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MANUFACTURING IN THE USA: PAVING THE ROAD 

TO JOB CREATION 

HEARING 

BEFORE THE

JOINT ECONOMIC COMMITTEE 

CONGRESS OF THE UNITED STATES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

NOVEMBER 16, 2011 

Printed for the use of the Joint Economic Committee 

( 

(II) 

JOINT ECONOMIC COMMITTEE 

[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress] 

SENATE 

ROBERT P. CASEY, JR., Pennsylvania, 

Chairman 

JEFF BINGAMAN, New Mexico 

AMY KLOBUCHAR, Minnesota 

JIM WEBB, Virginia 

MARK R. WARNER, Virginia 

BERNARD SANDERS, Vermont 

JIM DEMINT, South Carolina 

DANIEL COATS, Indiana 

MIKE LEE, Utah 

PAT TOOMEY, Pennsylvania 

HOUSE OF REPRESENTATIVES 

KEVIN BRADY, Texas, Vice Chairman 

MICHAEL C. BURGESS, M.D., Texas 

JOHN CAMPBELL, California 

SEAN P. DUFFY, Wisconsin 

JUSTIN AMASH, Michigan 

MICK MULVANEY, South Carolina 

MAURICE D. HINCHEY, New York 

CAROLYN B. MALONEY, New York 

LORETTA SANCHEZ, California 

ELIJAH E. CUMMINGS, Maryland 

WILLIAM E. HANSEN, Executive Director 

ROBERT P. O’QUINN, Republican Staff Director 

(III) 

C O N T E N T S 

OPENING STATEMENTS OF MEMBERS

Hon. Robert P. Casey, Jr., Chairman, a U.S. Senator from Pennsylvania ......... 1 

Hon. Kevin Brady, Vice Chairman, a U.S. Representative from Texas .............. 3 

WITNESSES

Mr. Andrew Herrmann, President, American Society of Civil Engineers, 

Washington, DC ................................................................................................... 6 

Dr. Veronique de Rugy, Senior Research Fellow, Mercatus Center at George 

Mason University, Arlington, VA ....................................................................... 8 

Mr. Chris Edwards, Director of Tax Policy Studies, Cato Institute, Washington, DC ............................................................................................................. 9 

Mr. Robert Puentes, Senior Fellow, Metropolitan Policy Program, Brookings 

Institution, Washington, DC ............................................................................... 12 

SUBMISSIONS FOR THE RECORD

Prepared statement of Representative Kevin Brady ............................................ 30 

Prepared statement of Mr. Andrew Herrmann ..................................................... 32 

Prepared statement of Dr. Veronique de Rugy ..................................................... 38 

Prepared statement of Mr. Chris Edwards ........................................................... 44 

Prepared statement of Mr. Robert Puentes ........................................................... 54 

Prepared statement of Representative Michael C. Burgess ................................. 59 

(1) 

MANUFACTURING IN THE USA: PAVING THE 

ROAD TO JOB CREATION 

WEDNESDAY, NOVEMBER 16, 2011 

CONGRESS OF THE UNITED STATES, 

JOINT ECONOMIC COMMITTEE, 

Washington, DC. 

The committee met, pursuant to call, at 2:07 p.m. in Room 216 

of the Hart Senate Office Building, the Honorable Robert P. Casey, 

Jr., Chairman, presiding. 

Senators present: Casey and Klobuchar. 

Representatives present: Brady, Burgess, Campbell, 

Mulvaney, and Hinchey. 

Staff present: Gail Cohen, Will Hansen, Colleen Healy, Jesse 

Hervitz, Dan Neumann, Brian Phillips, Christina Forsberg, and 

Jeff Schlagenhauf. 

OPENING STATEMENT OF HON. ROBERT P. CASEY, JR., 

CHAIRMAN, A U.S. SENATOR FROM PENNSYLVANIA 

Chairman Casey. We will get started. The hearing will come to 

order. I want to thank our witnesses. First, let me say an apology 

for being late. We have House Members who are here. They had 

a longer distance to travel and they were here on time, so our Vice 

Chairman was leading that team. 

I will present an opening statement, and then our Vice Chairman 

Brady will as well, and then we will get to our witnesses. But I am 

grateful to our witnesses for being here, for your presence, your 

testimony and the experience and scholarship that you bring to 

these issues. 

Today’s hearing is the fourth in a series by the Joint Economic 

Committee that we have been holding, to determine the best strategies for revitalizing manufacturing in the United States of America. Previously, we looked at how trade policies affect manufacturing, and the need for a comprehensive national manufacturing 

strategy. We also looked at the importance of job training and preparing our workers to compete in a global economy. 

With today’s hearing, we will examine the positive impact that 

infrastructure investment would have on economic growth and job 

creation in the manufacturing sector. When the economy is operating below full capacity, investing in infrastructure boosts aggregate demand and paves the way for long-term economic growth. 

In the immediate term, I should say, rebuilding roads and 

bridges and improving and modernizing our ports and airports will 

create needed construction and manufacturing jobs. These sectors, 

2 

which were hardest-hit in the Great Recession, are also the ones 

that most positively are impacted by an infrastructure investment. 

In the longer term, improving our infrastructure will help 

strengthen our Nation’s competitiveness, by enabling producers to 

move their products to market more quickly and at less cost. Since 

manufacturers rely upon roads, rails and ports to transport their 

goods domestically, and to export abroad, infrastructure improvements will have a significant, positive impact on U.S. manufacturers. 

The U.S. has underinvested in infrastructure. That’s an understatement. I’m not sure many people would contest that. The 

United States spends just two percent, just two percent of gross domestic product on infrastructure, half of what we spent in the year 

1960. We also invest far less than our international competitors. 

China spends nine percent of GDP, not two percent, nine percent 

of GDP on infrastructure, and Europe is at five percent. 

The quality of U.S. infrastructure is poor, ranking 23rd in the 

world behind countries such as Spain and Chile. In fact, the American Society of Civil Engineers has identified up to $2 trillion, 

that’s with a ‘T’, $2 trillion of infrastructure investments needed to 

get back on equal footing with competitors abroad. I don’t think 

there is anyone on this Committee who would say we can afford 

$2 trillion today. But I would also assert that we cannot afford not 

to begin to invest in infrastructure, and we certainly cannot afford 

to do nothing. 

While private sector funding on infrastructure projects is across 

the board, there have been many worthy projects that simply won’t 

deliver the financial return required by the private sector, but will 

deliver enormous benefits to the public and should go forward. 

The role for the Federal Government is even greater today than 

is typically the case. Normally, state and local governments shoulder about three-quarters of the cost of infrastructure projects. But 

state and local governments are continuing to feel the effects of the 

Great Recession, contending with reduced revenues and increased 

spending on other services. 

There is a great deal of research showing that infrastructure investments are highly efficient in the use of federal funding. The 

Congressional Budget Office cites infrastructure spending as one of 

the most effective policies for boosting both growth and employment. Moody’s Analytics estimates that every dollar of infrastructure spending leads to $1.44 of increases in GDP, the usual bang 

for the buck analysis. You spend a buck, what do you get in return? 

