THE CASE FOR PUBLIC SPENDING ON TRANSPORT INFRASTRUCTURE IN SUPPORT OF ECONOMIC GROWTH: PERSPECTIVES ON US GOVERNMENT INVESTMENT STRATEGY AND LESSONS FROM IRELAND.
Austin Smyth, University of Hertfordshire, Robert Miller, Central Places Ltd.
This paper examines approaches to infrastructure investment in the US and Ireland
Calls for systematic and targeted investment in infrastructure, particularly transport, have been heard frequently in recent years across the world as the global and national economies have been faced with financial and economic challenges not experienced in the Western democracies for more than eighty years. But opinion has been divided, particularly in the US, about the effectiveness of such spending as a tool for driving the economy out of recession and creating jobs and economic recovery. Support for such spending is typically grouped with various fiscal measures ascribed to a Keynesian perspective in contrast to a monetarist approach focusing on reducing public expenditure including spending on transport. However, it can be argued that such a distinction is somewhat artificial given for instance, the UK Government’s encouragement to infrastructure spending, albeit funded or at least financed by large contributions from the private sector.
In the US, the idea of spending on public works projects like road-building as economic stimulus has been a mainstay of jobs proposals from both Congressional Democrats and the White House in recent years. In February 2009, the U.S. Congress approved the American Recovery and Reinvestment Act. President Obama’s FY 2013 Budget proposed a plan to renew and expand America’s infrastructure. The plan included a $50 billion up-front investment connected to a $476 billion six-year reauthorisation of the surface transportation program and the creation of a National Infrastructure Bank.
It is not only in times such as these and a focus on fiscal austerity that there have been repeated calls for such investment to address so called infrastructure deficits. Ireland is one country that responded to a clamour for greatly increased investment in its infrastructure during its prolonged economic boom from the late 1990’s through to 2008/9. Empirical evidence is now available on which to assess the efficacy of that prolonged programme of infrastructure investment that was brought to an abrupt halt in the last few years following the onset of the worldwide financial and economic crisis in 2009.
This provides arguably a unique opportunity to evaluate the economic and related impacts of a massive spending programme that was the equivalent to the US investing more than $275 billion per annum for 10 years on transport infrastructure.
The arguments for infrastructure spending among interest groups, lobbyists and many economists and the evidence for it stem from a variety of analytical tools and empirical evidence. The debate on the merits of investment infrastructure has been informed by aggregate econometric models and has achieved prominence against the backdrop of the financial and economic cries being faced by many countries.
This paper reviews the approaches and methods employed in and outcomes reported from the US, based largely on secondary evidence. It reviews the Irish experience over the last decade on the basis of regional and census data as well as other secondary evidence and relevant literature. It goes on then to table some insights into the role of approaches to decisions on investment for securing value for money from scarce public funds in times of austerity.
Association for European Transport