US Inaction On Renewing Infrastructure Slows Growth

TRAFFIC jams are growing longer. Sewer and water mains are bursting more often. Concrete bridges are crumbling.

All over the United States, the infrastructure that knits together the economy has been neglected. Federal spending on infrastructure fell from 4.5 percent of the annual budget between 1961 and 1970 to an average of 0.8 percent a year between 1981 and 1987. This rapid decline is not without consequences. Almost 40 percent of bridges in the US need substantial repair, with about 120 collapsing annually.

"In the next few years, we will be seeing [bridge] facilities closed in record numbers," says Samuel Schwartz, director of the Infrastructure Institute in New York. "It will take 50 years to replace or rehabilitate all of the structures that we have built in the last 150 years." That means a huge capital investment for infrastructure.

Rapid deterioration of existing structures is damaging economic growth and cramping improvements in Americans' standard of living, several economists assert. America's transportation-dependent lifestyle demands an expanding infrastructure to handle ever-larger numbers of autos, delivery vehicles, railroad freight loadings, and arrivals at airport gates.

Sleepy yawns have in the past greeted discussion about infrastructure needs. But a drawn-out slump has voters smarting. Democratic Presidential candidate Bill Clinton has parlayed these concerns into headline-grabbing economic proposals, including additional spending on infrastructure of $20 billion annually over the next four years. President Bush supports a $4 billion increase for 1993.

The Clinton/Gore campaign has focused both on transportation and communications infrastructure needs. Sen. Al Gore (D) of Tennessee sponsored the $3 billion High-Performance Computing Act that was passed last year. Computer hardware will be developed to link homes, businesses, factories, and research universities through a fiber-optic "information highway." This and Mr. Gore's proposed Information Infrastructure and Technology Act (to facilitate the movement of technologies into the marketplace) are exam ples of government involvement in innovation.

As the flooding and immobilization of downtown Chicago demonstrated earlier this year, electronic and communications networks depend on a strong and reliable infrastructure base.

House Majority Leader Richard Gephardt (D) of Missouri is working with Rev. Jesse Jackson and New York financier Felix Rohatyn on a more glamorous proposal for investing $500 billion in infrastructure. They are discussing changes in investing rules to allow the nation's $3 trillion in pension funds to be invested in infrastructure projects.

Awareness of the urgency of the infrastructure deficit is growing without political hype, however, as more and more traffic is rerouted around closed bridges or slowed by clogged highways.

Cities and states are finding it difficult to come up with money to make the improvements. The Federal Highway Administration estimates that there is currently an investment shortfall of $13 billion to $42 billion a year on the nation's roads.

"Leadership has to come from Congress and the administration," says David Aschauer, a professor of economics at Bates College in Lewiston, Maine. "It's not going to come about spontaneously at state or local levels, they're just too strapped for cash."

Professor Aschauer has created controversy by drawing direct links between spending on infrastructure and overall economic growth. "Up to 50 percent of the decline in our long-term economic growth can be attributed to the falloff in infrastructure investment which occurred in the 1970s and '80s relative to the '50s and '60s," Aschauer says. "Historically, transportation [investment] has the most impact on economic growth and productivity improvement," he argues.

Last December, Mr. Bush signed the Intermodal Surface Transportation Efficiency Act (ISTEA) which will inject $151 billion into the economy over six years. More than 600,000 construction-related jobs will be produced this year by the act. The legislation also reversed 70 years of federal opposition to privately funded infrastructure improvements.

"The ISTEA legislation represents a sea change in the way transportation infrastructure is financed in this country," says Joseph Giglio, a managing director of Smith Barney, Harris Upham & Co., an investment firm in New York.

In addition, for the first time federal funds will be available to construct toll facilities, including bridges, roads, and tunnels. The federally financed Interstate Highway System will remain free.

In February, Bush further urged the federal government to facilitate the transfer of publicly built highways, bridges, and tunnels to private operators.

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