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New EPI report examines local, state, and federal infrastructure investments
Kirill Abbakumov   on Monday, October 2, 2017 at 12:00:00 am

On September 11, 2017, the Economic Policy Institute released a new report examining the division among federal, state, and local governments for funding, financing, and overseeing infrastructure investment. The main findings of the report are that the case for state and local governments to play the larger role in infrastructure investment is quite weak, while the benefits of a strong role for the federal government in funding, financing, and overseeing infrastructure investments are much greater.

Infrastructure plays a vital role in economic growth, and over the past year there have been a growing bipartisan support for increased investment in America’s infrastructure. But supporters of infrastructure investment often have conflicting ideas about which level of government will provide that investment.

The Trump administration’s infrastructure plan would leave state and local governments to pick up at least 80% of the increased investment. In contrast, Senate Democrats recently proposed a $1 trillion infrastructure plan constituted entirely of federally funded and financed investment.

Other key findings of this report include:

  • The federal government can help mitigate infrastructure funding challenges at the state level during economic downturns because it can run deficits over the short term, positioning the federal government in helping states to maintain stable or increasing infrastructure investment.
  • Infrastructure user fee pricing mechanisms are the best funding option for ensuring economic efficiency; such mechanisms can be managed at any level of government – federal, state, or local.
  • Because most infrastructure is connected to regional or national infrastructure networks, federal government may be better positioned than states to make infrastructure decisions that most effectively and efficiently integrate the network by taking into account economies of scale and positive spillover effects.
  • The federal government can play an important role in pricing externalities, taking account of externalities of carbon emissions and avoiding the challenge of states setting different carbon pricing levels.
  • A federal role can help ensure equitable access to infrastructure for all citizens by promoting equity and access to basic needs, ensuring that all citizens regardless of where they live and regardless of local economic conditions.