Committees Ponder Ways to Pay For Infrastructure Needs

Thu. May 8, 2008


In a quandary over how to pay for the nation's infrastructure needs, two House committees today struggled over the puzzle that would cost tens of billions in the next few years. They also fretted over the loss of economic efficiency and the safety hazards posed by aging and crumbling roads, waterways and airway systems. At a joint hearing of the House Transportation and Infrastructure and the House Budget panels, Budget Chairman John Spratt acknowledged the difficulty of coming up with solutions. After noting various options for raising the money -- ranging from new taxes to bonds and borrowing or private tolls -- Spratt said "We need to understand the new proposals for financing infrastructure improvements, keeping in mind that there is never such a thing as a free lunch." Transportation and Infrastructure Chairman James Oberstar has long advocated that infrastructure spending be part of a capital budgeting plan. He wants to spread the costs over the useful life of the project rather than count it upfront.

"Our current method of accounting biases spending decisions against physical infrastructure by requiring [it] to be paid for all at once rather than over its useful life," he said. The result, he said, is that such investments "are not judged on their long-term economic return but rather on a distorted view of their [immediate] impact on the [federal] budget." Oberstar and others have argued that such up-front accounting, which requires either new revenue or offsetting cuts in equally desirable programs, fails to acknowledge future cost savings to the economy of the efficiencies stemming from such investments. In testimony to the committees, CBO Director Peter Orszag and the GAO's Patricia Dalton laid out scenarios to address the financing problem, along with their advantages and disadvantages. At the same time, they provided a grim assessment of the nation's failure to keep pace with expanding infrastructure needs.

"Demand has outpaced the capacity of our nation's surface transportation and aviation systems," Dalton's report stated, "resulting in decreased performance and reliability. In addition, water utilities are facing pressure to upgrade the nation's aging and deteriorating water infrastructure to improve security, serve growing demands, and meet new regulatory requirements." Noting that the nation spends about $400 billion a year on infrastructure, with the federal government's share at $60 billion, Orszag stressed the need to carefully set spending priorities for projects. And he underscored the difficulty that Congress faces in dealing with the problem of falling further and further behind in meeting even the most urgent needs. Congress, he said, faces challenges in prioritizing projects and fundung them.

by David Hess