The foundation must be sound - United States infrastructure - A Business Agenda for the 90s - Cover Story

Nation's Business, Sept, 1990

The Foundation Must Be Sound

In the mid-1980s, Congress created the National Council on Public Works to assess the condition and needs of the nation's infrastructure, that vast network of transportation, water-supply, waste-disposal, and other facilities that keep the economy functioning.

The findings were grim. The council reported back to federal lawmakers that it had found "convincing evidence that the quality of America's infrastructure is barely adequate to fulfill current requirements and insufficient to meet the demands of future economic growth and development."

Since then, there has been little improvement in these resources, says Nancy Rutledge Connery, who was executive director of the council and has continued to monitor U.S. infrastructure conditions.

The magnitude of this issue can be assessed by considering the extent of the transportation infrastructure and the volume of vehicles it supports: 2.2 million miles of paved highways and roads, 140 million automobiles, 40 million trucks, 20,000 intercity buses, 80,000 local-transit buses, 150,000 miles of private railroad track, 26,000 miles of commercially navigable waterways, 1.3 million freight cars, 20,000 locomotives, 2,000 rail passenger cars, 5,300 airplanes operated by airlines, 220,000 general-aviation aircraft, 5,700 public airports, 2,300 navigational aides and other aviation facilities, 40,000 commercial-shipping vessels, 16 million recreational boats, 10,000 subway and other commuter-transit cars, 1.1 million miles of natural-gas pipelines, and 205,000 miles of oil pipeline.

Another indicator of the scope of the problem can be found in spending estimates by the Environmental Protection Agency. The EPA says $68 billion will be needed to refurbish waste-water-treatment facilities, and an additional $15 billion will have to be spent to accommodate population growth by the year 2008.

The congressional commitment to deal with the infrastructure issue will be tested soon in one major area. Next year, lawmakers will face the challenge of drafting legislation to meet highway needs. The decision to move forward will be dictated by the expiration of the basic law covering the nation's highway and transit programs, the Surface Transportation Act.

The demise of the act will provide lawmakers with a chance to establish new directions and new priorities for ensuring that the nation's transportation system-vital to productivity and economic growth - can meet the demands of the years ahead. If Congress fails in its task, a critical segment of the transportation system that U.S. companies use to send their goods to market could suffer.

While Congress ultimately must confront the whole gamut of the decaying infrastructure, setting forth a forward-looking highway plan in 1991 would be a good place to start.

According to the Federal Highway Administration, 25 percent of the nation's interstate roadways have deteriorated, and 23 percent of the nation's 575,000 bridges are structurally deficient. Some form of rehabilitation is necessary for an estimated 60 percent of the total miles of paved highways in the U.S.

While the need for highway repair is great and will become greater, the need for new roads is also likely to rise. In the 1990s, the number of miles traveled annually by vehicles is expected to increase by one-third. By 2020, demand for surface transportation will double, according to the American Society of State Highway and Transportation Officials.

In addition, population shifts will continue, requiring new road capacity in states such as California, where highway congestion is already severe.

According to William Kelleher, manager of the Community Resources Department and director of the Small Business Center for the U.S. Chamber of Commerce, "Twenty years of under-investment in infrastructure has come home to roost."

Inadequate investment in the infrastructure has already cost the U.S. economic 'might - a development documented in terms of lost growth in productivity.

David A. Aschauer, senior economist at the Federal Reserve Bank in Chicago, found, for example, that during the past two decades, Japan has invested about 5.1 percent of output in public works and achieved productivity growth of 3.1 percent annually. The U.S., meanwhile, has invested 0.3 percent and achieved productivity growth of only 0.6 percent a year. West Germany, Britain, and France have also invested more as a percent of GNP and had higher rates of growth.

Today U.S. physical capital investment, as a percent of GNP, continues to fall.

To meet the nation's mobility needs and to improve the outlook for economic growth, the business agenda calls on Congress to:

* Act immediately to restore portions of the basic infrastructure that have fallen into dangerous disrepair.

* Begin constructing the new roads needed to accommodate growth.

* Establish programs to encourage better use of the existing infrastructure.

* Impose user fees as a major means to finance infrastructure construction, maintenance, and rehabilitation.