How Math Is Making Our Highways Crumble

How Math Is Making Our Highways Crumble

Why you should care

Because OZY readers who drive know the link between annihilated roads and a mechanic’s bottom line.

Welcome to the world of zero. We’ve grown used to lots of zeros these days: zero inflation (in Europe and Japan) and near-zero interest rates (at least if you’re a U.S. bank, though it’s less than zero if you’re in Europe). And now, get used to zero public investment.

Yes, the U.S. government invests


in our roads, bridges and buildings.

No, we didn’t make that up. It’s a stark reality that might sound like math trickery, but the results are as real as the pothole that just ate your tire. The government spends, say, $100 million building a new strip of highway, but elsewhere in the highway system, there’s — you guessed it — $100 million in highway damage that goes unfixed. In other words, Uncle Sam is playing a fool’s game with the roads and bridges you drive your children on, instead of doing anything to prevent all those potholes and breakdowns that have real-life consequences. “Can it make sense that at this moment, as I speak to you, the share of public investment in GDP … is zero?” asked Harvard economist and former U.S. Treasury Secretary Lawrence Summers recently in a keynote speech at Princeton.

Here’s a breakdown: During 2013, the most recent year full data was available, in total government spent $596 billion maintaining highways, bridges and buildings. But just like a car would, the road’s “depreciated” or deteriorated to the tune of $506 billion, according to the U.S. Commerce Department’s Bureau of Economic Analysis. Meanwhile, states spent almost $90 billion on those roads (a figure that has been in steep decline since the financial crisis broke in 2007). A spokesperson said the bureau doesn’t comment on the statistics it produces (go figure!), but the bottom line for the math-challenged among us is pretty clear: The depreciation cancels out nearly all the money that the federal government spends on maintaining roads and all the other infrastructure we count on.

The obvious step, many experts say, is for Uncle Sam to up the spending, especially since the governments gets to borrow at a farthing — 3 percent for 30 years. Rates for many European countries are even lower. But it’s not a simple call. The International Monetary Fund says that government infrastructure spending can pay for itself because it creates efficiencies and stimulates faster growth in the economy, which then results in higher tax receipts. But Andrew Warner, an IMF economist who has looked at infrastructure spending around the world, warns that many projects never deliver the promised economic benefit. “It isn’t a slam dunk,” he says. In other words, politicians, keep your dirty mitts off it. Who thinks the U.S. Congress can do that?

Alan Auerbach, a famed University of California, Berkeley, economist who’s pioneered research into generational accounting, taxation and spending, says now may not be the time to borrow and spend since the economy is picking up nicely all by itself. But, he adds, “We are probably under-investing.” So how do you fund the investment in roads and infrastructure? He figures it should be some combination of increased taxes or cutbacks from other areas of spending.

As for whether or not we can rely on the politicians to do that … it might be better to install heavy-duty shocks and fasten your seat belts. Those potholes can be tooth-rattlers.



Numbers and factoids --- fodder for your next cocktail party.