That is, prior to 1970 you can see in the numbers the U.S. investment in infrastructure was at a fairly decent level. We were maintaining our infrastructure as well as building new, but since 1970 we’ve not been doing that. So the question is why.”

“I think the big answer is that particularly at the governmental level, and the federal level, 1970 marks a time where there was a shift in federal spending away from infrastructure toward more people services, particularly in the medical area because we have the passage of Medicare and Medicaid in 1965, and they would have been up and running by 1970.”

“So this really gives the nation a dilemma. We certainly want to continue to support people and their needs, but we also need infrastructure in order to support people now as well as in the future. It’s going to be a big decision facing our national leaders.”

Mike Walden is a William Neal Reynolds Distinguished Professor in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook and public policy.