When we build roads, bridges, ports, communications networks, municipal water systems, and other infrastructure, we are not just putting construction workers and engineers to work — we are also revitalizing communities, protecting public health and safety, connecting people to jobs, empowering entrepreneurs, and making it easier for American businesses to export goods around the world. There is certainly enough work to do, with $2 trillion in deferred maintenance on the Nation’s infrastructure. Built by far-sighted investment over generations, America’s world-class infrastructure is falling behind the rest of the world. As other nations have sought to compete economically by improving infrastructure, U.S. investment lags behind many of its overseas competitors. In the most recent World Economic Forum rankings, the United States had, in less than a decade, fallen from 7th to 18th overall in the quality of its roads. Building a durable and reliable 21st Century infrastructure creates good jobs that cannot be outsourced and will provide American workers and businesses with the transportation and communication networks they need to help grow the economy. The Budget includes significant investments to repair the existing infrastructure and build the infrastructure of tomorrow in smart, efficient, and cost-effective ways.
2.2.1
Long-Term Investments in Upgrading America’s Transportation Infrastructure
To spur economic growth and allow States and localities to initiate sound multi-year investments, the Budget includes a six-year, $478 billion surface transportation reauthorization proposal.
By reinvesting the transition revenue from pro-growth business tax reform, the President’s plan will ensure the health of the Highway Trust Fund for another six years — two years beyond the 2015 Budget GROW AMERICA proposal — and invest in a range of activities to spur and sustain long-term growth. The President’s plan to rebuild America will increase spending to repair and modernize the Nation’s highways and bridges, as well as injecting much needed investment into the existing transit and intercity passenger rail systems. The President’s plan also increases investments to expand new transit projects, link regional economies by funding the development of high-performance rail, and support American exports by improving goods movement within the Nation’s freight rail networks. Small businesses particularly depend on the quality of transportation networks to get goods to market competitively, allowing them to win customers, expand operations, and hire new employees. To help spur innovation and economic mobility, the reauthorization proposal would permanently authorize the competitive TIGER grant program to support projects that bring job opportunities to communities across the United States. The proposal would also advance the President’s Climate Action Plan by building more resilient infrastructure and reducing transportation emissions by responding to the greater demand and travel growth in public transit. Also, to make sure that Americans are driving vehicles that are safe to operate, the reauthorization proposal includes additional resources for investigating automobile defects, improving data collection to better support Government oversight of auto manufacturers, and making changes to hold auto manufacturers more accountable for reporting and responding to vehicle defects.
The Case for Investing in Infrastructure in Today’s Economy
The Budget proposes to invest in infrastructure through a comprehensive six-year surface transportation reauthorization proposal, as well as tax incentives for State and local infrastructure investment, a new Infrastructure Bank, and other initiatives. The Federal Government plays a vital role in infrastructure investment, and the Nation’s roads, bridges, and other surface transportation infrastructure systems are badly in need of upgrades and repairs. For example, 65 percent of America’s major roads are rated in less than good condition and one quarter of U.S. bridges need rehabilitation, replacement, or significant maintenance and repair to remain in service or do not meet current design standards and traffic needs. Although the economic recovery has begun to accelerate, the economy is still operating below capacity, and interest rates remain at very low levels. While infrastructure investment will continue to be needed even after the economy reaches full employment, time is running out to make these needed investments under ideal economic conditions.
A recent study published by the International Monetary Fund (IMF) [1] makes a convincing case that “the time is right for a strong infrastructure push” in advanced economies such as the United States. While infrastructure is critical for economic efficiency and growth, the private sector often fails to make sufficient investment in infrastructure for several reasons, such as positive externalities, large start-up costs, and economies of scale. Thus, in many cases, the public sector can provide infrastructure more efficiently.
Public infrastructure investment promotes economic growth by boosting aggregate demand in the short run and improving economic efficiency in the long run. While infrastructure needs to be financed, the IMF study presents statistical evidence that — under the right conditions — the combination of short- and long-term economic gains from infrastructure investment can offset much of its cost. When many workers are unemployed, infrastructure investment increases total employment, as opposed to bidding workers away from other sectors, thus increasing aggregate demand.
