Cross-posted from Strong Towns.
The American Society of Civil Engineers (ASCE) has just released a report that should be titled “Pretending it is 1952.” Like a broken record, ASCE is again painting a bleak picture of the future if American politicians — as if they need to be plied — won’t open up the checkbook for our noble engineers. And in a way that the Soviet Central Committee would have expected from Pravda, the media and blogger world is sounding the alarm. This feels more like a cult than a serious discussion on America’s future.
In the Long Depression of the 1870s, the railroads found they had overinvested in transportation capacity. Speculating on future growth and the returns on land development, they collectively built more rail lines than could be put to productive use. The result was a huge financial correction in which the private-sector railroads consolidated their routes, downsized their unproductive infrastructure, and put their reserve capacity into endeavors that had a higher rate of return. This was a painful, but necessary, correction.
The parallels to 2011 are obvious. We’ve built out the interstate highway system as it was originally envisioned — although we opted to go through cities instead of around as planned — and then we built some more. We poured money into highways, county roads, and local streets. We have so much transportation infrastructure — a huge proportion of it with no productivity — that every level of government is now choking on maintenance costs.
While originally conceived in the name of “national defense,” these investments were made in the service of “growth” and the belief that all increases in mobility, no matter how insignificant, would add to the overall prosperity. We’ve spent trillions to save seconds in the first and last mile of each trip, and what we’ve gotten is the fake prosperity of a land-use pattern that is bankrupting us, housing bubble and all. This is the essence of the financial correction we are experiencing.
But there is one huge difference between today and 1873. Back then, while the railroads received government subsidies, they were still private businesses. They had to face financial reality. Today, our transportation systems are a public good funded through government spending. The only reality check on this system is financial collapse.
We have a government that can borrow and tax as much money as needed and a Federal Reserve to print whatever Congress lacks the “courage” to raise. Combine that with a cult-like belief that the path to prosperity in America is to create more growth through more infrastructure spending, and you have a recipe for financial disaster. There is no negative feedback loop here that will slow this madness. Even Tea Party darling Michele Bachmann is a shill for massively unproductive transportation projects in her own district.
So in steps the American Society of Civil Engineers. If this is an infrastructure cult, they are the normal-looking guy that is there to reassure anyone who might think of leaving. That is probably what upsets me the most. I’m proud to be a civil engineer, but I will have nothing to do with ASCE and their self-serving, narrow view of the world. Consider the following:
- ASCE estimated the “costs to households and businesses” from transportation deficiencies in 2010 to be $130 billion. (pg. 3 of the report)
- ASCE estimated the cumulative losses to businesses will be $430 billion by 2020. (pg. 5)
- ASCE estimated the cumulative losses to households will be $482 billion by 2020. (pg. 5)
If you add these together, the total cost to households and businesses is $1.042 trillion. Well, ASCE states that to reach “minimum tolerable conditions” (a pretty sad standard) would take an investment of $220 billion annually. Over 10 years, that’s $2.2 trillion. Yeah, you read that right. The American Society of Civil Engineers wrote a report that suggested over the next decade we spend $2.2 trillion so that we can save $1.0 trillion. And you wonder why we’re broke.
There are some things to understand about the $1 trillion as well. Those aren’t losses to businesses and households as in money out of their pockets. This is the same old game we reported on extensively last year with our disucssion of the cost-benefit analysis approach on the Staples overpass. The costs are all very real dollars that we spend. The benefits — or in this case the losses — are things like lost driving time and wear and tear on your car.
Say you work at a job making $25/hour. By ASCE math, I as an engineer spend untold sums and improve your commute by two and a half minutes in each direction. Each day that is five minutes saved. Each week it is 25 minutes. Each year I’ve saved you 22 hours. Over the 25 years of that road, I’ve saved you 540 hours which, at $25 per hour, is worth $13,500. Now, it is not just you that has enjoyed this tremendous windfall. Look around at the thousands of others on the road with you. Add them all up and, according to ASCE and the standard engineering approach, this transportation project is making us all very rich.
ASCE is touting some other GDP costs as well, although it is hard to discern them clearly since, due to the ridiculousness of the numbers, they are forced to project out to 2040. Anytime someone has to project out that far to make an economic argument, they are grasping. For some context, consider that 30 years ago, inflation was over 10 percent, interest rates were over 15 percent, the internet was still a decade and a half away, Ronald Reagan was president, and the big event of the year was the launching of the Space Shuttle. Think they’ve factored in that kind of volatility? And you have to love the hubris of engineers making projections. What other profession would do a 30-year projection and come up with a precise number like $3.248 trillion?
ASCE estimated that, in a 30-year trend projection, we would have 400,000 more jobs in 2040 if we fully funded our transportation system (pg. 13). The ridiculousness of this number can’t be overstated. New jobless claims last week alone were 400,000. We’re supposed to make a multi-trillion dollar investment over the next three decades on a trend line projection that we’ll have 400,000 more jobs? Are they serious?
One other thing in the report that made me shake my head was a table they had titled “Top 20 Countries and Economies Ranked by the Quality of Roads and Railroads” (p
g. 17). For roads, the United States is ranked 19th, behind such countries as France (second), Switzerland (third), and Germany (fifth), all countries that I have driven in. Anyone who has done likewise will attest that the standard highway in Europe is like a country road here in the U.S. I agree that their freeways are awesome, but they are also designed to connect towns, not feed strip development. I would attest that the “quality” in this case is less engineering-based and more a function of their adjacent land use not messing things up as ours does.
The table itself is based on an “Executive Opinion Survey” from “The Global Competitiveness Report for 2010-2011” [PDF]. ASCE doesn’t point out that, despite the sad opinion of our roads, the report ranks the United States as the fourth most competitive economy in the world. It is not really clear how we became so competitive with an infrastructure system ASCE ranked as a ‘D’. Just maybe there is more to an economy than infrastructure?
At Strong Towns, we want our infrastructure maintained. In fact, it’s the common denominator of a Strong Town. But the reason why we can’t maintain our infrastructure is not because we lack the money or are afraid to spend it. It is because the systems we have built and the decisions we’ve made on what is a good investment are based on the kind of ridiculous math you see reflected in this ASCE report. We spend a billion here and a billion there and we get nothing but a couple minutes shaved off of our commutes, which just means we can build more roads and live further away from where we work. (Or, as we call that here in America: growth.)
Sixty years of unproductive infrastructure spending later, we are awash in maintenance liabilities with no money to pay for them. This is what happens when you have a government-subsidized, Ponzi-scheme growth system that, at all times, lives for the next transaction. America is all about new growth, which is why we don’t even bother to question the findings in a study like this.
The ASCE report is an embarrassment to the engineering profession. The fact that politicians, journalists, and bloggers are all lined up to mindlessly parrot these conclusions is pathetic. If we are actually going to get this country moving in a positive direction, we need a real understanding of how infrastructure spending is used to create value. We need a new approach to land use.