State spending cuts during recessions mean infrastructure will fail

State spending cuts during recessions mean infrastructure will fail.

Yesterday, I pointed out that Rep. Paul Ryan’s GOP budget proposal would require the federal government to spend less and less on transportation over time. Reihan Salam asks whether this is really such a bad thing. Can’t state governments just pick up the slack? That’s possible, sure. But it hasn’t happened so far. As a recent report (pdf) from the Congressional Budget Office detailed, the federal government’s share of infrastructure spending has already been shrinking since the 1960s and 1970s. And the states, which still provide the vast majority of spending on roads and highways, haven’t made up the difference. The end result? There’s less infrastructure spending overall as a percent of GDP: Keep in mind that this is all happening at a time when infrastructure is getting increasingly expensive to build — the CBO notes that the cost of building highways has tripled since 1980, far faster than inflation. States are spending the same, but getting less and less. Now, maybe this would all be okay if we were keeping our roads and bridges and pipes in good shape. But various experts and groups like the American Civil Society of Engineers seem to think that we’re woefully under-investing in infrastructure of all sorts. One potential pitfall with handing over more and more infrastructure responsibilities to the states, meanwhile, is that states tend to cut way back on spending during recessions. And local funding can be pretty erratic, all told. Here’s a graph from New America’s Samuel Sherradan, based on CBO data: We’ve seen this in the current downturn. Sherraden observes that California’s transportation spending declined by 31 percent from 2007 to 2009 after the housing bubble burst and local tax revenue fell. The same goes for Texas, which saw an 8 percent drop. “[I]t is clear,” Sherraden writes, “that leaving a greater share of infrastructure spending to state and local governments makes infrastructure investment more vulnerable during downturns.” Now, this isn’t the last word on how best to divvy up responsibility on transportation between state and local governments. That’s a long-running, complicated debate — I’d recommend Robert Jay Dilger’s paper (pdf) for a history and overview. And, it’s true, some experts like Edward Glaeser argue that states would be less likely to build costly boondoggles if left to their own devices (although states are perfectly capable of building costly boondoggles of their own, see here and here for rebuttals to Glaeser). But that’s a separate discussion. For the purposes of the Ryan budget, there’s no guarantee that states will rush in to fill the infrastructure gap if the federal government pulls back sharply.

California can’t do HSR – financial constraints.

WSJ (News Service) 5/18/12

(California's Kafka Express, http://danieljmitchell.wordpress.com/2012/05/19/californias-train-to-nowhere/)

The good news in this debacle is that the state’s fiscal woes will make it nearly impossible to complete Governor Jerry Brown’s runaway high-speed rail train. The bad news is that the Governor is going to try anyway. Transportation experts warn that the 500-mile bullet train from San Francisco to Los Angeles could cost more than $100 billion, though the Governor pegs the price at a mere $68 billion. The state has $12.3 billion in pocket, $9 billion from the state and $3.3 billion from the feds, but Mr. Brown hasn’t a clue where he’ll get the rest. …In 2008 voters approved $9 billion in bonds for construction under the pretense that the train would cost only $33 billion and be financed primarily by the federal government and private enterprise. Investors, however, won’t put up any money because the rail authority’s business plans are too risky. Rail companies have refused to operate the train without a revenue guarantee, which the ballot initiative prohibits. Even contractors are declining to bid on the project because they’re worried they won’t get paid. Mr. Brown is hoping that Washington will pony up more than $50 billion, but the feds have committed only $3.3 billion so far—and Republicans intend to claw it back if they take the Senate and White House this fall. If that happens, the state won’t have enough money to complete its first 130-mile segment in the lightly populated Central Valley, which in any event wouldn’t be operable since the state can’t afford to electrify the tracks. …Mr. Brown and the White House are betting that the state will be in far too deep when the money runs out to abandon this mission on Camino Unreal. The Governor also figures that the $100 billion bill will seem smaller spread out over 30 years. What’s an extra $3 billion a year when the state’s already $16 billion in the hole?
Uniformity

Political polarity makes uniformity impossible.

John Kincaid, Robert B. and Helen S. Meyner Professor of Government and Public Service and director of the Meyner Center for the Study of State and Local Government at Lafayette College, editor of Publius: The Journal of Federalism, 2004, ‘Trends in Federalism: Continuity, Change and Polarization’, http://dspace.lafayette.edu/bitstream/handle/10385/521/Kincaid-BookoftheStates-2004.pdf?sequence=1, TB
The partisan polarization evident in the 2000 presidential election and in Washington, D.C., is a new contextual trend that is increasingly shaping federalism and intergovernmental relations. In 2003, it became evident that polarization has strained the traditional bipartisanship of the Big 7 state and local associations, especially the National Governors Association (NGA), where partisan conflict led to the firing of NGA’s chief lobbyist, to reduced dues payments by some states, and to several states withdrawing from the NGA for a time. Although bipartisanship still prevails generally in these associations, continued polarization will weaken their ability to present a united front, especially on major issues that have significant impacts on both the states and the national electoral balance.¶ This polarization has affected public, presidential, congressional and judicial responses to virtually all public policy issues and introduced fundamental philosophical differences over some long-standing federal-state practices and intergovernmental programs. The consequences of polarization were reflected, for example, in the battles that scuttled reauthorization of three major intergovernmental programs in 2003: the 1996 welfare-reform law, the Transportation Equity Act for the 21^st Century (TEA-21), and the Individuals with Disabilities Education Act (IDEA). The compromises needed to enact legislation under conditions of polarization will likely make some intergovernmental programs more complex and somewhat schizophrenic.¶ This polarization also makes it impossible to resurrect bipartisan and nonpartisan intergovernmental institutions, such as the U.S. Advisory Commission on Intergovernmental Relations (ACIR), which were dismantled or defunded during the 1980s and 1990s. These institutions sought to foster intergovernmental cooperation and consensus building. The ACIR, for example, an independent bipartisan commission established in 1959, was defunded in 1996.

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