The U.S. economy still has unused capacity. While the unemployment rate has declined significantly and more workers are holding full-time jobs, nearly four percent of the workforce is still working part time for the lack of full-time work, and unemployment rates in the construction sector remain higher than in the economy as a whole. Moreover, the Federal Government remains able to borrow at very low interest rates, with the 10-year Treasury rate ending 2014 below two and a half percent. While the Budget proposes to offset the cost of its new infrastructure investments, it would front-load the investments and pay for them over the 10-year budget window. This pro-growth approach has the potential to realize both the short- and long-term gains from investing in infrastructure, with no risk of higher long-run debt.
The IMF study also highlights the importance of choosing high-efficiency infrastructure projects based on rigorous benefit-cost analysis. The United States has a pent up supply of badly needed infrastructure projects that meet these tests, and the President’s surface transportation plan would result in larger share of funds being allocated through competitive processes.
[1] International Monetary Fund, 2014, “Is It Time for an Infrastructure Push? The Macroeconomic Effects of Public Investment,” in World Economic Outlook: Legacies, Clouds, Uncertainties.
2.2.2
Infrastructure Permitting
To further accelerate economic growth and improve the competitiveness of the American economy, the Administration is taking action to modernize and improve the efficiency of the Federal permitting process for major infrastructure projects. In May 2014, the President announced a comprehensive interagency plan with 15 reforms to turn best practices into common practice. To implement this plan, the 2015 Budget proposed a new Interagency Infrastructure Permitting Improvement Center housed at the Department of Transportation to lead the Administration’s reform efforts across nearly 20 Federal agencies and bureaus. While waiting for the Congress to act, the Administration set-up an interim interagency team to support reforms, such as moving from separate, consecutive reviews to synchronized, simultaneous reviews. For example, the U.S. Coast Guard, the Corps of Engineers, and the Department of Transportation have launched a new partnership to synchronize their reviews for transportation and other infrastructure projects, such as bridges that cross navigation channels. By developing one environmental analysis that satisfies all three agencies, project timelines can be significantly reduced. Building on these efforts, the Budget supports an expanded, publicly available Permitting Dashboard that tracks project schedules and metrics for major infrastructure projects, further improving the transparency and accountability of the permitting process. To accomplish these goals, the Budget proposes $4 million for the Department of Transportation to expand the Federal Infrastructure Permitting Dashboard and fund staff to lead interagency reforms that accelerate progress and improve outcomes. In addition, the Budget includes $4 million for permitting reforms through a proposal to expand interagency transfer authorities, which would institutionalize capacity to address cross-agency management improvements. The Budget also includes additional funding to expedite the consultations required pursuant to the Endangered Species Act, which also will help accelerate permit review timeframes.
2.2.3 — Build America Investment Initiative
The Budget includes support for the Build America Investment Initiative (BAII), a Government-wide, interagency initiative to increase infrastructure investment and promote economic growth by supporting public-private collaboration in major infrastructure sectors such as transportation, water, and telecommunications. As part of the BAII, the Administration has launched investment centers to provide States and municipalities with assistance on securing investment in transportation, water systems, and rural infrastructure. Together, these centers will facilitate direct private investment in U.S. infrastructure and encourage greater public-private collaboration. For example, as part of the BAII, the Department of Transportation established the Build America Transportation Investment Center to serve as a one-stop-shop for cities and States seeking to use innovative financing and partnerships with the private sector to support transportation infrastructure. An Interagency Infrastructure Finance Working Group, co-chaired by the Secretaries of the Treasury and Transportation, delivered recommendations to the President on how to promote awareness and understanding of innovative financing and increase effective public-private collaboration. Building on those recommendations, the Administration has worked with the private sector to launch two additional investment initiatives that will help leverage existing investments in drinking water and wastewater infrastructure and other infrastructure such as hospitals, schools, local and regional food systems, and broadband expansion throughout rural America. Other Federal agencies are also focusing on using existing authorities to increase the private sector’s participation in the financing of public infrastructure. In addition, the Budget proposes to create a new America Fast Forward Bond program that, like its Build America Bond precursor, will provide State and local governments with an optional taxable bond alternative to traditional tax-exempt bonds. The Federal Government will share in the cost of these bonds so they are as affordable to issuers as tax-exempt bonds, proceeds of which can be used to further finance governmental capital projects.
