Why that Bridge to the Future is So Expensive

After an election there’s often fleeting talk of compromise. One area that seems ripe for compromise is infrastructure. In 2009, the American Society of Civil Engineers graded U.S. infrastructure a “D”and estimated it would take $2.2 trillion over five years to fix. The World Economic Forum ranks the U.S. twenty-fifth in infrastructure, down from fifth a decade ago.

Infrastructure used to be a bipartisan issue, often because representatives from both parties wanted to carve out a piece of the federal transportation pie to benefit their home states. President Eisenhower, no bleeding-heart liberal, spent over $400 billion of public money to create the interstate highway system. Even in the partisan atmosphere of 2011, a bipartisan bill was proposed that would have created an infrastructure bank to help move private funds into building projects. Fareed Zakaria notes that unemployment in the construction industry is at 11.4%, the highest of any industry. Investing in infrastructure could boost short-term growth and improve our long-term economic fortunes.

Inflated Cost

The problem is that infrastructure costs money, and government finances are tight and private credit is sluggish. This problem is exacerbated by the fact that building infrastructure often costs much more in the U.S. than in many other countries. The 8.5-mile Second Avenue subway line in New York is costing $1.7 billion per kilometer, while Singapore is building a 22-mile subway for $130 million per kilometer. A big reason New York is spending so much has to do with the hard Manhattan bedrock and the age of New York’s subway system. But even London, with the oldest subway system in the world, was able to build its Jubilee line for $350 million a kilometer.

Why the disparity? It’s hard pin down one reason, but a few themes emerge.

Politics and Culture 

Democracy, some have observed, is a messy business. Infrastructure projects impact the average voter more than something like Wall Street regulation, so everyone wants their say. Often the loudest voices are the ones exclaiming “not in my backyard!” And while the American public likes the benefits provided by infrastructure, they are not as fond of the taxes required to pay for these projects. At the same time, U.S. companies are forced to wrestle with unions and comply with labor, environmental, disability, and other legal standards not found in other countries.

Legacy of Infrastructure Past

The first major toll road in the U.S. was the Philadelphia and Lancaster Turnpike Road, built in 1795. Infrastructure has a long history, and modern projects must grapple with that legacy. There’s the legacy of federalism, which has created a system fragmented between the federal and state government. States often have to apply yearly for federal money, and provide estimates and analysis to comply with federal regulations, which can add cost and decrease speed. There’s also the physical legacy of all that existing infrastructure, which has to be dealt with during any current construction.

The U.S. is a common law system, which means that while there are legal statutes, a lot of the law is subject to the interpretation of judges, and legal precedents created by this judicial review impact how laws are applied and enforced going forward. Our reliance on judicial review can slow down infrastructure projects, and there’s evidence that courts often rule against public agencies and for private companies.

Finally, there’s the legacy of anticorruption measures from the Progressive era. Overt corruption has largely disappeared from politics, even though infrastructure is one domain where it sometimes surfaces. Still, what Matt Yglesias at Slate calls a “misguided overemphasis on procedural barriers to corruption” can do more harm than good, and create unnecessary hoops for governments and firms to jump through.

Cost Over Speed

One of these anticorruption measures is the lowest bidder system, which attempts to ensure cost, rather than corruption or favoritism, determines who wins infrastructure contracts. However, as Stephen Smith argues in Bloomberg, prioritizing cost means governments can’t take into account important factors like speed, efficiency, or reliability. Governments are forced write complicated contracts to ensure some level of accountability from contractors. Commuters will confirm that speed rarely seems a priority of transportation construction, and taxpayers will attest that cost overruns are so frequent that it seems like no one is accountable when it comes to infrastructure.

Solutions

Most of the problems I’ve pointed out seem too systemic to correct, which may be true. But governments have been trying to move away from some of the unnecessary constraints that cause inefficiency. For example, Massachusetts has utilized a “design-build” contracting process for some infrastructure projects. This process consolidates the designing and building aspects of a project under one firm, and lets the state judge bids on both quality and cost to determine the “best value,” rather than just accepting the lowest bid. One example of this type of project is the I-93 Fast 14 Project in Medford, which replaced fourteen bridges in less than a year and ahead of schedule. This project normally takes at least four years.

Smart reform is needed to clear some of the red tape that increases the cost and decreases the speed of infrastructure projects. But this reform has to balance the interests of contractors with the interests of the public. Many government services, like infrastructure, are increasingly privatized. While this can have benefits, it’s important to have laws that discourage conflicts of interests and create proper incentives for private firms. This will allow governments to harness the skill of American engineers and workers to bring our infrastructure into the twenty-first century.

One comment

  • One of the biggest reasons for expensive infrastructure spending in America is the fact that we have extremely powerful state and local governments. Interest is a huge cost driver, and it simply costs more for state and local governments to borrow. Now that European governments have seen fit to send their bond yields through the stratosphere, expect to see the cost of European infrastructure rising. State and local governments also add in whole new levels of nimbyism and political wrangling. Scott Walker was able to basically kill any hope for high-speed rail in Wisconsin or Minnesota. Moreover, they are also way, way more incompetent. For more, see the Rhode Island Department of Transportation.

    Another reason for high American costs in Buy America provisions, which require American governments to continue employing American firms and planners who are not as qualified as their European and Asian counterparts. In the free market, the US would just contract with a foreign firm to build infrastructure more cheaply, but protectionist policies inhibit this correction.

    There are also additional explanations for specific kinds of infrastructure. In America, the holding of rail lines by private corporations who want their cut makes fixing rail lines exceptionally difficult. Suburban sprawl, poor urban planning, and the curious insistence that streets also function as parking lots all increase American road expenditures.

    Finally, no country in Europe or Asia has to deal with the singular problem of the Republican party.

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