Infrastructure. Spend a buck, you get a buck-44 in return. 

The Treasury Department and the Council of Economic Advisers 

analysis found that 61 percent of jobs created by infrastructure investment would be in construction, and 12 percent would be in 

manufacturing. So more infrastructure investments are needed to 

boost demand, put skilled construction and manufacturing workers 

back to work, and ensure that U.S. companies have the physical infrastructure needed to compete against international competitors. 

Just by way of example, in my home State of Pennsylvania, the 

Delaware River Deepening Project is the kind of infrastructure 

project that we should fund. By deepening the main channel of the 

Delaware River, providing access to the Port of Philadelphia for 

3 

larger vessels, we can bring down transportation costs for business, 

increase productivity, boost exports and increase jobs in the region. 

In addition to making U.S. products more competitive around the 

globe, this project would create thousands of construction jobs immediately, and lead to more than 1,000 long term jobs through the 

increased activity at the Port of Philadelphia. I’m sure other members could cite projects in their own states and their own districts. 

Other traditional infrastructure repairs are also badly needed. 

More than a quarter of the bridges in Pennsylvania are structurally deficient, with a staggering 23 million vehicles passing over 

a deficient bridge in a state like ours each and every day. 

Nationwide, there are more than 69,000 bridges in need of repair—69,000. To delay rebuilding our rails, roads and bridges 

would be short-sighted, costing our economy jobs in the short run 

and eroding our competitive position in the long term. Unfortunately, that is precisely what the Senate did earlier this month, 

when on party lines it voted down legislation that would have invested in our Nation’s infrastructure, by creating an Infrastructure 

Bank, in addition to other provisions in the bill. 

We must figure out a bipartisan path forward in the months 

ahead on infrastructure, not to mention so many other priorities. 

Today, we are fortunate to have a distinguished panel of experts 

who have deep knowledge of infrastructure investments, thoughtful 

ideas on where the U.S. should invest, and useful analysis of how 

the U.S. competes and how we compare to our competitors across 

the globe. 

So I want to thank our witnesses. We are going to get to you in 

a moment, I look forward to your testimony, but I would turn the 

microphone now to Vice Chairman Brady. 

OPENING STATEMENT OF HON. KEVIN BRADY, VICE 

CHAIRMAN, A U.S. REPRESENTATIVE FROM TEXAS 

Vice Chairman Brady. Thank you, Chairman Casey, for convening this important hearing. I want to welcome our witnesses as 

well. A good infrastructure is vitally important to the U.S. economy, providing Americans with millions of miles of roads, hundreds 

of thousands of bridges, tens of thousands of airports, dams, waterways and transit lines, and hundreds of train stations and ports. 

Pro-growth policies such as low taxes, balanced regulation and 

free market innovations drive the need for additional infrastructure 

in America. As a former local Chamber of Commerce executive, I 

can attest to the need for infrastructure, as a critical precursor to 

spark economic development and attract businesses in communities 

large and small across America. 

Though America’s infrastructure remains among the most advanced in the world, the American Society of Civil Engineers gave 

our infrastructure a letter grade D, highlighting we have a long 

way to go until we can meet the current and future infrastructure 

needs of our growing country. 

The manufacturing sector is a critical input in infrastructure, 

with the provision of raw materials, industrial equipment, and the 

manufacturing sector is the beneficiary. It relies on the Nation’s infrastructure to transport goods to compete in the global economy. 

4 

In fact, the manufacturing sectors open up the prospect for major 

energy infrastructure development. 

An excellent opportunity for long-term economic growth exists 

today in the form of the Keystone XL pipeline, from Alberta to 

Texas, which would result in at least 20,000 new jobs affiliated 

with the pipeline. Long-term investment in infrastructure will help 

American manufacturing, including energy manufacturing, remain 

internationally competitive. Mr. President, I hope you would stop 

delaying these needed 20,000 American jobs. 

No one disputes the value of good infrastructure. However, planning and building infrastructure takes years, sometimes decades. 

Higher infrastructure spending cannot create a significant number 

of jobs in the near term. President Obama himself remarked 

months ago, ‘‘shovel-ready was not as shovel ready as we expected.’’ 

According to the Federal Highway Administration, the federal 

project delivery process can take up to 15 years, from planning 

through construction. Environmental regulations and constraints 

on federal funding can extend this time line even farther, resulting 

in costly delays and routine cost overruns. 

The current system of federal infrastructure spending is inefficient. U.S. taxpayers are not getting good value for their dollars 

that they are currently spending on infrastructure. Research over 

the past decade indicates that the growth benefits from federal infrastructure spending have been extremely low. The current system 

of federal infrastructure spending is broken, and must be fixed to 

make smart investments in good infrastructure projects. 

As an example, the GAO reviewed the Department of Transportation’s system of 6,000 employees administering over 100 separate 

surface transportation programs, with separate funding streams for 

highway, transit, rail and safety functions. The GAO determined 

this system was extremely fragmented, and lacked accountability, 

impeding effective decision-making and limiting the ability to provide solutions to complex challenges. 

Analysis by the National Surface Transportation Policy and Revenue Committee found the project that should cost $500 million 

would actually take 14 years to complete and cost twice as much, 

due to the impact of delays and inflation. Examples already abound 

at the state level of diverted funds originally allocated to infrastructure, going to other budget items suspended or altogether forfeited. 

All too frequently infrastructure funding fails to reach high-priority projects, diverted instead to projects with little or no real benefit. Federal regulations, such as project labor agreements, high 

road contracting, Buy American provisions and the Davis-Bacon 

Act have unnecessarily increased the cost and lengthened the completion time of infrastructure projects. 

For example, the Davis-Bacon Act’s prevailing wage requirements have led contractors to pay an average of 22 percent above 

the market wage rates, and have bogged down contractors with 

extra paperwork. An environmental impact statement alone can 

take up to two years to complete. Major infrastructure projects 

often require the approval of other federal agencies, such as the 

U.S. Fish and Wildlife Service, the Advisory Council on Historic 

Preservation and the U.S. Army Corps of Engineers. 

5 

For the good of manufacturing, infrastructure, and American 

workers, federal regulators must consider how both proposed new 

rules and the cumulative burden of existing rules, affect the ability 

of American businesses to create jobs at home by selling in global 

markets. Federal regulators must also begin to perform retrospective analysis, to determine if existing regulations are meeting their 

goals in cost-effective ways. 

Congress should make it easier for the private sector to invest 

in transportation infrastructure, reducing the stress on already 

cash-strapped federal resources. Major economies worldwide have 

demonstrated success in partially and fully privatized roads, water 

and sewage systems, seaports and airports. America is behind the 

times when it comes to involving private capital in infrastructure 

development. 

The United States is capable of keeping up with other countries 

and excelling as the leader in infrastructure development. We 

strive to achieve an ‘‘A’’ in infrastructure, by addressing the systemic problems with our current means of funding infrastructure, 

in conjunction with reform of burdensome regulations that impede 

the ability, both public and private provisions of infrastructure. 

