It's almost a cliche at this point - the United States needs to spend more on infrastructure. Other countries are running circles around us in the infrastructure department. It's fashionable to blame this on the Republicans' scorched- earth tactics against President Barack Obama, and on conservative distrust of government spending in general. And those are certainly factors. Problems with state and local government finances are another issue.
But there is a third big factor that many people ignore: America's abnormally high infrastructure costs. As in the health-care industry, we pay through the nose but get very little bang for our buck.
A recent example is the price tag of the World Trade Center Transportation Hub in New York. The new train station's cost has soared to double the original estimate, and is now almost at $4 billion, and still climbing. That's $4 billion. For a train station.
If you think that's an isolated example, think again. Blogger Alon Levy has compiled an amazing list of rail projects in the U.S. and other countries, and found that U.S. costs are much, much higher than those of other rich countries. For example, New York's East Side Access project in Manhattan and Queens - connecting the Long Island Rail Road to Grand Central Terminal - has cost anywhere between $4 billion and $8.1 billion per kilometer (six-tenths of a mile) of rail line. The 7 train subway extension to Manhattan's west side has cost about $1.7 billion per kilometer. By comparison, Tokyo's Toei Oedo subway line cost only about $350 million per kilometer. A train line in Denmark, by the way, cost only about $170 million per kilometer.
With costs like these, you don't have to be a small- government libertarian to throw up your hands and cancel an infrastructure project. If we don't figure out how to bring these costs down, we're going to continue suffering from subpar infrastructure and all the economic problems that result from that - slower growth, lower productivity and impaired urbanization.
What are the reasons for the insanely high costs? As with health care, there are a lot of causes. Blogger Scott Beyer rounds up a few suspects. These include: 1. The Davis-Bacon Laws, which mandate high wages for infrastructure workers; 2. Government-labor agreements that mandate the hiring of union workers; 3. "Buy America" laws; 4. A torturous environmental review process that is used by opportunistic landowners to drive up the value of their property; 5. The Transportation Alternatives Program, which mandates things like bike lanes; 6. Mysteriously high administrative costs; and 7. Toll bans on most interstate highways.
Some of these seem more important, some less, but three main themes emerge. First, we force up wage costs intentionally. Second, we value the pocketbooks of landowners more than other countries. And finally, we have a more inefficient bureaucracy.
The first of these is something that conservatives and libertarians should want to attack, since they are generally opposed to unions and to wage floors. The second is something that liberals should want to curtail, since boosting property values isn't on any liberal's to-do list. And the third is something that should appeal to third-way moderates who want to make American government more efficient.
So I see room for a political bargain on infrastructure costs. Democrats could agree to curtail union power, repeal wage-floor laws and slash administrative costs, while Republicans would agree to curtail the ability of NIMBYs to hold up review processes, and to spend a lot more on infrastructure in general. Of course, if that kind of bargain is going to happen under Obama, it will require the Republicans to overcome their impulse to engage in destructive partisan politics, and that's reason for pessimism. But if we keep raising awareness and pushing for this issue, something might get done in the future.
Infrastructure is reaching the point where it's too important to be used as a political football. As with health care, we can no longer afford not to cut costs.
Noah Smith is an assistant professor of finance at Stony Brook University and a freelance writer for a number of finance and business publications.