2.2.4 — Launching the National Parks Centennial Initiative
For 100 years, National Park Service (NPS) parks and historic sites have preserved and shared America’s cultural and historical identity. These places present America’s unique history and draw tourists from across the United States and around the world. There is an opportunity to celebrate the centennial anniversary of the Nation’s great parks by providing enhanced park services for visitors, and through targeted investments to improve NPS facilities. This opportunity is an historic effort to upgrade and restore national parks, while putting tens of thousands of Americans to work and engaging and inspiring younger generations to carry the Nation’s parks into the future.
The Budget proposes $860 million in mandatory and discretionary funding to allow NPS, over 10 years, to make targeted, measurable, and quantifiable upgrades to all of its highest priority non-transportation assets and restore and maintain them to good condition. Addressing the critical needs of these assets avoids deterioration and costs for future generations. The Budget also proposes matching funds to leverage private donations for signature projects and programs at national parks. This significant effort ensures America’s national treasures will be preserved over the next hundred years for future generations.
The 1916 Act that created NPS called for parks to be left “unimpaired for the enjoyment of future generations.” The Parks Centennial seeks to live up to this call by providing more opportunities for children to interact with natural areas. This targeted effort involves transporting over a million urban youth a year to national and public lands with dedicated youth coordinators to welcome them and their families. Today’s investment in the next generation of visitors will help build the stewards of America’s national treasures in the future.
This year also marks the 50th anniversary of the Voting Rights Act, which the Budget commemorates by proposing $50 million to restore and highlight key sites across the United States that contributed to the struggle for civil rights. This includes investments in specific NPS sites associated with the 1950s and 1960s civil rights movement, such as the Selma to Montgomery National Historic Trail, Little Rock Central High School National Historic Site, Brown v. Board of Education National Historic Site, and the Martin Luther King, Jr. National Historic Site. State, local, and tribal governments can also apply for historic preservation funds to help them document and preserve stories and sites associated with the struggle.
2.2.5— Smart Investments in Federal Facilities
Investing in the Nation’s federally-owned facilities ensures that mission execution is optimized at the lowest possible cost. Funding reductions in recent years have led to facility deterioration, as well as missed opportunities to consolidate and reduce operating costs. The General Services Administration (GSA) is leading the Federal effort to both invest in Federal facilities and consolidate space to reduce costs and optimize efficiency, saving tens of millions in annual lease costs. The Budget will invest more than $2.5 billion in GSA’s Federal facilities portfolio, an increase of more than $1.1 billion over the enacted level. GSA will invest $1.25 billion in construction and acquisition priorities, including the next phase of the consolidated Department of Homeland Security Headquarters and the first phase of a Civilian Cyber Campus. GSA will also invest more than $900 million in critical repairs and alterations and consolidation activities. The National Aeronautics and Space Administration and the USDA Forest Service will eliminate operating costs by demolishing unneeded facilities. The Smithsonian Institution and DOI will make necessary investments to improve the condition of facilities and reduce operational costs. The Budget invests $60 million to continue renovations of USDA headquarters, and $206 million for the Agricultural Research Service to renovate and construct its facilities. The Budget also invests $1.5 billion for construction projects at the Department of Veterans Affairs (VA), an increase of nearly $500 million over the 2015 enacted level. These investments will enhance the Department’s mission while providing opportunities for long-term savings, as building upgrades and renovations result in a reduced footprint. Government-wide, agencies will continue their efforts to reduce their space in accordance with the Administration’s goal to reduce the Federal footprint. In total, the Budget provides an additional $2.4 billion in capital investment funding over the 2015 enacted level.
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