'Starting to Look Like a Third World Country'

In Financial Armageddon, I noted an Infrastructure Report Card by the American Society of Civil Engineers (ASCE) that called for $1.6 trillion to be spent over a five-year period to bring the nation's infrastructure to a good condition. My point was that this was another in a long list of multi-trillion dollar obligation that were undermining the economic and financial wellbeing of the United States. A commentary in the Financial Times by John Gapper expands upon what decaying roads, rail networks, bridges, dams and the like mean for our future in "On the Pot-Holed Highway to Hell."

If anyone doubts the problems of US infrastructure, I suggest he or she take a flight to John F. Kennedy airport (braving the landing delay), ride a taxi on the pot-holed and congested Brooklyn-Queens Expressway and try to make a mobile phone call en route.

That should settle it, particularly for those who have experienced smooth flights, train rides and road travel, and speedy communications networks in, say, Beijing, Paris or Abu Dhabi recently. The gulf in public and private infrastructure is, to put it mildly, alarming for US competitiveness.

You might have expected that investing in US infrastructure would be a hot political topic this year. Well, no. Hillary Clinton spent the final week of her Indiana campaign standing on the back of a pick-up truck arguing for a temporary suspension of the "gas tax", the fuel duty that pays for highways.

You read correctly. Faced with the emptying of the Highway Trust Fund, established in 1956 as the US entered a period of growth and prosperity, Mrs Clinton suggested cutting its source of funds (which she claimed could be made up by a tax on oil companies). It was more important to give Americans a summer break from $4-per-gallon petrol.

At times I wonder whether the world's biggest economy has the will to solve its challenges or will end up wandering self-indulgently into the minor economic leagues. I expect it will get serious when the crisis is too blatant to ignore, but it has not done so yet.

Perhaps that is a bit unfair. Some leaders have recognised the problem for economic development, as well as safety. They include Arnold Schwarzenegger and Ed Rendell, governors of California and Pennsylvania, and Mayor Michael Bloomberg of New York. The trio have allied to press for the states and Washington to act.

I think I sensed defensiveness on the part of Mr Rendell, one of Mrs Clinton's big supporters, when I talked to him on Tuesday about her gas tax proposal (which happily may have backfired on her). He insisted he would have spoken out against her plan if she had not proposed to fill the coffers from oil taxes.

Mr Rendell's main point was that the US needs all the cash it can get for its transport infrastructure, as well as water and power networks. He took a tour d'horizon of the problem: "Dams are in a horrible condition ... We have no real rail transport, unlike most nations in the world ... Summer delays make flying in America a disaster."

As it happens, I heard a similar lament from Mr Schwarzenegger at the Milken Institute Global Conference in Los Angeles last week. He recalled a recent visit to France during which he travelled with Nicolas Sarkozy, the French president, on the country's new high-speed train. "I could not believe we were going at 350km an hour," the erstwhile film action hero marvelled.

There are lots of ways in which infrastructure inadequacy matters to the US but I would focus on two.

First, it imposes a drag on economic growth. The private infrastructure is poor enough - broadband speeds lag behind other countries and mobile coverage is spotty. But much of the public infrastructure is unfit, a fact that was becoming clear even before Hurricane Katrina flooded New Orleans and a Minneapolis bridge collapsed during rush hour last year.

Second, it presents an awful image of the US to investors and other visitors. The state of transport and communications infrastructure is a symbol of a nation's economic development and the US is starting to look like a third world country. In fact, scratch that. Many developing countries look and feel better.

Of course, they are in a different phase of development. The US invested 10 per cent of its federal non-military budget in infrastructure in the 1950s and 1960s as it built the interstate highway system - at the time, the envy of the world. While US investment has fallen to less than 1 per cent of gross domestic product, China has been matching its double-digit postwar record.

The bigger problem is that, unlike European countries including the UK, the US shows little sign of finding the will or the funding mechanisms to maintain what it has or to build anew. Mr Schwarzenegger spoke enviously of public-private partnerships in both Canada and the UK that have enabled these countries to start redressing their inadequacies.

In the US, the Highway Trust Fund is likely to run out of money next year and the voters' tolerance for tax rises is strained. They have seen spending overruns and delays on projects such as Boston's $20bn "big dig" and the "bridge to nowhere" - a dubious Alaskan project to which federal funds were allocated.

