United States

US needs to close the investment gap in its infrastructure

INSIGHT ARTICLE  | 

The infrastructure of our country is critical to the manufacturing community. Raw materials in the supply chain need to get to the next producer, goods need to get to customers, workers need to get to their places of employment and energy must get to our factories. 

Yet, as the American Society of Civil Engineers has been pointing out for some time now, the country’s infrastructure has been earning D averages on the ASCE grading scale since 1998. The society notes that the infrastructure investment gap is having a significant impact on the U.S. economy, businesses and, ultimately, families. If this gap is not closed, it could mean the loss of more than $7 trillion in sales and 2.5 million jobs by 2025.1

During the election cycle, we heard a lot about the need for investments in our country’s crumbling infrastructure. By now it’s clear that we need to invest in revitalizing not only our roads, but our bridges, ports, power grid, telecommunications and pipelines as well. The president-elect committed to devoting significant investments to improve the country’s transportation and power network so we can move parts and finished goods more efficiently and put more people to work.

What will it take?

As the National Association of Manufacturers points out in its “Building to Win” initiative, public and private infrastructure investment has been on the decline for a number of decades. There have been some efforts in the past few years to provide public funding for projects addressing inland waterways, ports, roads and bridges.2 But these efforts do not address the long-term investments in and maintenance of our infrastructure; for the moment, they only provide short-term allocations.

The funds to support these programs generally arise from federal and state fuel taxes. State and local governments own more than 90 percent of non-defense public infrastructure assets, but, despite the returns in jobs, operational efficiencies, lower costs and quality of life that such investments would earn, state spending on infrastructure has declined in recent years.The funding issue is complicated because each state operates independently and private/public partnerships have had a spotty record of success.

Then we have the question of where to invest the funds. Much of the money for road expansion goes to the busiest locations, often leaving smaller communities without the resources to attract new business. NAM recommends a bipartisan commission to oversee a national strategic plan, which would evaluate priorities and investment options. The sooner this could get underway, the better. The costs in pollution and inefficiencies will only rise as investment is delayed.

Don’t plan on infrastructure spending by the government to save your manufacturing or distribution business, however. You should focus on the right decisions for your business today and keep an eye out for changes down the road that might create opportunities when federal and state governments start spending on our infrastructure. That infrastructure spending may be delayed as a significant amount of time at the beginning of the new administration in Washington will be spent focusing on identifying legislative priorities, easing the regulatory environment, revamping our tax system, amending or replacing our health care system, and addressing immigration and trade issues.

The companies I see that are succeeding today are focused on the core issues they can control. But they are also working with their legislators to get their voices heard. 


SOURCES:
1. “Failure to Act: Closing the Infrastructure Investment Gap for America’s Economic Future” (2016) American Society of Civil Engineers
2. “Building to Win” National Association of Manufacturers
3.  McNichol, E. “It’s Time for States to Invest in Infrastructure” (Feb. 23, 2016) Center on Budget and Policy Priorities 

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Steve Menaker 
National Manufacturing Practice Leader

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