Biden Infrastructure Spending Outlook
By Will Kaydos
The White House claims the infrastructure projects will improve US competitiveness, create more and better jobs, reduce emissions, and several other benefits. This sounds great, but reality will be different.
Construction cost estimates typically assume all goes well with proposed projects, but design mistakes, unexpected problems, and mediocre project management inevitably increase costs. “Mission creep,” such as adding features to buildings, can also lead to hefty cost overruns when project managers are spending taxpayers’ money.
On the benefits side, the bill includes $550 billion for rebuilding roads, bridges and other hard infrastructure. However, I estimate $400 billion of that is for previously deferred repair and maintenance, instead of new projects that will produce healthy returns on investment. Fixing a flat tire won’t improve a car’s engine, and repairing roads and bridges isn’t going to make the engine of our economy - private businesses - more productive and competitive.
Improving productivity and competitiveness requires investment, innovation, and effective management of capital and people. Infrastructure shortcomings can affect performance, but nothing indicates we have severe infrastructure problems that prevent US companies from being world-class competitors in many industries.
I expect the infrastructure bill to produce substantially higher budget deficits than forecast; jobs and wages that will last only as long as the river of borrowed and printed money keeps flowing; and small gains in GDP and US business effectiveness.
Infrastructure improvements will slightly help domestic companies become more competitive, but domestic companies must do that by increasing their investment in improving their products, their business processes, and their people.
The infrastructure bill has some good points, but the promised costs, funding, and benefits of the bill will unfortunately follow the traditional government pattern of wishful thinking, creative accounting, and fantasy-land economics that we have seen for the past forty-plus years.