Mr. Chairman, thank you and I look forward to the witness’ testimony. 

[The prepared statement of Representative Brady appears in the 

Submissions for the Record on page 30.] 

Chairman Casey. Thank you, Vice Chairman Brady. I will provide a brief introduction of our witnesses, and then we will get 

right to their testimony. We do have a distinguished panel. First 

of all, I would like to introduce Mr. Andrew Herrmann, a principal 

with Hardesty and Hanover, LLP and president of the American 

Society of Civil Engineers. Mr. Herrmann’s experience includes design, inspection, rehabilitation, and construction, along with managing some of the firm’s major bridge projects. He is a registered 

professional engineer in 29 states and Ontario, and is a resident 

of Pittsburgh, Pennsylvania. That, of course, is a good helper for 

you here today. We are grateful you are here. Thank you so much. 

The Vice Chairman knows that we invite Pennsylvanians once in 

a while. We get some Texans too. 

Next, we have Dr. Veronica de Rugy, and she is the senior research fellow at the Mercatus Center at George Mason University. 

She was previously a resident fellow at the American Enterprise 

Institute, a policy analyst at the Cato Institute, and a research fellow at the Atlas Economic Research Foundation. 

Her primary research interests include the federal budget, homeland security, taxation, tax competition and financial privacy 

issues. Doctor, thank you for being here. That is quite a lineup of 

tough issues. Thank you. 

Next, Mr. Chris Edwards is the Director of Tax Policy Studies at 

Cato. He is an expert on federal and state tax and budget issues. 

Before joining Cato, Mr. Edwards was a senior economist on the 

Congressional Joint Economic Committee, a manager with 

PriceWaterhouseCoopers, and an economist with the Tax Foundation. Thank you very much, Mr. Edwards, for being here, and I 

guess I should say welcome back. 

6 

Mr. Robert Puentes is a fellow with the Brookings Institution, 

Metropolitan Policy Program, where he also directs the program’s 

Metropolitan Infrastructure Initiative. His work focus is on the 

broad array of policies and issues related to metropolitan growth 

and development. 

He is an expert on transportation and infrastructure, urban planning, growth management, suburban issues and housing. He is also 

an affiliated professor with the Georgetown University’s Public Policy Institute. Mr. Puentes, thank you for being here. 

So we will start with Mr. Herrmann and we will go from my left 

to right. Thank you very much. Oh, and I should say before you 

start, if you have a longer statement, it will be made part of the 

record, and if you could try to keep the summary of your remarks 

or any comments you make to within a five minute time period. 

Thank you. 

STATEMENT OF MR. ANDREW HERRMANN, PRESIDENT, 

AMERICAN SOCIETY OF CIVIL ENGINEERS, WASHINGTON, DC 

Mr. Herrmann. Thank you. Mr. Chairman, Members of the 

Committee, my name is Andrew Herrmann, and I am the president 

of the American Society of Civil Engineers. It is an honor for me 

to appear before this Committee to discuss the critical link between 

our Nation’s infrastructure and the Nation’s economic competitiveness, specifically as it relates to the vital American manufacturing 

sector. 

ASCE’s 2009 report card for America’s infrastructure gave an 

overall grade of D for 15 of the Nation’s essential infrastructure 

categories, and estimated that a total of $2.2 trillion would be 

needed to bring these categories into a state of good repair. More 

specifically, the report card assessed that the Nation’s roads should 

receive a grade of D minus, its bridges a C, and transit a D. 

If the Nation continues to underinvest in infrastructure and ignores this backlog until systems fail, we’ll incur even greater costs 

and risk public safety. Money invested in essential public works 

can create jobs, provide for economic growth and ensure public 

safety through a modern, well-engineered national infrastructure. 

For example, the Nation’s transportation infrastructure systems have an annual output of $120 billion in construction work, while 

also contributing $244 billion in total economic activity to the Nation’s gross domestic product. 

These economic benefits translate into real jobs as well. The Fed- eral Highway Administration estimates that every $1 billion invested in the Nation’s highways supports almost 28,000 jobs, including over 9,000 onsite construction jobs, over 4,000 jobs in supplier industries, and nearly 14,000 jobs throughout the rest of the 

economy. 

Equally as important as infrastructure’s job creation potential 

are the economic benefits to a region’s long-term growth and productivity. This past July, ASCE released the first in a series of economic studies, which measured the impacts to the economy in 2020 

and 2040, if the Nation maintains just current levels of surface 

transportation investments. 

Other pending studies, which will be coming out as the year progresses, will address water and waste water, energy transmission 

7 

and air and marine ports. The present study, entitled Failure to 

Act found that if investments in transportation are not made in 

conjunction with significant policy reforms, families will have a 

lower standard of living, businesses will be paying more and producing less, and our Nation will continue to lose ground in the 

global economy. 

The results show that the Nation’s deteriorating surface transportation will cost the American economy more than 876,000 jobs, 

and suppress the growth of the Nation’s GDP by almost $900 billion in 2020. The study results also estimate that more than 

100,000 manufacturing jobs will be lost by 2020. 

Failure to Act also assesses how a failing infrastructure will drive up the cost for businesses by adding $430 billion to transportation costs in the next decade. It will cost firms more to ship finished goods and needed raw materials will cost more due to increased transportation costs. 

Lastly, the report shows that productivity will fall, with busi- nesses underperforming by $240 billion over the next decade. As a 

result, U.S. exports will fall by $28 billion in key sectors. In particular, 10 sectors of the U.S. economy will account for more than 

half of this unprecedented loss in export value—among them, key 

manufacturing sectors, including communications equipment, medical devices, and machinery. 

In contrast, the study from the Alliance for American Manufacturing shows that roughly 18,000 new manufacturing jobs are created for every $1 billion in new infrastructure spending. These jobs 

will be created in fabricated metals, concrete, cement, glass, rubber, plastic, steel and wood product industries. 

Furthermore, that same study shows that using American-made 

materials for these infrastructure products yields a total of 77,000 

additional jobs, based on investment of $148 billion a year. By 

making infrastructure investments now, the Nation can grow the 

economy. Failure to Act estimates that in order to bring the Nation’s surface transportation up to a grade of B from its D, policy 

makers would need to invest approximately $1.7 trillion between 

now and 2020 in the Nation’s highways and transit systems. 

The U.S. is currently on track to only spend a portion of that, 

a projected $877 billion during the same time frame. However, by 

making these investments in infrastructure at this critical time, 

the Nation could protect nearly 1.1 million jobs, relieve congestion 

and grow the economy. 

ASCE looks forward to working with Congress as it develops legislation which brings the Nation’s infrastructure into the 21st century. For instance, by updating, maintaining and building our 

roads, bridges and transit systems, the Nation can create jobs in 

both the public and private sector, while fostering and growing 

manufacturing in the United States. 

Therefore, the first step towards a modernized transportation 

system must include passing a multi-year surface transportation 

authorization at or above the current levels of investment, followed 

by legislation funding other critical infrastructure needs. 

