Fixing America's Aging Infrastructure
FARAI CHIDEYA, host:
In other news, fallout from a very different tragedy. Congress just approved $250 million to rebuild the Minnesota Bridge whose collapse has caused deaths, injuries and anxiety about the state of America's infrastructure. But that's just one bridge and one location.
For more, we've got Bill Spriggs, professor and chair of economics at Howard University. Thanks for coming on.
Professor BILL SPRIGGS (Chairman, Department of Economics, Howard University): Thanks for having me.
CHIDEYA: So the American Society of Civil Engineers says it's going to take $188 billion over two decades to make the nation's bridges safe. So give us a sense of how a number that big compares to government expenses like Social Security or education.
Prof. SPRIGGS: Well, I think some people think of it more in terms of how does it compare to the war in Iraq, which is not very big. So when we think of real necessities and priorities, it's easy to see that it's an affordable expenditure. And it's not a new number. We have known about the deficit in our infrastructure since the 1990s. Many of our bridges were built in the 1950s and 1960s. And everyone knows that they are aging.
Ironically, of course, the levees that broke in New Orleans, not as a result of the hurricane, they really broke because it was poorly constructed infrastructure, should have alerted us and forced us to have this conversation and accelerated expenditures on fixing all of our infrastructure. And unfortunately, that conversation stopped and didn't go forward.
CHIDEYA: Bill, when you talk about rebuilding, there's the highway trust fund -comes from a federal gasoline tax - that tax has not been adjusted since 1993. Folks, in general, and politicians don't like gasoline taxes. So from an economic standpoint, what are alternatives if there's no increase in that tax?
Prof. SPRIGGS: Well the trust fund is actually quite healthy. We tend not to spend it down. It's one of those trust funds that assure that we have a revenue screen to address a problem, but we normally use the whole pot of federal money that's available. And so it is not a problem that can't be solved either from general revenues or from, perhaps, increasing the gasoline tax. People are in favor of trying to increase the gasoline tax more from a perspective of carbon emissions and trying to prevent global warming. So there are a lot of reasons why we may want to have the gasoline tax go higher.
CHIDEYA: I want a transition to another topic. Mortgage defaults are up. And they're not just slowing down our economy, they are tanking some other economies. So the Japanese stock market apparently took a tumble because of our housing pinch and how did that happened?
Prof. SPRIGGS: Well, they're all link together. The housing crunch in the U.S. has been financed by foreign governments primarily China and Japan and to an important but lesser extent the countries in the Arab nations buying securities that are backed by home mortgages. Of foreign investment - 40 percent of foreign investment and government-sponsored enterprises like Fannie Mae and Freddie Mac that hold mortgages are held by either China or by Japan. And so when the American economy starts to teeter, then people in China and Japan get quite nervous because they have all this money invested in the U.S.
The other fear, of course, is that this will bring about a true slowdown in the U.S. and, of course, in the case of China and Japan, both of whom run huge trade surpluses versus the United States, their economies would suffered greatly if the U.S. economy slowed down. So you have both the nervousness of what China and Japan and other nations will do with what they thought were fairly secure investments and the fear that their own income will start to fall if U.S. consumers have to pull back on consumption.
CHIDEYA: So finally, it sounds like that money is in jeopardy - the money that's coming from other countries that they don't think we're good investment.
Prof. SPRIGGS: That's the real fear that people have, that countries had diverted from just buying U.S. Treasury notes, which, of course, are very secure but have very low interest rates. And we're quite willing to dump money into U.S. bad mortgages. And in the case of China and in the case of Japan, this actually helped their growth because U.S. consumers financed all of their purchases over the last five years by growing deeper and deeper into debts.
So if they haven't been able to borrow against their homes, then American consumption would have been a lot lower. But facing a much riskier investment than they thought was the case means that some people are afraid that the almost endless supply of capital that America has been bathed in may come to an end.
CHIDEYA: Well, Bill, thanks so much.
Prof. SPRIGGS: Thank you.
CHIDEYA: Bill Spriggs is a professor and chair of economics at Howard University and he joined us from NPR headquarters in Washington.