What Role can Infrastructure Play in the COVID-19 Recovery Effort?
Once the most pressing COVID-19 needs are met, infrastructure can power economic resurgence
Given the state of the nation’s infrastructure and the ability of infrastructure to assist in the economic recovery from the COVID-19 pandemic, many advocates have pushed for infrastructure funding to be included in the COVID-19 spending packages to date. Addressing the country’s infrastructure needs has been one of the few issues both Democrats and Republicans could rally behind. As far back as the early days of the Trump administration, infrastructure has been a part of the federal policy conversation, and, more recently, House Ways and Means Committee Chairman Richard Neal, D-Mass., expressed a desire to make infrastructure financing a priority in 2020. However, those plans were quickly dashed once it became apparent that additional spending in the short-term needed to focus solely on addressing the immediate COVID-19–related needs of individuals, businesses and state and local governments. When the time comes to think more long-term recovery, the U.S. will need a toolbox of stimulus measures, one of which can be infrastructure - both in the form of traditional projects and more innovative measures like the infrastructure tax credit included in the Move America Act of 2019. During the Great Recession of 2008, the last major economic downturn, infrastructure factored into economic revival plans. Looking at lessons learned a decade ago, legislators can design infrastructure plans that not only address the country’s dire physical needs related to highway infrastructure and public transportation but also to spur economic resurgence following the economic turmoil wrought by the coronavirus pandemic.
While pre-COVID-19, infrastructure was still a topic of discussion, there were no concrete plans to move forward with any of the ideas put forth. House Democrats released the Moving Forward plan, a $760 billion, five-year infrastructure framework, in January 2020. Shortly thereafter, the president’s fiscal year 2021 budget released in February called for a $1 trillion federal investment in infrastructure. Neither plan detailed a way to pay for infrastructure investments, which has always been an obstacle for infrastructure plans gaining any traction. Still, infrastructure is one of the few areas where there is bipartisan support that something needs to be done, even if there is no clear path forward, much less consensus, on how to pay for it.
Thinking about long-term economic recovery strategies
Once it became evident that the federal government was going to need to pass massive spending packages to address the social and economic fallout from the coronavirus pandemic – more than 30 million Americans have filed for unemployment in the past six weeks – infrastructure has once again entered the discussion. After four phases of COVID-19 response legislation, infrastructure may begin to be included in future phases of legislation, particularly as legislators begin to think about long-term economic recovery strategies.
Taking cues from the Great Recession, the most comparable recent economic downturn in this county, there are lessons to be learned on infrastructure financing proposals. Those wanting to garner support for economic recovery plans that address longstanding issues, could look to what affordable housing advocates went through. Reflecting back on how housing advocates reacted to the Great Recession, strategies need to be decisive, swift, taken on a widespread scale and “uncomplicated.” These sentiments are applicable across different policy areas and were echoed by panelists on a recent infrastructure webinar hosted by Third Way that looked at infrastructure spending as a response to COVID-19. The panelists – Beth Osborne from Transportation for America, Carol C. Menassa of the University of Michigan’s Department of Civil and Environmental Engineering, and Third Way’s Transportation Policy Advisor, Alex Laska – were asked for their input on infrastructure investment’s place in any COVID-19-related stimulus spending. All noted they have been hearing that infrastructure will be critical to long-term economic recovery, though right now, the focus is rightfully on addressing immediate and critical needs in response to the pandemic.
Lessons learned from the American Reinvestment and Recovery Act
The key for infrastructure champions is to be ready with a plan so that when the time is right they can seize the moment. Preparation includes looking back to previous instances of economic turmoil, with Ms. Osborne providing highlights of the April 2020 report that details lessons learned from the American Reinvestment and Recovery Act (ARRA), which between 2009 and 2010 provided states with $26 billion in flexible dollars to spend on virtually any surface transportation capital projects and $8.4 billion in funding for public transportation capital projects. According to the report, the two most important lessons learned from the ARRA were that: 1) while the main directive was to create jobs, infrastructure spending under the ARRA was not targeted or governed that way; and, 2) Congress relied on existing programs – that had been put in place decades earlier and were not relevant to existing conditions and needs – in a rush to get things done quickly, which wasn’t the best way to create jobs and aid the recovery.
