NEWS

A Different Trillion-Dollar Deficit

21 Jun 2021, Posted in All Posts, Blog Posts

The federal government has spent vast resources to build and maintain the current administrative state, provide for defense, meet healthcare obligations, and more. With trillions allocated each year, spending often overtakes revenues creating massive deficits as much as a trillion dollars. But there is another trillion-dollar deficit that is draining the U.S. economy and wreaking havoc on the nation: the infrastructure crisis.

Every year, hundreds of billions of dollars are wasted or lost to infrastructure deficiencies. The problems range from dilapidated features in our transportation systems to inefficiencies in generating and delivering energy. The costs associated with these problems are staggering.

In a single year, at least $650 billion is lost from the U.S. economy, and more importantly, from citizens’ pocketbooks. While that estimate may seem high, the true cost could be as high as a trillion dollars annually.

In surveying America’s infrastructure crisis, Aii compiled a policy brief overviewing America’s Top Infrastructure Challenges. We highlight the five most pressing challenges costing the most in economic harm, impacting the most people, and most in need of immediate attention. These include:

• Roads and Bridges

• Damage Prevention

• Infrastructure Resilience

• Energy Grid Modernization

• Cybersecurity

The harms caused by these five challenges impact individuals and communities, small business owners and corporations, and strain both private resources and public funds. Together, they account for thousands of deaths each year, untold injuries and illnesses, and result in direct economic harm and losses in productivity.

Surface transportation networks including roads and bridges lead to three primary harms: vehicle maintenance and repair costs, delays and lost productivity, and fatalities. Before calculating deaths and injuries, poor road and bridge conditions are estimated to cost the U.S. over $286 billion each year. These costs come from pothole damage, unsafe road conditions, traffic, detours, bottlenecks, and more.

Excavation damage – striking pipelines, electrical lines, internet cables, and other underground utilities – is an everyday occurrence. The process of protecting the modern roots of society, which provide critical services like water, power, and information, is known as damage prevention. In the last five years, damage incidents to this subsurface infrastructure have increased annually, topping at 532,000 incidents in 2019 and costing an estimated $30 billion in economic harm. Those harms range from the cost of damage and repair for pipelines, explosions, deaths and injuries, loss of services, project delays, traffic, and more. Estimates put the upper end cost of excavation damage at $50 billion, $60 billion, or even $100 billion every year.

Infrastructure includes all the physical systems and structures around us that facilitate transportation and movement of people, goods, resources, and information. Without infrastructure, we would be vulnerable to the elements, unable to travel, and limited in our communication. It is critical, then, that infrastructure be resilient and able to persist through time, wear and tear, and natural phenomena. One of the most vital forms of infrastructure resilience is flood infrastructure to hold back storm and flood waters that would cause damage, economic harm, lost productivity, deaths, injuries, and illness.

Other features of our infrastructure, from roads and bridges to our energy grid must also be resilient to the forces that could take them offline. In the U.S., failure to invest in more resilient infrastructure leads to an annual cost of over $180 billion. This cost is primarily driven by storm damage, with flooding representing a significant proportion. This does not fully capture degradations and inefficiencies in transportation networks, buildings, energy generation, or power distribution systems.

When it comes to the electrical grid, costs include both blackouts as well as unseen inefficiencies and underperformance. Imperfect management as well as over-reliance on intermittent renewables without sufficient base load or power storage results in devastating blackouts, resulting in ruined food, lost productivity, injuries, and even deaths. The estimated costs associated with outages, but not accounting for inefficiencies, exceeds $150 billion each year.

The last critical public policy challenge related to infrastructure is not a traditional piece of infrastructure, but one that implicates infrastructure in many ways: cybersecurity. Foreign adversaries, hostile governments, and criminal actors possess the ability to steal information, intellectual property, private funds, and even public funds and information.

Far more troubling than these intrusions is the direct risk to critical infrastructure. In one single attack, criminal cyber actors were able to shutter the operation of a major national pipeline, cause a surge in gas prices, and create a fuel shortage for nearly half of the East Coast. While the FBI reports that cybercrimes account for $4.1 billion in annual losses, this does not being to account for the implications for major disruptions to transportation systems, the electrical grid, or supply chains, all of which have been victimized and continue to be targeted. These disruptions will impact millions of citizens and result in billions of dollars in loss to the U.S. economy and for our people.

It is incumbent on federal officials, state and local policymakers, industry, and private actors to begin tackling these infrastructure challenges. The solutions vary, and not all of them require additional spending. In some cases, more resources are needed, in others it is additional regulatory oversight, or elsewhere even removal of government involvement. Whatever each different underlying problem, the takeaway must be this: infrastructure is vital, and allowing it to degrade has legitimate costs.

We can calculate the costs of infrastructure problems in maintenance and repair costs, losses in GDP, and most unfortunately, in human lives and injuries. The U.S. currently loses out on around a trillion dollars of potential economic gains, or framed another way, the citizens of the United States pay out a trillion dollars each and every year for nothing. It is time to address this infrastructure deficit before the costs become insurmountable.

 

To learn more, read our latest Policy Brief: America’s Top Infrastructure Challenges

 

Written by Benjamin Dierker, Director of Public Policy