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Underinvestment has eroded the quality of our nation’s infrastructure, stifled U.S. economic growth, and is costing each American household $3,300 a year, says the American Society of Civil Engineers (ASCE). America’s infrastructure scored a C- in ASCE’s 2021 Report Card for America’s Infrastructure, released last March. Yes, we have made incremental progress. For the first time in 20 years, “ the country with the number one economy in the world is finally out of the D range. Still, there are serious economic consequences ahead.
By 2039 the nation’s failure to upgrade infrastructure investment levels will, according to ASCE, cost the US an estimated $10 trillion in lost GDP, or Gross Domestic Product (as measured in constant 2012 dollars). More critically that will also cost America’s economy more than 3 million jobs over the next 20 years. In short, it seems like we are running to failure. But it is actually much worse than that.
As the ASCE has determined it, the investment gap may be as big as $2.6 trillion over the coming 10-year period. And if we choose to make that upgrade actually happen, that will move our infrastructure from a grade of C- to perhaps a grade of B, according to ASCE. And with the Biden infrastructure investment stimulus adding another $2.3 trillion, that may take us to a grade of B+.1 And yet. . .
While there is a growing awareness and even some agreement on our infrastructure needs, most people and almost all policymakers and business leaders are mostly unaware of an ongoing and steady slow erosion of the economy, which extends well beyond an aging infrastructure. Let’s step back a bit. . .
. . .In fact, let’s look back beginning, seven decades ago:
In the period 1950 through the year of the 1973 Oil Embargo, and looking at trends in the chart that follows, growth in per capita GDP grew about 2.6 percent per year in the US. If we continued that trend through today, our incomes might have been close to 60 percent bigger than today. Yet, even with a recovery in the several years after the oil embargo, growth in per capita GDP has in fact weakened to 2 percent annually over the period 1973 to 2007. That period ended just before the financial crisis.
The nation’s population then grew around 1 percent annually in that three-decade period, which meant that GDP increased by about 3 percent per year on average. But since 2007, our per capita GDP has dropped to an average of 0.9 percent annually while population increases have slowed to 0.7 percent.
The economy is slowly wearing down. The result of a lagging infrastructure, but also because of an arrested energy/resource productivity which creates a higher burden of waste and other costs. Yet opportunities abound. If we choose to make it happen!
If the US population grows as the US Energy Information Administration (EIA) suggests in its latest Annual Energy Outlook 2050 at 0.5 percent per year between now and 2050, and if real GDP per capita grows as much as 1.6 percent instead of 2.0 percent as occurred over the period 1973 to 2007, then the overall economy might be 20 percent smaller by 2050 than we might otherwise hope to see.2
That could mean millions of fewer jobs. In short, for a number of reasons, the economy—both here and around the world—is slowly wearing down. This is the result of a lagging infrastructure, but also because of a lagging energy and resource productivity which creates a higher burden of waste and other costs as we closely examine next.
As we set forth in a recent essay (see, Laitner and Weiland 2018), the US dumps roughly 4.4 pounds of waste per person each day into the country’s many landfills. In 2014 that added up to just over 258 million tons. But the bad news? That is only the tip of a vast waste iceberg. As we also noted, if we then include all of the ongoing soil losses, all of the air pollution and greenhouse gas emissions produced, and finally, the very large amount of fecal matter we generate each day, that 4.4 pounds become 280 pounds per person per day within the US.
Across the entire U.S. population, that adds up to a combined 16.6 billion tons of aggregate wastes per year. If examined from another perspective, that is about 2.4 pounds of waste for each dollar of personal income that we earn in the United States (based on 2014 data, the latest year for which complete data was available as we wrote that essay in 2018). So, we ask the question: “Are we living more by waste than ingenuity?” One new study suggests that, in fact, the global human-made mass exceeds all living biomass. By 2040 that could grow to twice as much (See Elhacham, Milo et al. 2020).
The bad news is not simply the generation of waste; rather, it is the array of costs imposed by the trash, the rubbish and the many forms of pollution created by that large scale of waste. As one example of such costs, climate scientists Katharine Ricke, Laurent Drouet, Ken Caldeira, and Massimo Tavoni used a series of socio-economic projections, empirical climate-driven economic damage estimations and climate model projections in a study published, also in 2018 (see, Country-level social cost of carbon).
