Reimagining infrastructure in the United States: How to build better. A paper by McKinnsey & Company

7 July, 2020

Infrastructure agencies need to prepare for two very different scenarios - a sharp rise in funding or a precipitous drop.

Infrastructure

funding

USA

US infrastructure agencies have kept the country’s trains running, water flowing, and government buildings functioning during the coronavirus crisis. Now that operations are stabilizing, they can reconsider their capital-expenditure plans. What that entails will vary dramatically depending on whether the federal government provides substantial infrastructure funding as part of an economic-stimulus package. If it does, agencies will need to determine how best to spend their share. And if there is no such funding, they will need to prepare to be more efficient with potentially lower budgets. There is little doubt about the value of investing in good infrastructure. In 2015, the nonpartisan Congressional Budget Office estimated that every dollar spent on infrastructure brought an economic benefit of up to $2.20.1 The US Council of Economic Advisers has calculated that $1 billion of transportation-infrastructure investment supports 13,000 jobs for a year.2 Beyond the numbers, infrastructure is critical to the health and well-being of the country: the United States could not function without the roads, bridges, sewers, clean water, and airports previous generations paid for. The need for more and better infrastructure is acute. A partial shutdown of the 111-year-old Hudson River rail tunnel in New York, for example, could cost the economy $16 billion and 33,000 jobs, according to the Regional Plan Association.3 In 2016, the American Society of Civil Engineers estimated that the United States had an unfunded infrastructure gap of more than $2 trillion (Exhibit 1).4 And that figure may now be an underestimate: public- infrastructure federal, state, and local spending was only 2.3 percent of GDP in 2017 (the latest year for which figures are available)—a record low. In 2019, the McKinsey Global Institute (MGI) estimated that fully closing the infrastructure gap could translate into 1.2 percent more jobs across the economy.

Attachments

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