Why can’t we just leave infrastructure spending to the states?
Yesterday, I pointed out that Rep. Paul Ryan’s GOP budget proposal would require the federal government to spend less and less on transportation over time. Reihan Salam asks whether this is really such a bad thing. Can’t state governments just pick up the slack?
That’s possible, sure. But it hasn’t happened so far. As a recent report (pdf) from the Congressional Budget Office detailed, the federal government’s share of infrastructure spending has already been shrinking since the 1960s and 1970s. And the states, which still provide the vast majority of spending on roads and highways, haven’t made up the difference. The end result? There’s less infrastructure spending overall as a percent of GDP:
Keep in mind that this is all happening at a time when infrastructure is getting increasingly expensive to build — the CBO notes that the cost of building highways has tripled since 1980, far faster than inflation. States are spending the same, but getting less and less. Now, maybe this would all be okay if we were keeping our roads and bridges and pipes in good shape. But various experts and groups like the American Civil Society of Engineers seem to think that we’re woefully under-investing in infrastructure of all sorts.
One potential pitfall with handing over more and more infrastructure responsibilities to the states, meanwhile, is that states tend to cut way back on spending during recessions. And local funding can be pretty erratic, all told. Here’s a graph from New America’s Samuel Sherradan, based on CBO data:
We’ve seen this in the current downturn. Sherraden observes that California’s transportation spending declined by 31 percent from 2007 to 2009 after the housing bubble burst and local tax revenue fell. The same goes for Texas, which saw an 8 percent drop. “[I]t is clear,” Sherraden writes, “that leaving a greater share of infrastructure spending to state and local governments makes infrastructure investment more vulnerable during downturns.”
Now, this isn’t the last word on how best to divvy up responsibility on transportation between state and local governments. That’s a long-running, complicated debate — I’d recommend Robert Jay Dilger’s paper (pdf) for a history and overview. And, it’s true, some experts like Edward Glaeser argue that states would be less likely to build costly boondoggles if left to their own devices (although states are perfectly capable of building costly boondoggles of their own, see here and here for rebuttals to Glaeser).
But that’s a separate discussion. For the purposes of the Ryan budget, there’s no guarantee that states will rush in to fill the infrastructure gap if the federal government pulls back sharply.