Thank you. I would be happy to answer any questions. 

[The prepared statement of Mr. Andrew Herrmann appears in 

the Submissions for the Record on page 32.] 

8 

Chairman Casey. Thanks very much. Dr. de Rugy. 

STATEMENT OF DR. VERONIQUE de RUGY, SENIOR RESEARCH 

FELLOW, MERCATUS CENTER AT GEORGE MASON UNIVERSITY, ARLINGTON, VA 

Dr. de Rugy. Good afternoon, Chairman Casey, Vice Chairman 

Brady and members of the Committee. It is a privilege to be here 

today to discuss the important topic of government-funded infrastructure spending and economic growth. My name is Veronique de 

Rugy. I am a senior research fellow at the Mercatus Center at 

George Mason University, where I study budget and tax issue. 

In my written testimony, I make three points. First, infrastructure spending is a particularly bad way to stimulate the economy. 

Second, while no one disputes the value of good infrastructure, 

public work projects typically suffer from massive cost overruns, 

and hence rarely make for good investments. 

Third, the Federal Government shouldn’t be in the business of 

overseeing the construction of infrastructure. Privatization and 

state government public-private partnership are better alternative. 

In my oral testimony, however, I would like to focus on the misconception that infrastructure spending can create jobs. This morning on NPR, Jerry Bernstein, a former economist at the Council of 

Economic Advisers, explained that Keynesian economics amounts 

to the government doing all it can to foster job creation. 

Bernstein then described the President’s America Jobs Act, 

which includes $60 billion for infrastructure spending, as precisely 

the right way to help grow the economy and create jobs. Unfortunately, the evidence suggests otherwise. My colleague Matt Mitchell and I just finished a research project that looks specifically at 

this question, and here is what we find. 

First, there is no consensus among economists about the ability 

of stimulus to boost the economy, and there’s no consensus that 

this is actually the number. Moreover, the studies that find that 

such spending is effective assume conditions that are not found in 

the U.S. right now, such as low debt level. We don’t have this right 

now. Fixed exchange rates, we certainly don’t have this right now, 

and lower levels of government spending. We don’t have this right 

now. 

Second, the greatest problem with infrastructure spending as 

stimulus is the way it’s implemented. In a perfect Keynesian world, 

stimulus spending needs to be timely, targeted and temporary. Infrastructure spending fails to satisfy these criteria. Infrastructure 

spending is not timely. Even when the money is available, it can 

be months, if not years before it is spent. It is because infrastructure projects involving planning, bidding, contracting, construction 

and evaluation. 

Second, the only thing harder than getting the money out the 

door promptly is properly targeting spending for stimulative effect. 

The idea is to give the money a jolt, the economy a jolt by employing idle resources, firm and equipment, while data from recovery 

dug up showed that the stimulus money in the most recent bill, in 

general, and infrastructure funds in particular, wasn’t targeted to 

those areas with the highest rate of unemployment. 

9 

However, there is also evidence that even properly targeted infrastructure spending would fail to stimulate the economy. Many of 

the areas hardest hit by the recession are in decline, because they 

have been producing goods and services that are not and may 

never be in great demand. Building or improving the roads and 

other infrastructure in these areas won’t change the structural factors behind their decline. 

Finally, infrastructure spending isn’t temporary. Even in Keynesian models, stimulus is only effective as a short-run measure. In 

fact, Keynesians also call for surpluses during an upswing. In reality, however, the political process prefers to implement the first 

Keynesian prescription, deficit, but not the second one, surpluses 

to pay off the debt. 

The inevitable result is a persistent deficit that year-in and yearout, adds to the National debt. This is important because as former 

Presidential economic advisor Lawrence Summers has argued, fiscal stimulus ‘‘can be counterproductive if it is not timely targeted 

and temporary.’’ As I’ve explained, infrastructure spending simply 

does not meet those criteria. 

Now even if we could somehow do a better job at implementing 

the spending, other factor would get in the way of job creation, 

things like the prevailing wage requirements, because they often 

impose financial costs through increased wage for construction 

project. 

According to economists Garrett Jones and Dan Rothschild, in 

the case of the last stimulus, this increasing cost may have prevented the creation of 55,000 jobs. In their words, the difference between the market wage and the required Davis-Bacon wage represent, from a Keynesian perspective, a lost opportunity for job creation. 

So basically, if you are a Keynesian economist, you really want 

to do away with prevailing wage requirement. To conclude, economists have long-recognized the value of infrastructure, roads, 

bridges, airports or waterways are the conduit through which goods 

are exchanged. In many circumstances, private firms should be the 

one providing this infrastructure. In other cases, there may be a 

role for public provision at the local level. 

But whatever its merits, infrastructure spending won’t provide 

much of a stimulus, particularly not the sustainable job the Nation 

needs. In fact, it may even make it worse. Thank you. 

[The prepared statement of Dr. Veronique de Rugy appears in 

the Submissions for the Record on page 38.] 

Chairman Casey. Thank you, Doctor. Mr. Edwards. 

STATEMENT OF MR. CHRIS EDWARDS, DIRECTOR OF TAX 

POLICY STUDIES, CATO INSTITUTE, WASHINGTON, DC 

Mr. Edwards. Thank you very much, Chairman Casey, for having me testify today. In the description of today’s hearing, the Committee asked how infrastructure can help promote jobs growth in 

manufacturing. The short answer to that is that we can spur 

growth in jobs and manufacturing by making infrastructure spending as efficient as possible. 

Infrastructure spending should go to the highest value projects, 

and it should be constructed and maintained in the most efficient 

10 

manner. In my view, we can do that by reducing the federal role 

in infrastructure, to increase the efficiency of our investment. 

Let’s take a look at the overall data. Most infrastructure spending in the United States is by the private sector. Department of 

Commerce data shows that private sector infrastructure spending 

is more than four times greater than government infrastructure 

spending by all levels of government in the United States, about 

$1.7 trillion a year, to about $400 billion in the government sector. 

So my takeaway from that is the first thing we should do is remove 

hurdles to private sector infrastructure investment. 

The second point I would make, and unfortunately it contradicts 

something you said, Senator Casey. If you look at OECD data, 

they’ve got a new report out on infrastructure. It shows that U.S. 

government infrastructure spending is about the same share of the 

economy as the average in the OECD, about 3.5 percent of GDP. 

So I’m happy to compare notes with your staff on that. But I don’t 

think we’re underinvesting compared to other countries. 

Most of looking just at the Federal Government, most federal infrastructure spending, in my view, is really properly state, local 

and private sort of activities. Our urban transit systems, highways, 

community development and that sort of stuff. The biggest problem 

I see with federal involvement in infrastructure spending is that 

the Federal Government makes mistakes, and it replicates those 

mistakes across the country. 

So you can look historically at something like the huge federal 

involvement in public housing construction during the mid-20th 

century. It was a disaster. The Federal Government built these 

massive high-rise public housing structures in dozens of cities 

across the country. Everyone agrees now it was a disaster. 

