Peter Morici: Biden can bring nation together with bold infrastructure program

President-elect Joe Biden needs a large-scale project that will summon the political class and national imagination to rescue the country from another four years of partisan distrust.

A bold infrastructure program to reshape the American economy for a more prosperous and greener future could be just the ticket.

Congestion alone is costing the U.S. economy $400 billion a year. Those burdens fall most heavily on low-income workers. For the middle class, those are making coastal cities less relevant.

The American Society of Civil Engineers estimates the 10-year national infrastructure spending deficit at $2 trillion. Needs are likely larger, because climate change is intensifying hurricanes and flood abatement challenges in coastal cities and forest fires in California.

The federal gas tax was last increased in 1993. Bringing it in line with inflation — along with increased user fees for mass transit, bicycles and recreational vehicles which also benefit from the Highway Trust Fund — could raise $50 billion a year.

Congress is not likely to find another $150 billion annually without borrowing, but investing $2 trillion over 10 years should boost GDP some $400 billion. That’s a 20% rate of return, and against a 10-year Treasury rate of about 1% that looks like a pretty good business proposition.

This is systematically different from borrowing for present consumption — expanding food stamps or a guaranteed annual income. Still, getting Republicans in Congress to go along would be a terribly hard sell.

For one thing, it requires Washington to spend the money efficiently, but the Davis-Bacon Act effectively requires federally funded projects to hire workers at union wage rates and work rules and imposes regulatory burdens that raise costs about 20%.

A Democratic administration prepared to create 1.5 million jobs should have the carrots to forge a deal with unions to streamline work rules and accomplish regulatory reforms to give us fewer workers merely leaning on shovels. That could persuade Republicans all this borrowing is really an investment in improved logistics and labor-market reform.

The secretary of transportation could get a quick list of transit projects from state officials, but most of those focus on pre-pandemic patterns of travel. As work from home and Zooming persists, city office buildings will be repurposed into residences, employee populations and business centers will spread out and commuter transportation systems and airports will be used less intensively and in very different patterns than just a few years ago.

Clearly, many upgrades could be initiated quickly with confidence, but an unthoughtful, wholesale upgrading of transit systems, roads and airports could give us a lot of unsustainable capacity — state transportation officials are programmed to project the future by multiplying past usage patterns by simple growth rates. All that must be replaced with clean-sheet master planning.

The bottom line is that spending $2 trillion must entail reimagining what we need and by building cooperation and consensus among disparate private-sector and state and local government actors.

For Biden, this poses a great opportunity to refocus the nation away from identity politics and ideological bickering to a greater public purpose — a new, restored and repurposed American prosperity.

Peter Morici is an economist and emeritus business professor at the University of Maryland.