With the Republican Party’s convention next week, Republicans are about to publish their 2016 platform. Unfortunately, a major new infrastructure plank calling for maintaining and upgrading our infrastructure will be missing.
This despite the American Society of Civil Engineers (ASCE) giving American infrastructure a grade of D+, http://www.infrastructurereportcard.org/a/#p/home, and despite U.S. families losing in aggregate about $428 billion in disposable income this year (based on ASCE estimate), or about $3,400 per American family, because of lost productivity and higher costs due to our crumbling and outdated infrastructure.
This $3,400 in estimated lower annual disposable income per American family is expected for each of the next ten years, http://www.infrastructurereportcard.org/asce-news/the-high-cost-of-underinvesting-in-infrastructure-9-a-day/.
Without aggressive and prompt infrastructure investments—to prevent bridges from becoming unstable or collapsing, highways from buckling, and outdated highways and airports from causing further congestion, delays, lost productivity and extra costs for everyday goods—Congress and, by extension, the GOP with majorities in both chambers risk voters’ physical safety, their incomes, and their anger.
Voter anger will only increase if delays to repairs continue, because replacing infrastructure is much more costly than simply repairing it. In addition, costs may grow even larger if interest rates rise from current levels. Interest rates on 10- and 30-year U.S. Treasury bonds reached all-time lows last week, 1.32% and 2.10%, respectively. These levels are much lower than even those under Eisenhower. By comparison, April 1954 yields on 10-year notes reached as low as 2.29%.
What mystifies this registered independent, and proud American, about GOP intransigence is that such infrastructure investment yields large returns and that such investment is part of the GOP’s historical DNA.
The ASCE estimates a $1.4 trillion investment gap will need filling over the next decade, http://www.asce.org/failuretoact/. Were the federal government to borrow the required $1.4 trillion by issuing 10-year bonds at today’s extraordinarily low interest rates, the U.S. government might pay only about $21 billion each year in interest.
For purposes of illustration, aggregate family disposable income would increase by about $428 billion. If families were to spend this additional income each year, federal tax receipts could increase by up to about $107 billion each year (assuming a 25% tax rate). These tax revenues over ten years could cover all related interest and repay just over 60% ($860 billion) of the debt incurred. But that’s not all.
These increased tax revenues can be expected to continue for longer than ten years because infrastructure improvements generally last decades.