U.S. Could Use More Infrastructure Spending, Not Less


Fox News host Neil Cavuto dismissed the fact that infrastructure spending could boost the economy, arguing that tax cuts would be more stimulative. In fact, data show that infrastructure spending provides more stimulative benefit than tax cuts.

Fox's Cavuto Lobbied For More Tax Cuts Over Infrastructure Spending To Create Jobs

Neil Cavuto: Infrastructure Spending Didn't Have "The Bang For The Buck We Imagined." While talking with Rick Sloan, communication director of the Internal Association of Machinists and executive director of Union of Unemployed, Cavuto disagreed that spending on infrastructure could create jobs, arguing that tax cuts "gets more people hired in the boom":

CAVUTO: The money that we've committed to infrastructure in some various stimulus programs of late has yielded very few jobs and certainly not the bang for the buck we imagined.


SLOAN: What we're looking for is an influx of money into people's pockets so that they can become consumers again. If you have a quarter --

CAVUTO: You know how you can put more money in their pockets? Just cut the workers -- the people who are employed, cut their taxes, and maybe they --

SLOAN: They're already cutting -- they're already cutting the workers.

CAVUTO: But wait, wait, wait -- maybe they, the ones who are working, not the 30-some odd million you're addressing and trying to help out -- and touché to you for that -- but maybe if you give those people more money and businesses more of their money, then maybe that circulates around and gets more people hired in the boom that that creates. It's worked in the past.

SLOAN: We tried that with the first stimulus; it didn't work. And you're right about that.

CAVUTO: No, we tried that with Ronald Reagan.

SLOAN: There were huge tax cuts.

CAVUTO: We tried that with Bill Clinton. We tried that, and every time we tried that and we've given more money and put it in people's hands, it has done the trick. And the more we do it, the better it does, right? [Fox News, Your World with Neil Cavuto, 6/13/12]

In Fact, Infrastructure Spending Is More Stimulative Than Tax Cuts

CBO: Spending On Infrastructure Is More Stimulative Than Tax Cuts For Wealthy. The Congressional Budget Office's report on the estimated impact of the stimulus on the economy found that transferring money to state and local governments for infrastructure spending had a multiplier effect as high as 2.2, while a one-year tax cut for wealthy Americans had a much lower multiplier effect:

[Congressional Budget Office, February 2012]

Moody's: For Every Dollar Spent On Infrastructure In 2009 Stimulus, $1.57 Was Returned To The Economy. In its July 2010 analysis of the stimulus, Moody's Analytics found that every dollar of infrastructure spending resulted in $1.57 returned to the economy. It also found that tax cuts had little stimulative value:

[Moody's Analytics, 7/27/10]

EPI: "Infrastructure Spending Provides About 20-50% More Stimulative Benefit Than Tax Cuts." In a January 2009 post about infrastructure spending as part of the stimulus package, Ethan Pollack, policy analyst for the Economic Policy Institute, noted:

As we have previously written (see Pollack 2008), infrastructure spending provides about 20-50% more stimulative benefit than tax cuts, mainly because households are likely to save the extra money rather than spend it back into the economy. [Economic Policy Institute, 1/29/09]

New America Foundation: "Long-Term Investment In Public Infrastructure Is The Best Way Simultaneously To Create Jobs, Crowd In Private Investment." A study from the New America Foundation found that infrastructure spending makes the economy more productive and would "generate a multiplier of growth in other sectors of the economy":

U.S. public infrastructure is in shambles and is rapidly deteriorating. The American Society of Civil Engineers estimates that the United States must spend $2.2 trillion on infrastructure over the next five years to meet America's most basic infrastructure needs but that less than half that is currently budgeted, leaving an approximately $1.2 trillion shortfall. A multi-year program designed to close that infrastructure deficit would not only help fill the demand hole but make the economy more productive and efficient in the long-term. Indeed, long-term investment in public infrastructure is the best way simultaneously to create jobs, crowd in private investment, make the economy more productive, and generate a multiplier of growth in other sectors of the economy. [New America Foundation, October 2011]

Regardless Of Economy, U.S. Infrastructure Systems Need Updating

American Society Of Civil Engineers: "The Projected Cost Of Repairing The Nation's Infrastructure Has Grown To A Daunting $2.2 Trillion Over The Next Five Years." In its most recent estimate of the cost of necessary repairs to the nation's infrastructure, the American Society of Civil Engineers found:

ASCE released the grades in its 2009 Report Card for America's Infrastructure at the National Press Club, in Washington, D.C., on Wednesday, January 28, approximately two months ahead of schedule. Although the overall grade given by the "report card" -- a D -- is the same as that conferred four years ago, the projected cost of repairing the nation's infrastructure has grown to a daunting $2.2 trillion over the next five years.


The funds from the proposed stimulus legislation and the estimated spending over five years, which is estimated at $903 billion, will certainly help address infrastructure needs. Nevertheless, ASCE's assessment estimates that, even with the stimulus package, the nation's infrastructure will face a deficit of approximately $1.1 trillion. "We clearly have a long way to go," said [ASCE president, D. Wayne] Klotz. [ASCE.org, 2/09]

Urban Land Institute: U.S. Infrastructure Systems Are "Operating Beyond Their Planned Life Cycles." In a 2011 study on the country's infrastructure systems, the Urban Land Institute wrote:

In contrast with its global competition, the United states is lurching along a problematic course -- potentially losing additional ground. After more than 30 years of conspicuously underfunding infrastructure and faced with large budget deficits, increasing numbers of national and local leaders have come to recognize and discuss how to deal with evident problems. But a politically fractured government has mustered little appetite to confront the daunting challenges, which include finding an estimated $2 trillion just to rebuild deteriorating networks. Operating beyond their planned life cycles, these systems include roads, bridges, water lines, sewage treatment plants, and dams serving the nation's primary economic centers.


Despite the nation's unemployment woes, the vast job-creation potential of infrastructure projects is being sidetracked by concerns about government spending appetites and potential cost overruns. Related benefits from reducing carbon footprints -- energy efficiencies and greater independence from problematic foreign energy sources -- are also failing to gain much traction. [Urban Land Institute, May 2011]

Posted In
Economy, Budget, Jobs, Wages, & Unemployment, Taxes
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Neil Cavuto
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