The problem is that because of federal involvement, every city 

made that same mistake. You can see the same sort of thing going 

on now with high speed rail. If California, in my view, wants to 

spend its own money, its own taxpayer money to finance its own 

high speed rail system, great. I think it’s a bit of an economic boondoggle. But the problem with federal involvement is it takes money 

and induces states to make that same mistake over and over. 

The states, in my view, should be laboratories of democracy and 

laboratories of innovation and infrastructure, and a big exciting 

thing in the area of infrastructure, as Veronique mentioned, is public-private partnerships and privatization. This has swept the 

world. Unfortunately, the United States is a laggard in this, but 

there’s all kinds of exciting projects being done even in the United 

States. 

I’ll point to one, which I think is very interesting. Down in 

Chesapeake, Virginia, an engineering company, FIGG engineering, 

is building a $100 million bridge across the Elizabeth River down 

there. The old bridge had run out of its useful life. This private 

company came to the city and said, you know, we want to build a 

new bridge. It’s completely owned and financed, $100 million 

project, and looking on the Web site it’s really a beautiful project. 

So it’s complete privatization. It seems to me we ought to be 

doing that sort of thing where we can. The OECD notes that the 

United States lags far behind Australia, Canada and other countries on privatization and PPPs for roads and bridges and that sort 

11 

of stuff. There’s an infrastructure magazine called Public Works Financing that looks at these PPP and privatization projects. 

Of the 40 biggest companies in the world doing this sort of privatization for infrastructure, only two of the 40 are American, 

which I think is really unfortunate, and the United States has less 

of these sort of privatized infrastructure projects even than Canada, which has a population only one-tenth of ours. 

One big advantage, it seems to me, of privatizing the infrastructure is that infrastructure will get a more stable financing source. 

If you look at our air traffic control system in this country, it’s really—it has a very unstable financing. Congress keeps fighting over 

the level of financing for air traffic control, which is of course a crucial thing. 

I would suggest Canada as a model here. Canada privatized its 

air traffic control system 15 years ago. It’s a self-funded, non-profit 

corporation. It’s got government and labor on the board of directors. 

It works extremely well. It’s won international awards, and the 

funding source is stable, because they don’t rely on government 

subsidies. 

The Brookings Institution actually has a very good new report 

out on PPP, privatization of infrastructure, which I would recommend your staff take a look at. So to conclude, the Committee 

asked how can infrastructure help U.S. manufacturing, and how 

can it help us be competitive in the global economy? 

That is a crucial question. You know, I am very concerned when 

our manufacturing is getting hit from around the world, when 

there are things we could be doing to make our manufacturing 

more competitive. I think privatizing infrastructure is one way to 

go here. You mentioned the World Economic Forum rankings on 

U.S. competitiveness. 

To give you one example, the World Economic Forum puts U.S. 

and American seaports 23rd in the world, which is about right. The 

Maritime Administration, MARAD, has the same sort of assessment of U.S. seaports. Well U.S. seaports are almost all owned by 

state and local governments. There are, by contrast, privatized seaports around the world, which do very well in Britain and Hong 

Kong and other places, and indeed, the two highest, the first and 

third highest-ranked seaports in the world, according to the World 

Economic Forum, are in Singapore and Hong Kong, and those seaports are completely private. 

So I think we can get quality infrastructure in the private sector. 

Governments can’t afford infrastructure much anymore because of 

the giant deficits they’re running. 

So let’s look at these experiments going on around the world, and 

see what we can adopt here in the United States. Thank you. 

[The prepared statement of Mr. Chris Edwards appears in the 

Submissions for the Record on page 44.] 

Chairman Casey. Thanks, Mr. Edwards. Mr. Puentes. 

12 

STATEMENT OF MR. ROBERT PUENTES, SENIOR FELLOW, 

METROPOLITAN POLICY PROGRAM, BROOKINGS INSTITUTION, WASHINGTON, DC 

Mr. Puentes. Thank you very much, Chairman Casey, Vice 

Chairman Brady and Members of the Committee. I am pleased to 

be here today. I very much appreciate the invitation. 

Throughout most of our Nation’s history, I think we have always 

had a clear understanding of the role of strategic investments in 

our physical infrastructure in advancing the American economy. 

But the conversation, I think, has new meaning today, because 

the understanding now seems to be that we are too broke, both financially and in spirit, to make similar investments in our Nation’s 

economic future, or to beset by various political, regulatory or institutional barriers, to get anything really important done. 

I don’t think we should let this be the case. Today, we really 

need targeted and smart ways to drive economic growth, create 

jobs, restore fiscal health and regain our lead in manufacturing, innovation and productivity. 

One critical economic imperative is to boost exports and manufacturing, as we talked about, and to fully connect American firms 

and metropolitan areas to the global marketplace, particularly with 

nations that are rapidly urbanizing and industrializing. 

Today, exports in the U.S. make up only 13 percent of our GDP, 

compared to 30 percent in China and in Canada, and higher levels 

in India and Japan. We need to reorient our economy to take advantage of this new, rising global demand. But doing so not only 

means opening up foreign markets to American goods and services; 

we also need to build and retool the next generation of advanced 

production facilities, and the underlying infrastructure to move 

goods, services and ideas quickly and efficiently by air, land and 

sea. 

But to do that, we need systemic reform. That means fixing the 

infrastructure and the institutional partnerships that exist today, 

as well as the process for choosing those infrastructure projects. We 

need to address a range of overlapping financial, regulatory and institutional hurdles that currently stand in the way of these investments, and understanding these barriers and where reform can 

really be achieved should help us craft policy solutions, to streamline processes and invest in transformative projects that truly can 

catalyze economic growth. 

There are several critical areas that demand attention. First, in 

collaboration with states and metropolitan areas, the Federal Government should develop a comprehensive policy for national goods 

movement. This process should build off the bill that was just 

passed by the Environment and Public Works Committee, to conceive a national freight program, and prioritize corridors and 

projects on a cost-benefit analysis that includes all of these modes: 

air, rail, sea and road. 

Today, we are one of the only industrialized countries on the 

planet that takes a compartmentalized rather than holistic approach to goods movement. Programs like the Department of 

Transportation’s TIGER Program have been helpful in this regard, 

but there is clearly much more to do. 

13 

Another idea is for the Federal Government to help states reform 

their own state infrastructure banks. The problem is that rather 

than bringing a tough, merit-based approach to funding and project 

selection, many state infrastructure banks are simply used to pay 

for projects selected through a state’s wish list of infrastructure improvements, without filtering these projects through a competitive 

application process. 

A better approach, we think, would be for states to use their infrastructure banks more strategically, such as to directly support 

exports, manufacturing and the things we’re talking about today. 

On a national level, the creation of an infrastructure bank would 

leverage federal dollars for large projects whose impact is of national significance, like border crossings and ports that are integral 

to our National trade strategy. This is especially crucial for projects 

that cross multiple state borders, and require funding and coordination across a number of public agencies, and from the private 

sector in particular. 