Ricke and her colleagues found that carbon dioxide (CO2) emissions generated a median cost of $417 per tonne discharged into the oceans and atmosphere (measured in 2005 US Dollars). According to projections from the US Energy Information Administration we may emit on the order of 4,820 million tonnes of CO2 this year. The simple math suggests those releases of carbon dioxide will imposed perhaps $2 trillion of economic costs this year alone. Updating to today’s dollars suggests a cost equivalent to 12.2 percent of the nation’s GDP this year along.
Admittedly, many of the costs are long into the future. At the same time, however, we have been emitting large amounts of greenhouse gases whose costs we’re beginning to see right now. Without going into detail, the damages from weather and climate disasters within the US from 1980 to 2021, posted by the National Oceanic Atmospheric Administration (NOAA), is now estimated to be $1.9 trillion (CPI-adjusted dollars in 2021). And that will only grow in big ways with each passing year.
In recent years, the many government agencies, whether at the federal or state and local level, have adjusted budgets and mostly spent money to support things like defense spending, health and education programs, or for tax cuts and transfer payments. Washington Post columnist Fareed Zakaria has aptly noted that “Biden’s infrastructure plan is the first major fiscal program in five decades that would focus once again on investment.” And we need investment to drive the needed waste reductions and the greatly increased energy and resource productivity benefits. So, this is good news and a positive step to building our future.
We can think of the Biden Infrastructure Plan as a down payment on the needed investments to rebuild our economy, drop greenhouse gas emissions to zero or near zero.
Two things should be underscored in this regard. First, as Zakaria notes, yes, “(b)uilding infrastructure in the United States is insanely expensive.” Alas, too often overlooked in this kind of discussion is that there are also huge benefits—for example, the avoided $2 trillion climate costs in this year alone. Hence, we have a clear need to examine both benefits and costs together.
Second, the scale of needed investment is wholly missing. The Biden Infrastructure Plan calls for an initial investment of about $2.3 trillion dollars. But as we shall see, that first investment might best be thought of as a down payment on the more complete scale of effort that is really needed—something like 8 times bigger, to something on the scale of one-year’s GDP or economic activity.
In what I often refer to as a “Fermi Thought Experiment,” let me walk through some considerations to highlight just how big we absolutely have to be thinking. And let’s start with the assumption that, as the EIA suggests, the US economy will need to move from current energy use in 2021 of about 95 quads to 109 quads by 2050.3
Let us imagine two things: (i) the need to reduce energy waste and inefficiencies so that we lower consumption in 2050 down to, say, 65 quads (yes, there are studies suggesting such possibilities); and that (ii) the remaining uses of energy would be powered by the many various forms of renewable energies technologies managed by agile and cost-effective information systems. The question might then become, how much would it cost?
According to our colleagues at the EIA, by 2050 the annual expenditure for the 109 quads of total of energy uses will be $1,459 billion (in 2020 values). With energy efficiency costing a little bit less to save a quad, renewable systems costing a bit more, and information management systems adding to that total, let’s assume—again, in the spirit of a Fermi thought experiment—that the weighted average payback for a complete rebuilding of our entire energy system is 12 years given the necessary investment. And if we are to avoid an energy bill of $1,459 billion in 2050, then that annual expenditure times 12 suggests a total investment on the order of $13.1 trillion (also in 2020 dollars).
If we then add the ASCE infrastructure upgrade of $2.6 trillion, but also include necessary research and development budgets, policy and program costs, as well as workforce training and development expenditures—estimated here as ~$2 trillion or more over the next 29 years—the necessary rebuild investment might approach a total of $18 trillion. Or nearly 8 times what President Biden has now laid out. Again, what we might think of as a down payment.
Do we continue as we are, and “run to fail?” Or do we address the scale of effort—investment in both people and infrastructure—necessary to turn waste into opportunity and build our future? There is neither a law of physics nor economics that prevents us from or quadrupling the productive use of energy and other resources. Rather, it is much more an issue of imagination and our political will to get it done.
There is neither a law of physics nor economics that prevents us from quadrupling the productive use of energy and other resources. Rather, it is much more an issue of imagination and our political will to get it done.
– John A. “Skip” Laitner