9 Reasons Government-Funded Infrastructure Is a Bad Idea

Let private investors take the lead.


The new Congress hasn't even been elected yet, but it's already under pressure to add billions of dollars in new government spending to pay for "infrastructure."

Politico Magazine lists "rebuild our infrastructure" as one of 11 "bipartisan ideas that might actually pass" in President Obama's final two years in office. A Bloomberg View editorial opines: "Once Republicans control Congress, there's reason to hope that—just maybe—they'll be looking for a tangible accomplishment. Why not start with a new program of investment in public works?"

At The New York Times, columnist David Brooks declares it "completely obvious" that "the federal government should borrow money at current interest rates to build infrastructure," and he adds that "The fact that the federal government has not passed major infrastructure legislation is mind-boggling, considering how much support there is from both parties."

Brooks' Times editorial page colleague Paul Krugman, meanwhile, also uses the word "obvious" to describe the need for more federal spending, writing, "We have huge infrastructure needs, especially in water and transportation, and the federal government can borrow incredibly cheaply—in fact, interest rates on inflation-protected bonds have been negative much of the time (they're currently just 0.4 percent). So borrowing to build roads, repair sewers and more seems like a no-brainer."

A front-page news article in Sunday's Times declares that Obama's top aides "have met for weeks to plot…possible compromises with Republicans to…build roads and bridges."

Here are nine reasons why a burst of federal borrowing or taxing to pay for roads, bridges, sewers, or airport terminals would be a bad idea.

1.  It would be a betrayal by Republicans of the voters who elected them. No Republican politician I am aware of won election by saying, "Vote for me, I will borrow and spend more than the Democrats." In fact, when a Democratic Congress borrowed and spent for a "stimulus" bill that included infrastructure spending, voters responded by throwing them out and electing a Tea Party Republican House.

2. Plenty of borrowing, spending, and building is already happening at the state level. The Times has reported recently on the under-construction $3.9 billion new Tappan Zee bridge over the Hudson River, as well as the construction, for $3.6 billion, of a new main terminal at La Guardia Airport. In 2003 a new $1.9 billion AirTrain opened linking the subway and JFK Airport.

3. The federal government spends a lot on infrastructure already. The federal Department of Transportation had outlays of $76 billion in 2013. That is a vast sum.

4. Federal infrastructure spending is often on wasteful projects. Remember the $223 million Congress appropriated to fund the "bridge to nowhere" in Alaska? Federal infrastructure spending can be influenced by the seniority of a Senator on an appropriations subcommittee, rather than by whether a project is a genuinely worthwhile investment.

5. Federally funded projects are excessively costly because of excessive regulations. The government spent more than half a billion dollars on repainting the Brooklyn Bridge. Even after adjusting for inflation that is more than it cost to build the bridge from scratch back in 1883, when environmental regulations and prevailing wage laws were more lax or nonexistent.

6. Infrastructure projects are quickly overtaken by new and unanticipated technological improvements. The federal government spent a lot of money building and maintaining coastal lighthouses—until GPS technology made them obsolete. Cities spent lots of money acquiring land for reservoirs and building aqueducts—but advances in desalinization and wastewater treatment technology today can make some of those earlier investments look shortsighted.

7. Infrastructure projects can have unintended consequences. Building interstate highways through the middle of cities destroyed functioning neighborhoods, hastening suburban sprawl (and enabling both white flight and school re-segregation). If you believe that car exhaust fumes contribute to global warming, then the interstate highway system is a contributing factor in that, too.

8. Big infrastructure projects enrich the powerful at the expense of the powerless. Big, politically connected construction contractors do well, while the little guy with the misfortune to live in the path of "infrastructure" gets told to get lost.

9. The mere fact of low interest rates is not sufficient reason to borrow. If the government uses its borrowing capacity up now on infrastructure, it may have a harder time borrowing in the future for some more urgent need.

Sure, some "infrastructure" projects might be worthwhile. In those cases, private investors might decide to invest on their own, finding the potential rewards to outweigh the potential risks. But the idea that a new Republican Congress should come in and immediately borrow vast sums to fund big government construction projects is not as "completely obvious" as advocates claim.