Recent polling shows strong willingness for public sector agencies 

to consider private investments, rather than increasing taxes, cutting budgets or taking on more debt. It’s not a silver bullet, but 

while half of the states have enacted enabling statutes for publicprivate partnerships, the wide differences between them makes it 

time-consuming and costly for private partners wishing to engage 

in PPPs in multiple states to handle the different procurement and 

management processes. 

For this reason, we think the Federal Government should play 

a helpful role with states and metropolitan partners, by helping 

them think through the potential costs and tradeoff of these deals, 

as well as assessing true significant national interests. Over 25 

countries have been implementing specialized units throughout 

various government agencies to assist with the expanding opportunities for public-private partnerships. 

These units fulfill different functions such as quality control, policy coordination, and project promotion. We think that in the U.S., 

the primary purpose would be to provide technical non-binding information, assistance and advice to states and metropolitan governments. 

Entities like PPP units or an infrastructure bank would ideally 

help infrastructure investments, by leveraging existing funding and 

finance sources. These approaches epitomize a new 21st century 

style self-help that the National government should fully recognize 

and embrace. Mr. Chairman, we know that our global competitors 

in both mature and emerging markets alike are in the process of 

making these kinds of investments, and in doing so, they’re supporting their national economies. 

These investments at their core are the physical means to an 

economy shaping end, rather than the ends in and of themselves. 

Thank you again for the invitation to appear before you today. 

[The prepared statement of Mr. Robert Puentes appears in the 

Submissions for the Record on page 54.] 

Chairman Casey. Thank you very much. We will start our 

round of questions. I will start with Mr. Herrmann, and this is obviously a Pennsylvania-specific question, which is okay once in a 

while, right? 

14 

We have talked a little bit today about the Port of Philadelphia. 

We have in Pittsburgh, as you know better than I, I think, based 

upon your expertise, we have an inland port in Pittsburgh, and it’s 

the reason or the source of a lot of jobs in Pittsburgh. 

We are told that 38 million tons of cargo go through that port every year. It has an $800 million benefit to the region, and as I 

said, a huge job impact, 45,000 jobs in the southwestern corner of 

our state. 

One of the problems they have is in the lock and dam system, 

they have some basic, fundamental infrastructure needs or deficiencies that we’re all trying to work on together. Some of the Recovery Act money was helpful, but I mean right now, it has come 

down to the Army Corps, and everyone here knows what good work 

that they do, but the Army Corps of Engineers, we are trying to 

construct, and have used some of the Recovery Act dollars to do 

this, river and guard walls, something that fundamental, just 

guard walls for the lock and dam system. 

I wanted to get your assessment of that, of that kind of investment, and then in a larger sense, the impact of that kind of an infrastructure investment, not only in a community like southwestern Pennsylvania, but more broadly. Can you speak to that? 

Mr. Herrmann. Sure, yes. It’s funny. If we had waited a couple 

of months, we would have had another economic study on water 

ports coming out, probably the beginning of next year. But just to 

talk to that right now, the number of ports on the East Coast have 

to be dredged, they have to get wider, they have to, in some instances, raise bridges. Because of the improvements to the Panama 

Canal, there are going to be larger vessels coming through the 

Canal and the Northeast on this side is going to be at an economic 

disadvantage if we don’t improve our ports. 

So to stay competitive in the world market, and to be able to 

take that shipping and not have that shipping go to other countries, we’re going to have to improve our ports. The rails, the side 

walls, that’s all part of improving the ports, the levies, the dams. 

That is just part of it. So yes, we’re going to have to do that improvements, so that we can stay competitive, so that the shipping 

actually comes to the U.S. and doesn’t go to other countries. 

Chairman Casey. I wanted to pick up on some of the discussion 

here. Obviously we have, based upon testimony from here and by 

our witnesses, there is a debate about how to do this. I think 

there’s a recognition that we need to figure out some way forward 

on investing in infrastructure, that it is a priority, no matter how 

you arrive at the solution, that government can play a role, obviously, the private sector as well. 

We have a number of parts of our economy that are fortified by 

and strengthened by public-private partnerships. We see that all 

the time in economic development. Infrastructure is another example of that. But how do we do that? In other words, if we agree on 

the goal, how do we get there in this kind of an economy, where 

there are limitations on what the Federal Government can do? 

State governments have very little in the way of resources to dedicate to this. How do you get there? 

One of the reasons why I was so, not just supportive of, but encouraged by the bipartisan agreement in the Senate to form an inVerDate Nov 24 2008 12:05 Feb 22, 2012 Jkt 071697 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 C:\DOCS\71697.TXT DPROCT
15 

frastructure bank—a $10 billion investment which would leverage 

many, many multiples of that initial investment. 

We had a Democrat from Massachusetts, Senator Kerry and Senator Hutchison from the State of Texas. So you had Democrats and 

Republicans from different parts of the country agreeing on at least 

one idea, the infrastructure bank. It didn’t pass. So I guess I’d ask, 

and I know it’s a tough question. We’re low on time, but you can 

amplify it later. How do we move forward on this priority that we 

all agree is important? How do we move forward, not only philosophically, but how do we move forward within the limitations of 

our fiscal constraints, our political gridlock that we often see here 

in Washington, as well as the limitations at the state and federal 

level? 

I am at zero (time) now, so why don’t you hold that answer in 

abeyance, as they might say, and I want to turn to our Vice Chairman, because I don’t want to cut off your answer. But thank you 

for your testimony. 

Vice Chairman Brady. Chairman, thank you, and again, thank 

you to the witnesses. There are clearly some different viewpoints 

on how to move forward best in infrastructure, but we need to hear 

the whole, full range of options. Clearly, you know, this economy 

is our number one concern. Clearly, the President inherited a very 

poor economy. But now after three years, many of his policies, in 

my mind, have made things worse. 

Certainly, the stimulus failed to jumpstart the economy or restore consumer confidence. We were predicted to have a 6–1/2 percent unemployment rate today. Clearly, we missed it by a highway 

mile. The stimulus, after all that money spent, we actually have 

2.1 million fewer Americans working today than when the stimulus 

began. We actually have fewer Americans working than when we 

began to spend all that borrowed money. 

The infrastructure was a significant part of the first stimulus, 

and it was predicted that manufacturing and construction would 

see the greatest job growth as a result of it. But the opposite 

proved to be true, that construction jobs were predicted and projected at the end of last year, to be a gain of 678,000 jobs in construction. 

In truth, we still today have lost 903,000 construction jobs, not 

gained but lost 900,000 jobs. In manufacturing, in the last quarter 

of 2010 we were predicted to have gained 408,000 jobs from the 

stimulus. Again, we’ve actually lost more than 600,000 jobs in manufacturing. Clearly, the infrastructure in the first stimulus has not 

stimulated the economy. 

Today, we face a second round of stimulus and infrastructure 

again. In this case, the President has proposed a $50 billion infrastructure bank, to stimulate job creation. My question is, and I’ll 

start with Dr. de Rugy, today a pretty compelling case has been 

made that our infrastructure system is a leaky bucket, and before 

we pour more funding in it, we probably ought to fix those leaks, 

if we want to get the best bang for the buck. 

