Infrastructure spending has a multiplier effect of $1.80 for every $1 the government spends, Doug Elmendorf said. A recent Congressional Budget Office report determined that, while additional spending of tens of billions of dollars could be justified, the returns on project investment varied widely. For that reason, Elmendorf said it is important to pick projects carefully and apply cost-benefit analysis.
The panel focused on several areas where the current infrastructure funding will not keep up with demand. There are infrastructure needs that are highly visible, such as highways and railways, and needs that emerge from catastrophe, such as Minnesota′s bridge collapse and New Orleans′ failed levees. Nancy Kopp argued for prioritizing sewers, clean water systems and other water infrastructure. Over the next 30 years, 50 percent of water infrastructure will need replacing, she said.
Norman Mineta pointed to the underfunding of the highway trust fund through a gas tax that hasn′t increased since 1993. He predicts alternative fuels and electric vehicles will further decrease money for federal highways.
Too often funding of infrastructure is uncertain. Martin Koffel said it is important to develop infrastructure spending for a boom or bust economy. He favored developing effective public-private partnerships in which private organizations aren′t just buying outmoded infrastructure but are able to invest in infrastructure projects that can be improved.
Some panelists suggested ways to improve the allocation of funding. Mineta said discretionary programs are laden with earmarks, prohibiting progress. Kinton said it is important to get creative in securing money through user fees and the congressional process.
Elmendorf agreed that user fees are a logical solution. Water fees and congestion pricing would effectively reduce consumption, increase efficiency and generate revenue, he said.
Thomas Kinton cited the passenger facility fees that Boston′s Logan International Airport charges passengers who travel through that airport. The $4.50 fee has no impact on budgets but generates significant revenue for airport improvement projects.