Manhattan Institute for Policy Research.
Subscribe   Subscribe   MI on Facebook Find us on Twitter Find us on Instagram      



Building Bridges

April 23, 2007

By Nicole Gelinas

Conservatives think the private sector will mend the nation's crumbling infrastructure. They're wrong.

I am a conservative who thinks that conservatives and liberals alike have blown it on one of the nation's most important issues: infrastructure spending. While politicians find new ways to spend money on Medicare even in the face of a looming entitlement crisis, our nation's roads, bridges, airports and dams are crumbling. Roads and bridges may be boring, unsexy. But they are the backbone of tomorrow's capitalist economy. We ignore them at our peril.

Some conservatives may reason that if there were really a problem, the private sector would step in and fix things in pursuit of profit. Isn't that how it works in a capitalist society? Indeed, the private sector could play a bigger role. But it can't replace rational public planning and investment.

We're neglecting physical assets previous generations bequeathed to us. One glaring example: The interstate highway system, the backbone of modern America's growth, turned 50 last year. On the coasts, rush hour on these freeways consumes the entire day and much of the night because traffic exceeds the decades-old design. We spend only 60% of what's needed at all levels of government just to keep our roads in good condition, according to the American Society of Civil Engineers.

In mass transit, New York City and Chicago are taking free rides on infrastructure built a century ago. Many subway and elevated lines are jam-packed, hampering growth in the cities. The Tappan Zee Bridge, a link between upstate New York and the city, is past its life span and deteriorating. Nationwide, the Army Corps of Engineers estimates that 120 flood-control systems, including levees that protect California and the East Coast, are vulnerable to erosion and failure.

Government squanders opportunities to direct funding streams into infrastructure. Take the Chicago Skyway. In 2004 Chicago leased the already tolled road to a private consortium owned by Australia's Macquarie and Spain's Cintra for $1.8 billion. To recoup their investment, the companies will collect tolls for 99 years while maintaining the road.

But Chicago didn't use the windfall to invest in infrastructure. Instead, it's helping plug a budget gap. There is a frightening risk that cities and states will take away from the Skyway deal the notion that it's okay to sell off the furniture to pay for dinner. Taxpayers can reap billions to invest in new infrastructure by leasing assets to the private sector. But once the money is gone, it's gone.

Government should invite private companies to take on certain risks, like completing projects on time and on budget. But private firms shy away from what is known as traffic risk. New toll roads or lanes often must compete with free roads nearby, so a private builder might not earn enough to pay back investors within a specified period of time.

In Texas, where one private sector consortium has agreed to build two roads, a veto-proof majority in the state legislature has proposed a moratorium on such deals, citing concerns that Texas may be giving too much away, including the freedom to build competing roads should future traffic conditions warrant. Further, on one of the roads, the company agreed to take the risk because the state is signing over to it the right to collect tolls on an existing portion of road. In most cases of new construction, even in economically humming regions, the private sector won't take full risk; state governments must have the bonding capacity to issue some sort of minimum revenue guarantee to back up private sector investors.

It's not feasible for private sector companies to invest in other assets like dams without some form of government planning and payment. Without public enforcement, dams can't really be tolled; it's likely that too many free riders would shirk their responsibility to pay for the protection they afford.

Every year that we defer planning and funding for infrastructure while piling on promises to tomorrow's retirees we lose a bit of our capacity to invest in the future.

Original Source:



How de Blasio Is Failing the Test of the City's Success
Nicole Gelinas, 08-31-15

Is Puerto Rico Our Greece?
Daniel DiSalvo, 08-30-15

It's the Politics, Stupid: The Limits of Pension Reform
Daniel DiSalvo, 08-28-15

Gangsta Rap's Grim Legacy for Comptons Everywhere
Jason L. Riley, 08-26-15

Trump Gets His Facts Wrong on China
Charles W. Calomiris, 08-25-15

Big Sugar: Sanders and Rubio Share a Sweet Tooth
Jared Meyer, 08-25-15

How France Finally Bowed to the Global Economy
Nicole Gelinas, 08-24-15

Courts Worsen the Pension Mess
Josh B. McGee, 08-24-15


The Manhattan Institute, a 501(c)(3), is a think tank whose mission is to develop and disseminate new ideas
that foster greater economic choice and individual responsibility.

Copyright © 2015 Manhattan Institute for Policy Research, Inc. All rights reserved.

52 Vanderbilt Avenue, New York, N.Y. 10017
phone (212) 599-7000 / fax (212) 599-3494