I look at your study that was done this year, reading through it 

that estimated, because of paper work, permits, labor laws, environmental assessments, that drive out and delay projects, that that 

16 

drives cost overruns in infrastructure. On average, unit cost overruns have reached $55 billion annually. 

So here we have a $50 billion proposed stimulus, second round. 

First, is the prospect that a concerted effort to reduce those delays 

and that paper work and the permitting, could actually give us 

bang for the buck equal or, over time, larger than the expenditure 

today? Dr. de Rugy, could you tell us about how you formulated 

those cost overruns, and is it possible for Congress, in a concerted 

effort, to lower that number considerably? 

Dr. de Rugy. So the study was—there are two studies that you 

are talking about, and neither of them were mine. I was just reporting on them. The cost overrun was a pretty broad study that 

was done by a Danish economist, and they’re specialized in planning, in infrastructure planning. They found that overall, nine out 

of ten federal public jobs are cost overruns. 

The other one is for my colleague Garrett Jones and Dan Rothschild, who looked at the impact on this round of stimulus of the 

prevailing wage. They did two separate ways. They did the theory 

and then they went and looked and interviewed people who had received stimulus money. What they found is in fact that people 

think they would have been able to hire more people if they weren’t 

subjected to these laws. 

That being said, I mean while I’m entirely in favor, and even if 

you’re a Keynesian economist, as I said, of getting rid of these prevailing wages law and all the other things that actually artificially 

increase the cost of infrastructure spending, we really need to remember that it’s not going to create jobs. It just can’t, and it is because even in the context of Keynesian theories, infrastructure 

spending takes a lot of time to put in place. It can’t be timely. 

As such, I think your question is a good one, but even if we get 

rid of all the inefficiency in the system, it would still not be a good 

idea. Let the private sector do it. 

Vice Chairman Brady. Thank you. Mr. Edwards, comments? 

Mr. Edwards. I’d say two bullets on sort of different issues. One 

is the whole issue of jobs. I direct your attention, and I can send 

it to your staff, there’s a new report out by Wells Fargo a couple 

of weeks ago, which was kind of surprising. It was about U.S. manufacturing, and it actually gave a very glowing sort of look at U.S. 

manufacturing, which kind of surprised me. 

Their argument is is that U.S. manufacturing has gone extremely capital-intensive and high tech. They’ve cut jobs, jobs, jobs. 

We know that, but because of that, the end of fact is the remaining 

U.S. manufacturing companies are very productive actually in 

world markets, and they see looking ahead that U.S. manufacturing companies are going to be doing better and better, because 

labor costs in places like China and Brazil keep rising, and U.S. 

companies have already made this transition to a very high tech 

mode of production. 

On infrastructure, I would add that the new Brookings study on 

infrastructure is very interesting. They point out some of the advantages that private infrastructure has over government infrastructure. One of them is in these PPP deals, where you get a lot 

of private finance and management, the same private sector comVerDate Nov 24 2008 12:05 Feb 22, 2012 Jkt 071697 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 C:\DOCS\71697.TXT DPROCT
17 

pany both constructs and then maintains and manages the piece of 

infrastructure, like a bridge, over the long term. 

By doing that, they can be a lot more efficient from sort of a life 

cycle point of view. The current system, you’ve got one company, 

you know, building it. The government manages—— 

Vice Chairman Brady. I’m sorry, Mr. Edwards. You’re running 

out of time. I apologize. But I appreciate both points. I wish they 

were somewhat close to the question I asked. But still, I think 

those were important points to make. Thanks, Chris. 

Chairman Casey. Congressman Hinchey. 

Representative Hinchey. Thank you very much, Mr. Chairman, and thank you very much. It was very interesting so far, and 

I’m sure it’s going to continue to be very interesting. We’re dealing 

with a very serious situation here in the United States. We have 

an unemployment rate now that is nine percent. That’s the official 

rate, but the real unemployment rate is much higher than that. 

Many more people are unemployed and not working. 

This is something that really needs to be addressed. You have 

basic operations in this country that are very, very essential— 

roads and bridges, for example—that are beginning to decline. Infrastructure in this country is being neglected. All of that needs to 

be adressed; it needs to be invested in and upgraded. 

When you upgrade it, you generate very substantial numbers of 

jobs. All of these things and a lot more really needs to be done. 

This is something that really has to happen over now. We’re looking at this Congress here, right now. It’s almost been a year, and 

nothing has been done to stimulate the economy. 

So this has to happen. There are a number of things that are 

being talked about now. For example, one of them is the National 

Infrastructure Bank which is something that I think would stimulate the economy, generate jobs and overall would be very, very important. 

So I would like to ask Mr. Puentes and Mr. Herrmann, if you 

would please talk about that. What do you think about the National infrastructure bank, and what do you think should be done 

and what could be done in the context of that, to generate growth 

and stimulate this economy which would make these economic circumstances here in the United States much more effective? 

Mr. Puentes. Thank you. I think that, and it builds off the conversation we’ve already had here today. I think the first round of 

stimulus that we saw from the recovery package was about speed, 

was about putting people back to work in the immediate term. It 

was helping local governments, it was helping state governments 

through the tremendous fiscal challenges they were facing. 

When we talked about the infrastructure bank though, particularly in this current context, we’re really talking about something 

much different. We’re talking about making longer-term type investments that aren’t things that are going to be done in the short 

term necessarily. This isn’t about pothole refilling and the repaving 

and the things that we certainly need to do. But this is about connecting infrastructure investments to the next American economy. 

We’re at a point now where we need to move away from this consumption-based economy that predated the recession, focused on 

the real estate markets and financial shenanigans, to something 

18 

that’s really more about getting Americans back to work, in a productive manufacturing-based society, so making those infrastructure investments that are going to support that. 

So we have to get away from just infrastructure or transportation for its own sake, and connecting it directly to things like exports, for example. If we believe that doubling exports in five years 

is the right kind of national goal that we need to have, great. What 

kind of infrastructure investments do we need to make then, to 

achieve that goal? 

It’s about ports, it’s about trade corridors. It’s about the things 

we’re talking about here today. If we’re going to move to more of 

a low carbon-based economy, not just as an environmental imperative, but as a market imperative, what kind of infrastructure do we 

need to put in place? Where is it going to go? What’s the federal 

role in that? 

Those are the kind of questions we need to ask. It’s got to come 

through an economic lens, rather than through an infrastructure 

lens, and I think we’ll have a very, very different conversation. 

That’s what an infrastructure bank really should be doing, choosing projects, setting the framework and making sure that those investments are made to advance the American economy, not just for 

infrastructure for its own sake. 

Representative Hinchey. Thank you very much. Mr. 

Herrmann. 

Mr. Herrmann. Yes. The first stimulus bill, I think there is a 

little confusion. They said a significant part of it actually went to 

infrastructure, when out of the $787 billion originally obligated, 

less than $100 billion went to actually infrastructure. So a very 

small portion, less than ten percent. So it really didn’t have that 

much of a chance at that point. 