Meanwhile, people are finding it hard to accept that if they do not pay for roads and rail links through taxes, they will have to stump up in other ways. Indiana's politicians ran into a backlash after Macquarie-Cintra, an Australian-Spanish consortium, took control of a state highway and raised the tolls on those using it.

But cutting taxes, balking at tolls and, in the case of California's public sector unions, opposing public-private partnerships on principle will not get the job done. The bill will have to be met, whether through increases in federal and state spending (in a more lucid moment, Mrs Clinton suggested issuing infrastructure bonds) or higher user fees and tolls.

Americans may not like the sound of that, but they cannot expect the US to maintain the economic dynamism of the late 20th century in the 21st unless they buckle down. Sooner or later, wishful thinking is going to crash into financial reality.

Comments

[Aaron Krowne]

The sad part is state and local officials have to lobby to Washington to fix this country's infrastructure problems.

Where are those problems located?

IN OUR STATES AND CITIES, not in Washington! (Though of course D.C. itself is also a wreck).

This is what happens when a Federal government becomes a parasite wasting most of a nation's resources on its own graft and foreign escapades. We will all pay dearly for letting them direct trillions of what would otherwise be useful capital investment over the last 50 years into various black holes, never to return.

[dearieme]

You are not alone, mind. In Britain our West coast mainline railway is absorbing a fortune, we need to replace the Forth Road Bridge, and the motorways are saturated with traffic. Our present government has underspent on infrastructure and overspent on vote-buying since it entered office in 1997. And, oh madness, London is getting the 2012 Olympics.

[Brian]

It is a crime that those placed in charge can sell off our nations infrastructure to foriegn interests, thus getting themselves off the hook and allowing them to direct the public to a 1 800 # for complaints about the roads. Talk to the new owners. The new owners answer to nobody. You want road improvements, sure. Now the toll is $8....each way sucker. Its just another spineless, short term thinking policy that the majority of our officials have adopted. What do I care, I have a guaranteed pension funded on the backs of the tax payers. Ever wonder why Fed, State, County and Muni employees never compalain about state increases... because they are voting for their own freaking pay raises!!!
The entire system should be privatized and this Bulls*** gtd pensiona nd free healthcare crap needs to stop. They dont deserve it. These employees are some of the laziest people around and complain the most. Fire them all and let them interview under a private entity for their jobs. Heck.. if the DMV of NJ can do it then believe me, it can be done.

[thomas shawn]

"The private infrastructure is poor enough - broadband speeds lag behind other countries and mobile coverage is spotty."

I can vouch that that USA is way behind the Philippines in cell phone and wi-fi coverage.

[David]

May I remind people lest they tend to forget, America is bankrupt and trying to live high on the hog like it was circa 1955.
the apex of American financial power was prior to 1960.
Nixon went to China not because
he was a diplomat ,no, Nixon was a gangster he went their to secure loans and lay down the foundation for the scheme to set up China as the
industrial base so that the corporations could make not a living but a killing.this at the American worker's expense.
when they opened the door to cheap exports in 1970 it wasn't out of the goodness of their hearts .it was because they got their political slush funds and pockets filled with cash off the backs of the American workers.
and today with nothing else to offer foreign companies ,they sell America piece by piece.
instead of fixing those bridges they plan of selling them.
Some people may not know this but every National park is no longer owned by Americans.
if you give the corrupt politicians another couple of decades there will not even be a street light that belongs to Americans.
it is all for sale at bargain basement prices, pennies on the dollar. For since they murdered
Jfk, America has had a junta as its govt. it has become a Banana Republic. but still Americans wear that silly grin salute the flag and bend over backwards to take it up the rear.Americans are brainwashed with we are number 1 ,but when you ask them number one at what all you get back is glazed eyes and a silly grin.
the fema camps are ready for business the the glazed eyed with their silly grins (useless eaters ) will be rounded up soon.
there is only one way to escape the pending collapse. and that is the return to the soil and labor in the fields like your forefathers did.

[Buck Q Johnson]

lyk

[Buck Johnson]

We are fools and we have fools that are running the country for us.