The new highway construction racket
It has become an article of faith for labor unions, contractors and the pols compromised by them: Every good thing comes from pumping billions of taxpayer dollars into new highways.
Southwestern Pennsylvania is no stranger to this economic development claim that is little more than a shibboleth. One of the more contemporary examples ‘round our parts is the Mon-Fayette Expressway.
Long being built piecemeal with the premise of great things to come has led to virtually nothing in the realm of meaningful economic development coming to the region. While it might sound like a joke, it remains a truism that some days more deer than vehicles traverse the highway.
And neither is it difficult to predict much the same for the coming Southern Expressway, now being built largely in one big piece between Pittsburgh International Airport and Interstate 79 at the Allegheny-Washington County line.
For there long has been evidence that such highway projects fall far short of their promised benefits. And a new Wall Street Journal analysis is quite instructive to that end (which pretty much means it will be roundly ignored).
As David Harrison wrote last week in his “The Outlook” column, “U.S. economic growth prospects won’t necessarily benefit long term from billions of dollars in spending on roads and highways.”
He cites a wide body of research that suggests major new investment in U.S. roads would spark little, if any, long-term economic gain.
“While the projects would spur hiring and spending temporarily, both when they are announced and under way, they aren’t likely to raise the economy’s productivity and, in turn, its overall growth potential in a lasting way, many researchers find,” Harrison says.
“That is because the U.S. already has an extensive system of roads, so building more wouldn’t add much to productivity, economists say.”
Or as University of Pennsylvania economist Gilles Duranton told Harrison, “Highways can generate a boost for the short run, but in the long run that seems to be dubious.”
All this said, The Journal’s Harrison reminds that “new spending for roads accounts for the largest single share—roughly 19 percent—of the $579 billion in new spending that the White House and a group of lawmakers have agreed to.
“Both Democrats and Republicans say that money would raise the economy’s productivity, defined as the level of output per hour worked.”
Indeed, construction of this country’s original interstate highway system did spur economic growth. But that’s because such a system had not existed prior.
Harrison cites a 1999 white paper by John Fernald, an economist with the Federal Reserve Bank of San Francisco, that found the system meant a cross-country trip that used to take months could be accomplished in days.
“Businesses gained access to new suppliers and new customers,” Harrison notes. “Cities were able to specialize in certain industries. International trade opened up. By one estimate, the U.S. economy would be 3.9 percent smaller today without the interstate highway system.”
But, he stressed, such gains came about when the interstate highways first were built. “By now, the gains have been reaped,” he reminds.
That is, there’s little in the way of additional private sector productivity gains to be had from new highways.
Or as University of Maryland economist Charles Hulten concluded, “In developed countries with vast road networks, such as the U.S., new investment resulted in no change in overall productivity and growth,” Harrison writes.
And then there’s this:
Harrison notes how “researchers have also found that in developed countries, whatever local benefits come from highway improvements come at the expense of other locations.”
“In other words,” he says, “road spending reallocates the pie but doesn’t make it bigger.”
The same principle, we must note, is applicable to such things as taxpayer-financed baseball fields, football stadiums and hockey arenas. Or, say, Pittsburgh’s North Shore Connector.
But, but, but, the pols, the trades and the unionists (especially) continue to champ at the bit of initial, immediate growth. “That’s real money being spent on real family-sustaining jobs,” they might say.
Yes, but …
Harrison cites the work last year of Duranton and co-authors Geetika Nagpal and Matthew Turner (at Brown University) suggesting that new investments “lead to a displacement of economic activity while net growth effects are limited.”
Harrison also cites a 2012 paper by San Francisco Federal Reserve economists Sylvain Leduc and Daniel Wilson that found new spending on roads can boost an area’s economy at two specific times — immediately after the new spending has been announced, and six to eight years later, when construction is under way.
“Beyond 10 years, there were no economic benefits to infrastructure spending, they found,” Harrison stresses.
Oh, by the way, Harrison also notes that those “immediate benefits” discussed earlier only apply during recessions; it remains unclear whether in this time of post-pandemic rapid economic expansion if those short-term benefits would be seen at all.
David Harrison’s methodical review of the available wide body of research is a damning indictment against public policy prescriptions taken as an article of faith.
And it should force taxpayers to constantly question their faith in politicians who succumb to the entreaties of those seeing to their own short-term gains and not the long-term benefits to taxpayers who foot the bill for such things – and then at government-insisted premiums such as “prevailing wages” that make what too often are needless projects made needlessly more expensive.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).