The Wall Street Journal recently published an article on the recent decline in spending on behalf of state and local governments. This is a potentially worrisome trend, particularly given the state of local infrastructure in communities across the country. As the article relates:
State and local governments spent an annualized $248.47 billion on construction in August—the least since March 2014 and down nearly 11% from its recent peak in mid-2015.
The decline depressed gross domestic product growth this spring and was on track to weigh on growth again in the third quarter.
Further, this could be a lingering result of the recession, as governments still suffer from lower tax revenues:
Many state governments have yet to fully recover from the recession and associated steep declines in tax revenue. In late 2015, inflation-adjusted tax revenue was lower in 21 states compared with the peak before or during the recession, according to Pew Charitable Trusts.
As the article goes on to detail, infrastructure investment enjoys a nominal level of bipartisan support:
Democrats and Republicans disagree on the appropriate size and role of government, but infrastructure spending often enjoys bipartisan support. President Barack Obama and the GOP-led Congress last year enacted a $305 billion, five-year highway bill. Many Republican governors advocate spending to repair crumbling roads and support basic services, though some favor public-private partnerships for infrastructure.
And lower infrastructure investments could have a serious impact on the broader U.S. economy:
The government cutbacks could dent U.S. economic growth overall, many economists say.
“It’s going to be a very significant drag in the third quarter,” said Pantheon Macroeconomics chief economist Ian Shepherdson. But he said he expects a rebound in late 2016 or next year because the volatile construction-spending data are undershooting the trend suggested by government revenue numbers.
Given this confluence of economic and political factors, private investment in infrastructure is now more important than ever. Projects like the Rover Pipeline will bolster regional infrastructure and pave the way for economic stimulus, all using private funds. At a time when so many aspects of our country’s infrastructure is in dire need of repair, federal authorities should fully support opportunities like the Rover Pipeline.