The Foreseeable Future Does Not Hold A Sustainable Recovery

by: Michael Panzner

Even if the optimists are right in arguing that the U.S. economy is experiencing some sort of a rebound (that's a big "if," by the way, that I don't agree with), it doesn't take away from the fact that many other issues are likely to get in the way of a sustainable recovery, now and for the foreseeable future.

Aside from the burgeoning financial crisis in Europe (where an unhappy ending seems assured) and the likely prospect of a severe downturn there and in China as well, there are other factors dimming the outlook. These include our nation's ballooning debt burden, the rapidly rising costs of an aging population, and a financial system that remains largely broken.

Then there are longer-term structural issues, including the cost of bringing the country's infrastructure up to a first world standard. As I (and others) have noted previously, the American Society of Civil Engineers (ASCE), in its 2009 Report Card for America's Infrastructure, gave a grade of "D" to America's bridges, dams, roads, and other infrastructure, and estimated a five-year investment need of $2.2 trillion.

That was almost three years ago. In the meantime, financial Armageddon erupted in spectacular fashion, and money that could have been put to work in a more productive fashion was squandered on bailouts for banks and other boondoggles. That means things are generally no better than they were -- in fact, they appear to have gotten worse. Here are three reports that indicate as much [click images to enlarge]:

Brokenbridges

"More Broken Bridges than Golden Arches: U.S. Urban Infrastructure Infographic" (PR Newswire)

"There are more deficient bridges in our metropolitan areas than there are McDonald's restaurants in the entire country," stated James Corless, Director of Transportation for America.

T4America's report highlights data from the National Bridge Inventory 2010 research by the Federal Highway Administration (FHWA). Transportation Management System provider CTSI-Global illustrated the recent findings in an infrastructure infographic.

Structurally deficient bridges are defined as "in need of more frequent monitoring and critical, near-term maintenance, rehabilitation or replacement."

How many bridges in U.S. urban areas have been rated as structurally deficient? One in nine.

Infrastructureinvestment

"America's Transport Infrastructure: Life in the Slow Lane" (The Economist)

America, despite its wealth and strength, often seems to be falling apart. American cities have suffered a rash of recent infrastructure calamities, from the failure of the New Orleans levees to the collapse of a highway bridge in Minneapolis, to a fatal crash on Washington, DC’s (generally impressive) metro system. But just as striking are the common shortcomings. America’s civil engineers routinely give its transport structures poor marks, rating roads, rails and bridges as deficient or functionally obsolete. And according to a World Economic Forum study America’s infrastructure has got worse, by comparison with other countries, over the past decade. In the WEF 2010 league table America now ranks 23rd for overall infrastructure quality, between Spain and Chile. Its roads, railways, ports and air-transport infrastructure are all judged mediocre against networks in northern Europe.

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Total public spending on transport and water infrastructure has fallen steadily since the 1960s and now stands at 2.4% of GDP. Europe, by contrast, invests 5% of GDP in its infrastructure, while China is racing into the future at 9%. America’s spending as a share of GDP has not come close to European levels for over 50 years. Over that time funds for both capital investments and operations and maintenance have steadily dropped.

Usbusinesssaleswater

Usjobswater

"Failure to Act: The Economic Impact of Current Investment Trends in Water & Wastewater Treatment Infrastructure" (American Society of Civil Engineers)

By 2020, the predicted deficit for sustaining water delivery and wastewater treatment infrastructure will be $84 billion. This may lead to $206 billion in increased costs for businesses and households between now and 2020. In a worst case scenario, the U.S. will lose nearly 700,000 jobs by 2020. Unless the infrastructure deficit is addressed by 2040, 1.4 million jobs will be at risk in addition to what is otherwise anticipated for that year.

The impacts of these infrastructure-related job losses will be spread throughout the economy in low-wage, middle-wage and high-wage jobs. In 2020, almost 500,000 jobs will be threatened in sectors that have been traditional employers of people without extensive formal educations or entry-level workers.23 Conversely, in generally accepted high-end sectors of the economy, 184,000 jobs will be at risk.24 Unless the infrastructure gap is addressed, by 2040 its impacts will put at risk almost 1.2 million jobs within basic sectors, while a relatively stable net amount of 192,000 jobs in knowledge-based industries may be jeopardized. In this latter grouping, approximately 415,000 jobs will be threatened; however, medical services are expected to grow between 2020 and 2040 due to increasing outlays to fight water-borne illnesses.

The impacts on jobs are a result of costs to businesses and households managing unreliable water delivery and wastewater treatment services. Between now and 2020, the cumulative loss in business sales will be $734 billion and the cumulative loss to the nation’s economy will be $416 billion in GDP (Table 3). Impacts are expected to continue to worsen. In the year 2040 alone, the impact will be $481 billion in lost business sales and $252 billion in lost GDP.26 Moreover, the situation is expected to worsen as the gap between needs and investment continues to grow over time. Average annual losses in GDP are estimated to be $42 billion from 2011 to 2020 and $185 million from 2021 to 2040.