U.S. versus German infrastructure spending and results

“Quality, Not Just Quantity, of Infrastructure Needs Attention” (Wall Street Journal, May 20, 2015) has some interesting data. The U.S. has spent, adjusted for deprecation, 52 percent of GDP on “public capital stock” (infrastructure such as roads, bridges, train tracks, etc.) while the Germans have spent just 35 percent of GDP. What results have been achieved? “global executives” rated the German infrastructure superior to that of the U.S.

In other words the Germans are getting substantially better value for each public dollar invested.

Why the constant calls by Americans to put more money into public infrastructure if it turns out this is not one of the things that we can do competitively?

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10 Comments

  1. Ed

    May 25, 2015 @ 2:30 pm

    1

    I have changed my mind on infrastructure projects in the US over the years. Only the most absolutely necessary stuff until the corruption, which is the real source of the overspending, gets cleaned up.

  2. Vic

    May 25, 2015 @ 4:59 pm

    2

    My understanding is that competitive advantage only matters for tradeable goods. Even if Germans build their bridges better and cheaper than the Americans, they can’t be brought over to the US. Hence it doesn’t really matter that someone else is better at it – if we want / need a bridge, we have to build one.

    Hence the discussion should be framed in the context of ‘do we need it’, imho.

  3. philg

    May 25, 2015 @ 6:02 pm

    3

    Vic: Nobody “needs” a new bridge in the U.S. It is always possible to use a ferry, drive up or down the river to use an existing bridge, etc. Thus it does make sense to ask “Should we leave the private economy with enough money to finance 200 Googles or rebuild the Tappan Zee?” If we’re not good at government-built infrastructure we could have less of it and more of something else.

  4. CHenry

    May 25, 2015 @ 9:18 pm

    4

    This is a subject and comparison that has been written about at length. German roads last longer because they are built substantially better than most U.S. roads. The German system of road construction relies on large long-term contracts with national companies that must build and maintain the roadway and are responsible for repairing any design and engineering defects. There is a powerful incentive to build roads that hold up well over long periods. Roadbeds are deeper and better built to support the road surfaces above. By contrast, roads construction contracting in the U.S. is done at the state and local levels with the opportunity for local variability, and typical participation by low-bidding and less-well-capitalized local construction companies with no similar incentives to avoid construction methods that are not durable.

  5. Ian MacAllen

    May 26, 2015 @ 11:01 am

    5

    We could wait for more bridges to collapse like I-35 in Minneapolis. That might be an interesting public policy shift. The Tappan Zee bridge is an important infrastructure project because its pretty close to actually being the next I-35. Its true that drivers could find alternate routes, like the George Washington Bridge to the south. The main reason the Tappan Zee Bridge is an important conduit though is because routing more traffic through Manhattan and the Bronx isn’t beneficial to anyone: not the drivers sitting in traffic on a roadway that cannot be expanded; not the residents along the Cross Bronx that the GWB feeds; and not the consumers of goods in New England who are receiving goods from trucks passing over the Hudson River from warehouses in NJ and ports in Newark.

    You’ll get no argument from me that Cuomo is crook. The solution though isn’t to stop investing in infrastructure, which also has one of the highest rates of return of any government dollar. The solution is funding an investigative agency with the power to find and prosecute corruption. Instead of spending billions spying on Americans (and apparently, not stopping terrorist activities despite the investment), let’s spend money legally investigating corruption of government contracts.

  6. crazytrainmatt

    May 27, 2015 @ 1:25 pm

    6

    The Tappan Zee is a specious example — the bridge is structurally fine, just narrower and older than NYSDOT would like. The original bridge was built at the widest point on the Hudson, just to keep it outside Port Authority jurisdiction.

