Infrastructure is the set of fundamental facilities and systems that support the sustainable functionality of households and firms, serving a country, city, or other areas, including the services and facilities necessary for its economy to function. (Source: Wikipedia)
The term infrastructure entered the vocabulary of public policy discussions in the 1970s when it became widely recognized that roads and bridges are a part of the nation’s capital stock providing services that make a significant contribution to the well-being of Americans. At that time, public roads and bridges had been allowed to deteriorate to the point that they were interfering with transport and travel, and there became a groundswell of support for upgrading them. Since that time, the public and politicians have taken a positive view of infrastructure and the desirability of investing in such.
More recently, the debate about our nation’s infrastructure has reached a feverish pitch. Much of the debate centers on what constitutes infrastructure. Is it the traditional roads, bridges, ports, airports, water systems, sewer systems, and electric power lines? Or does it also include broadband availability, health care, childcare, eldercare, and education at all levels? Should the jobs that are created in building and maintaining Infrastructure also be added as a benefit (instead of being regarded solely as a cost)? For many, this is seen as a great opportunity to take advantage of the favorable sentiment toward infrastructure—and the urgency of addressing the current debilitating condition of the nation’s infrastructure—and expand the definition to include other things that are less favored.
Ignored is the question of how infrastructure should be paid for—by individual and business users or by the government (taxpayers)? And if the latter, which level of government—local, state, or federal? There has been a longstanding presumption on both sides of the debate that infrastructure naturally falls into the responsibility of government, especially the federal government, and, if the government does not take this on, worthwhile infrastructure investment and repairs will not be undertaken.
Early in our nation’s history, many road systems, bridges, tunnels, and canals were built to collect tolls to support construction and operating costs. Operating costs included costs of collecting tolls, which often were substantial in relation to other costs. Nonetheless, numerous projects proved financially viable and fostered the development of the new nation, especially the move westward.
At the same time, many roads and bridges were not being built because toll collection costs were so high that they rendered the projects financially not worthwhile, even though they were economically worthwhile apart from toll collection costs. In these cases, local and state governments stepped in to undertake infrastructure projects and financed them with tax receipts. Local governments financed local projects that largely benefited local residents and states financed projects that connected localities (such as state roads). Sometime later—in the 1920s—the federal government stepped in, largely to assist in the financing of a national network of roads using federal taxpayer funds. Several decades later, in the 1950s, the national interstate highway system was begun, financed by both federal and state governments. Much of interstate funding has come from fuel taxes that are collected at the pump by states and the federal government. This has been a way for users to cover some of the costs. But the infrastructure legislation now before Congress would be funded from special taxes, borrowing, and miscellaneous other sources. In other words, infrastructure would become more a responsibility of the federal government, which moves even further away from the principle of users paying for infrastructure.
Another issue has to do with accountability for allowing infrastructure to crumble over the years. Much of that responsibility falls on the shoulders of state and local governments that chose to fund other obligations—such as shortfalls in public pension plans—as strains on their budgets were mounting. They found it politically expedient to ignore facing up to deteriorating infrastructure. Instead, they chose to kick the can down the road. In many cases, the hope was that an opportunity would come along to get the federal government to pick up the tab—that is, to get taxpayers from other parts of the country to chip in. That time has arrived.
The time has also arrived to question whether the longstanding conditions for government funding of infrastructure still hold. Mainly, this has to do with whether the costs of collecting tolls remain prohibitively high. Has technology lowered those costs sufficiently that we can rely on users to pay for the costs of infrastructure? The growing number of toll roads around the country that rely exclusively on electronic collection systems for paying tolls are telling us that this is a promising way of providing infrastructure going forward. It is also likely to result in tighter cost controls and better maintenance of roads, bridges, and other infrastructure. Modern electronics have fostered the capability of developing inexpensive cooperative networks among governments around the country that permit a single electronic pass to be used and a single billing for tolls. This type of system has been put in place in Norway and elsewhere and works well. Future technological developments will only make such an approach to dealing with infrastructure more feasible.
Should this be done, it would be appropriate to remove the tax at the pump and lower other taxes that have financed public investment and maintenance of infrastructure. In other words, users of infrastructure should only be billed once and their overall costs of paying for infrastructure should not increase in the aggregate. Indeed, better cost controls under such a system will lead to lower all-in burdens on the public of paying for infrastructure.
In sum, the time has come to rethink the way we provide and fund infrastructure. At the end of the day, infrastructure must be paid for and one must answer the question of whether it makes more sense for users (beneficiaries) to cover those costs or taxpayers, including those in other parts of the country? Also, does it make sense to move to a system that is going to be more effective in holding down infrastructure costs? The current inclination to turn funding over to the federal government and use general revenues is a move in the wrong direction! Technological advances have made it increasingly feasible to shift the cost of infrastructure from taxpayers to users.