An excellent article by Charles Duhigg in the NY Times on November 23, 2009, detailed the degree to which cities around the United States have violated
The problem is what is sometimes called “combined sewer overflows.” In cities like New York, the sewage from your home and the rainwater in the street both end up in the same sewer system. During big rainstorms, the surge of
This is less of a problem in New York City than in other places, because our drinking
Duhigg’s piece notes that the government has spent over $35 billion in the past thirty years to improve the city’s
The recent financial crisis seems to have caused some scaling back of our high rates of consumption, and we even see private savings rates starting to grow. However, as a society we seem to be unwilling to admit our need to invest in infrastructure. The American political culture currently rejects taxation almost as a reflex at virtually every turn.
Governments’ highly visible failures are one reason for this continued anti-tax fervor. So too is the culture of consumption that gets people trampled to death at Black Friday store sales the day after Thanksgiving. In the case of the combined sewage problem, the $50 billion solution is probably not a great idea anyway. It is based on a bricks-and-mortar approach typical of traditional engineering thinking and technology that I believe is being supplanted by more ecologically-oriented, creative and cost-effective pollution control technologies. One of the causes of combined sewage overflows is that we have paved over land that used to absorb
Still, new large-scale investments are needed to improve treatment of sewage in New York City. When this is added to funds needed for transportation, energy, new school buildings, and other basic needs, it is easy to feel overwhelmed.
What we need both in New York and nationwide is an infrastructure investment strategy and financial model – sort of a business plan for the United States. For a variety of reasons, our federal government does not have a capital budget. Our cities and states have capital budgets, which separate funds allocated to long-term projects from funds allocated to day-to-day expenses, but not the federal government. The federal government has a single budget that incorporates both immediate expenses and expenses that should be paid off over time into one lump sum. Consequently, the U.S. doesn’t have a means of managing its borrowing – all borrowing is considered part of the federal deficit. Some of that borrowing is for capital improvements that we should finance and some is for day-to-day expenses that in good times should not be paid for with borrowed funds. In that respect we are like those people that use their credit card to buy groceries and other necessities, but don’t pay the full balance on their bill each month.
State and local government debt is relatively transparent and is analyzed and rated by private firms that guide investors. The ratings of state and local finances by private rating agencies such as Moody’s influence the interest rates that states and cities must pay to borrow money. This serves to encourage at least a little bit of financial planning by these governments. But the federal government has no similar incentive to plan their long-term borrowing or think about the investments the nation truly needs and can actually afford.
The issues of combined sewage overflow and the capital needs of our society as a whole require that we give some thought to a long-term capital investment plan for this complicated business called the United States of America. I know that our policy and investment decisions are based on a wide variety of political factors that have nothing to do with rationality and even common sense. But shouldn’t our national, state and local infrastructure investment decisions be based on a plan that looks realistically at our capacity to generate the revenues needed for investment and the priorities among capital facility needs? I do not think we are rich enough to do everything, and I know we need to start making some strategic investment choices.