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Investing in Infrastructure: A Good Strategy for State Economic Growth

February 26, 2016 at 11:00 AM

Some states have cut taxes and offered corporate subsidies in recent years in misguided efforts to boost their economies, even as they neglect overdue and economically powerful investments in infrastructure.

State and local spending on infrastructure — roads, bridges, schools, and other critical assets central to the economy — is at a 30-year low.  But now’s the right time for states to reverse that trend, with revenues returning in most states to pre-recession levels, low interest rates for debt-financed projects, and the job market still recovering.

Investing in infrastructure will improve state economies, now and in the future.  In the short term, key infrastructure investments would provide immediate jobs for Americans who are working less than they’d like and making less than they need to get by.  Large public construction projects can create hundreds of well-paying jobs, both to build and maintain them. 

Projects that bring an influx of new money into a state because they are funded with federal dollars or through borrowing ― as most state infrastructure projects are ― can be particularly effective at boosting employment and earnings.  These dollars further improve the local economy as workers spend their paychecks in the area.  Materials and equipment bought from in-state companies would have a similar effect.

In the longer run, higher-quality and more efficient infrastructure will boost productivity in states that make the needed investments, lifting long-term economic growth and wages. 

States that try to grow their economies solely by cutting taxes and offering corporate subsidies — which spur little to no growth and take money from schools, universities, and other public investments essential to producing the talented workforce that businesses need — are missing these opportunities. 

Every state needs infrastructure improvements with potential to pay off economically.  It’s time for states to return to these types of investments, which will boost productivity, support business growth, create jobs, provide a healthier environment, and improve opportunities for all of their residents.  


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