To wit, a 2010 Smart Growth for America report found that 10 months after the ARRA was signed, for every billion dollars spent on public transportation, 16,419 job-months were produced, compared to 8,781 job-months produced for every billion dollars spent on projects funded under highway infrastructure programs. It should be noted, only $4.4 billion of ARRA funds were invested in public transportation projects compared to the $15.8 billion invested in highway infrastructure projects, leading analysts to conclude public transportation investments were the better investment if job creation is one of the goals. Further, in 2009 and the following years, public transportation spending created more jobs than roadway repair, which in turn created more jobs than road expansion projects, leading the researchers to conclude that shifting available funds towards public transportation would increase employment. If the goal of using infrastructure as part of the recovery bill is to create jobs, lawmakers should be sure to allocate funds to the types of projects that help to meet that goal.
In using infrastructure investment to spur economic recovery, the reliance on existing programs was seen as more of a cultural problem than a political one – according to panelists, few in Congress know a great deal about infrastructure and its funding since action is only required every 5-7 years when transportation bills comes up for reauthorization. Because of this, educating legislators should be considered a necessary step to advancing any infrastructure plan. Another part of that preparation means ensuring existing workers are ready to participate in any projects created as a result of infrastructure investment. It was noted during the panel that the construction industry needs to adapt, which means: educating and training, or retraining, workers; creating new business practices; attracting younger workers (the aging of the industry is a big concern); and improving efficiencies. Infrastructure projects are vital to rebuilding economies and create well-paying jobs so the panelists definitely see a place for infrastructure in the recovery effort.
While there are numerous infrastructure needs in this country, and based on lessons learned from the 2009 Recovery Act, panelists argued stimulus infrastructure spending should focus on transit spending, at a point where COVID-19 transmission issues have been sufficiently addressed. Panelists also asked that thought be given to the long-term impacts – climate change being chief among them – of any projects undertaken. The resiliency of projects should also be considered; proponents should make sure the nation’s infrastructure is not only relevant but that it will also be here in the future. Issues of inequality were also mentioned as the pandemic has shown that broadband needs of the underserved (those living in rural areas, low-income households, etc.) need to be addressed as work from home and homeschooling requirements shined a light on current shortcomings.
Funding and the future of infrastructure
While the need and desire to pass infrastructure legislation may be at their highest points in recent memory, even the most optimistic must bear in mind there are still a number of obstacles that need to be overcome. Pre-COVID-19, it would have been difficult to pass any major infrastructure legislation given the lack of agreement between Democrats and Republicans on how to pay for it, and those challenges still exist during and after the pandemic. Indeed, funding anything not directly responding to the key COVID-19 needs for households and businesses is even more difficult; one needs only to look at recent comments made by Senate Majority Leader Mitch McConnell about the growing debt implications of additional COVID-19 legislation to see how difficult it will be to pass any major infrastructure legislation at this time. Furthermore, 2020 is a presidential election year, and it is usually difficult, though not impossible, to pass any major bills, especially the closer one gets to the election.
Still, out of the devastation of COVID-19 comes the opportunity to rethink the structure of existing programs and create new ones, focusing on how infrastructure can be designed to meet future needs. Should infrastructure spending and tax legislation pass this year, such a bill would be an excellent vehicle to expand tax incentives for affordable housing, community development and historic preservation, as House Ways and Means Committee Chairman Neal has advocated. This would also include supporting a key piece of infrastructure legislation introduced in 2019, the Move America Act, which would expand tax-exempt private activity bonds and create a federal infrastructure tax credit to fund infrastructure projects. On April 30, Chairman Neal expressed support for including Build America Bonds and private activity bonds in future infrastructure efforts, as well as a desire to see infrastructure funding as part of “CARES 2.” There is also the upcoming expiration of the Fixing America’s Surface Transportation (FAST) Act of 2015. Set to expire September 30, 2020, reauthorization of the Fast Act, and the desire to aid long-term economic recovery, can provide the legislative impetus needed to fund infrastructure spending in 2020.