    It’s a travesty that US infrastructure investment is less efficient than the rest of the world. See https://pedestrianobservations.wordpress.com/2011/05/16/us-rail-construction-costs/ for an example of rail. Stephen Smith has followed this issue, for example http://www.bloomberg.com/news/articles/2012-08-26/u-s-taxpayers-are-gouged-on-mass-transit-costs .

    As such, I don’t think corruption is really a helpful way of framing the question. I think instead it is a combination of:
    * Anti-corruption rules that force municipalities to take the lowest bid based on narrow criteria
    * Lack of stable funding to maintain in-house engineering staff that leads to an excess reliance on contractors in the design and oversight phases
    * A national lack of a consensus behind infrastructure funding means that under-bidding serves politicians trying to build public support, leading to costly change orders later.
    * The overrepresentation of rural areas in the Senate and state legislatures leading to excess infrastructure investment in these constituencies (e.g. Cuomo’s investment in the Tappan Zee rather than the NYC subway)
    * A complete lack of a dialogue to increase union labor productivity through work rule reform
    * Archaic regional boundaries in major metropolitan areas rarely reflect commute patterns (the SF Bay Area and the NY tri-state areas are excellent examples of this disfunction, but the urban-rural tension plays out everywhere at the city, state, and county levels)
    * The tax and user-fee structures for air, road and rail transport are a complete mess and heavily bias one mode over the other.
    * Land use codified in stone that has covered the country in low-value suburbia that is dense enough to have traffic problems and expensive construction costs, but not dense enough to reap the benefits of a public transport network and shared infrastructure.
    * Finally, a complete failure to account for lifecycle costs is playing out across the US right now. Phil has posted a number of comparisons of current tax burden vs. public services in different regions, but this is meaningless without accounting for outstanding debt and capital stock. Pensions and infrastructure both are two major examples where the past generation has benefited more than it has paid forward. This has been facilitated by the ease of moving to a different tax district once the damage is apparent (e.g. those who shed Detroit’s liabilities by fleeing to its rich suburbs or even the rest of the country). The major cities are further along in their lifecycles (think the return of the NYC subway to good repair in the 1980s) and are buoyed by high-value land and industries, but the suburban infrastructure built 1950-1990 will need complete renewal in the coming decades. It’s an open question whether the tax base will flee this obligation.

  7. Anon

    May 27, 2015 @ 1:47 pm

    7

    crazytrainmatt #6,
    Not sure about many points but are you sure that Tappan Zee serves rural area? Have you crossed it during rush hour or anytime after 6:30 pm. Stanford, CT, Greenwich, CT (different kind of farming is going on in there but yes, it involves green 🙂 ) and Yonkers NY are not your regular centers of agriculture. Most of Tappan Zee traffic is going towards those cities. Although, are you sure that MTA, NY DOT and NY/NJ Port Authority are not funded enough to have architects on staff? They seem to have enough money to have full time IT staff as well as all kinds of ‘supervisors’ with regular city/government benefit structure.

  8. Steven

    June 2, 2015 @ 3:41 am

  9. philg

    June 2, 2015 @ 10:56 am

    9

    Thanks, Steven, though it is only peripherally related to the U.S. v. German topic of the original posting. My take-away from the article is “everything is just a matter of opinion and everyone’s opinion is equally valid.” But then I look at http://en.wikipedia.org/wiki/High-speed_rail_in_China and read that China has more high-speed rail than the rest of the world combined. So we Americans can sit on our low-speed trains (until they derail due to our incompetence) and have wonderful debates about China while the Chinese have already gotten off their high-speed trains and are working or enjoying a visit with friends and family.

  10. Steven

    June 2, 2015 @ 7:00 pm

    10

    You’re right. The chinese and the Germans are getting substantially better value for each public dollar invested. I haven’t tried high-speed rail in China, but in Germany (and most of continental Europe) it’s a pleasure.

    The US could stop investing in infrastructure, just give up. But spending a bit fighting corruption, as suggested by Mr. MacAllan in comment #5, might be the better solution and improve ROI substantially.

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