An Infrastructure Package Is a Bad Idea

Chris Edwards

House Democratic leaders suggested that a fourth COVID-19 relief bill should include infrastructure spending, and President Trump voiced his approval in a tweet a couple weeks ago: “It should be VERY BIG & BOLD, Two Trillion Dollars, and be focused solely on jobs and rebuilding the once great infrastructure of our Country!” Both liberal and conservative commentators support a federal infrastructure package.

Fortunately, political leaders have put this misguided idea on the backburner for now, but it regularly sweeps through Washington in a cycle like a seasonal virus.

The vast majority of the nation’s non‐​defense infrastructure is owned by state and local governments and the private sector. It is more efficient if infrastructure owners make the funding and investment decisions rather than federal politicians. This study discusses 18 reasons why federal aid for state and local activities, including infrastructure, makes little sense.

The COVID-19 outbreak has made federal infrastructure spending even more dubious because the demands for various types of infrastructure may substantially shift in coming years. Breaking ground on long‐​term government projects while consumer needs are in flux is too risky.

The demand for urban bus and rail systems may be down for years to come. Even before the crisis, transit use had been falling in many cities due to the rise in Uber and Lyft and the growing unreliability of some systems, such as the Washington D.C. subway. With heightened fears of infectious diseases, transit demand may sink further, as Randal O’Toole explores.

State and local politicians have pumped billions of dollars into sports stadiums and convention centers over the years. Demand for these facilities will likely be down, so ending government subsidies makes more sense than ever.

What about airports? Personal air travel will probably rebound strongly because there is no online substitute for a vacation in the Caribbean. But long‐​term demand for business air travel may shift down because video conferencing on Zoom and other services can substitute for in‐​person meetings. Such a shift in business meetings would also reduce Amtrak use.

A CEO on television the other day noted that a share of business air travel stems from in‐​person meetings signaling to business partners the importance of a relationship. But that cultural cue may go by the wayside because every business leader now has extensive experience with video meetings. Furthermore, many businesses will be cash‐​strapped in coming months, and online meetings are a lot cheaper than flying.

Meanwhile, automobiles are the safest travel mode in a world of infectiousness diseases, so highway demand will likely rebound. Automobiles are also the safest transportation mode in the face of terrorist threats and natural disasters, notes O’Toole. States will need to build more highway capacity, but they can probably push back the timing of expansion because of the recession.

A federal infrastructure package would probably cater to lobbyist demands, not market demands. It would likely include billions of dollars for transit, even though the ridership outlook is grim. As for the states, they should proceed with caution because the crisis will shake up many economic relationships, including infrastructure use.

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Here is further reading on transit, highways, airports, Amtrak, infrastructure, air traffic control, and aid‐​to‐​states.