The other thing, the infrastructure banks that you mentioned. 

The way they’re proposed, they would actually act as a bank. They 

would look at a project, prioritize it, make sure there would be a 

return on investment. So that an infrastructure bank could be selfsufficient. It could actually get repaid. 

Representative Hinchey. And what else do you think about it? 

What kind of strong stimulus would it create? 

Mr. Herrmann. It would provide not only a stimulus to start 

projects, but also make a judgment on which projects are the best, 

which projects have the basis of repaying to be successful. So I 

think that’s a very strong part of the infrastructure bank concept. 

Representative Hinchey. But actually put them into play 

then? 

Mr. Herrmann. Yes. 

Representative Hinchey. Not just speculate, but actually put 

them into operation? 

Mr. Herrmann. Oh definitely, because they would be truly acting as a bank. So they would have to make the judgments that 

these projects are critical for hopefully the region, the state, the 

local area, and then also make sure there’s a stream of revenue to 

pay them back. 

Representative Hinchey. Thank you very much. 

Chairman Casey. Congressman Mulvaney, I want to note that 

for the record, my staff tells me that you arrived at 1:45. There’s 

19 

no prize for that, but maybe an extra minute. But thank you very 

much. 

Representative Mulvaney. Thank you, Mr. Chairman. Mr. 

Herrmann, I enjoyed your testimony. I enjoyed all the testimony, 

had a chance to read through some of yours before the hearing. 

You do a pretty good job of presenting some of the numbers. I always find it a little bit helpful around here to actually dig down 

into the numbers, and when you look at your testimony, there’s 

some statistics from the Federal Highway Administration that 

would suggest that a billion dollars invested in the Nation’s highways supports about 28,000 jobs. 

You’re absolutely correct, your last comment about somewhere 

under $100 billion of the last stimulus program going to infrastructure, and I think the number for actual roads was closer to $48 or 

$50 billion dollars. We take the number 50, because I don’t have 

my calculator and I’m doing this the old fashioned way up here. 

That if you assume that that is correct, and that that $50 billion 

should have created $28,000 per billion spent, that’s 1.4 million 

jobs that would have been created from just that part of the stimulus bill, just the part spent on roads. Clearly, that cannot be the 

case. The very largest number that I have seen anybody try and 

lay claim to from the stimulus is three million jobs. That’s from the 

Obama administration, and that was jobs saved or created. 

So on the very best day, the very best argument I’ve seen is that 

the stimulus created three million jobs, yet the FHA would have 

us believe that 1.4 million of those came from roads, leaving 1.6 

million jobs to have been created from the other $800 billion. That’s 

16 times larger than the amount of money we spent on roads, supposedly created only 1.6, and that’s on the very best day. 

By the way, as you dig down into it a little bit and you look at 

the weaknesses of numbers, while the Federal Highway Administration says a billion dollars in spending creates 28,000 jobs, the 

Alliance for American Manufacturing says it only creates 18,000 

jobs. So almost 40 percent less. 

Clearly, it didn’t work. Clearly, it didn’t work. The definition of 

insanity to me is doing the same thing again and again, and expecting a different outcome. So as we sit here today and hear calls 

for new and expanded stimulus, why should we expect that the 

next time it would be any different than last time? 

So Dr. de Rugy, I’ll ask you this question. You mentioned Dr. 

Summers’ line about if it’s not done correctly, if it’s not targeted, 

if it’s not timely and not temporary, that it could actually be counterproductive. Is that what we saw here, and if so, why is that? 

Dr. de Rugy. Well so the Keynesian theory, at least as it goes, 

is that you need to inject money quickly into the economy, and then 

you will have this multiplier effect. So not only do you need to do 

it quickly and timely, but you also needed to do it in a very targeted manner, which means the assumption is that you’re going to 

be picking up people from the unemployment line and putting them 

back to work. 

Representative Mulvaney. Is your experience—sorry to cut 

you off, but again, we’re on a time clock. Is it your experience that 

the Federal Government is able to do that on a $50 billion project? 

20 

Dr. de Rugy. No, and that’s one of the things that happened 

with the stimulus bill, is that rather than actually thinking of how 

to spend the money productively, they basically went through the 

common and already-existing channels. But more importantly, 

when it comes to infrastructure and targeting the spending, I mean 

people have to understand that the people who are unemployed 

right now, people who were usually before the recession building 

houses, are not the ones who have the skill sets to go and start 

building bridges and roads. 

So this idea that you’re able to actually get people from the unemployment lines, who were doing different type of construction 

and make them and train them and get them prepared to have the 

skills to actually build roads, is completely a misconception of how 

the way it’s done. 

The study by Garrett Jones and Dan Rothschild showed that half 

of the jobs that were supposedly created or saved, were actually 

jobs that were poached from other existing jobs, other companies, 

and that it is very likely that these other companies didn’t hire behind, because they actually used these poaching to shrink the size 

of their labor force as they were struggling. So it can’t work. 

Representative Mulvaney. Thank you, Doctor. Mr. Puentes, I 

heard both you and Mr. Herrmann talk about the relative small 

size of the first stimulus. It was only $50 billion, or I think the 

total infrastructure spending was about $100 billion, after you add 

things like the electrical grid, and that there’s a lot of folks, I take 

it you’re one of them, claiming or calling for a larger stimulus next 

time. 

Have you ever seen gentlemen, I’ll put it to you, Mr. Puentes 

first, any academic studies whatsoever that suggest there’s any 

economies of scale when it comes to infrastructure spending, that 

if $50 billion didn’t work, $50 billion didn’t get us the 1.4 million 

jobs that it was supposed to, that $100 billion will. Have you ever 

seen any academic studies that show that? 

Mr. Puentes. Well, I’m not sure I understand. The concept, I 

think that we’re talking about something now that is very different 

from what we were talking about just three years ago, and this 

idea of using this money to capitalize an infrastructure bank, gets 

back to this larger point about what we want—again, what we 

want the American economy to do, and how do we make those investments strategically, right, in projects that it’s not—this is not 

just a general grant program. The idea is for the money not just 

to go out to the states, and to hope that the money is spent in ways 

that are—— 

Representative Mulvaney. I’m going to cut you off, because 

we’re out of time and I’m trying to be respectful. I’ll save my extra 

minute for another time. What you’re really saying is that next 

time we’re going to do it better than we did last time? 

Mr. Puentes. It has to be fundamentally different. I think the 

idea is to do it very differently. 

Representative Mulvaney. Thank you, sir. Thank you, Mr. 

Chairman. 

Chairman Casey. Thank you, Congressman. Congressman 

Campbell. 

21 

Representative Campbell. Thank you, Mr. Chairman. I wanted to start out, before I get to a question by amplifying something 

that was pointed out. A lot of the reason we don’t have some of the 

infrastructure going on is not actually financial or fiscal, but it’s 

regulatory. 

In my district in Orange County, California, there is a toll road 

that we are ready to build. It has been ready to build for years. 

It is ready to build right now, and it is a toll road. It is entirely 

privately funded. It is being stopped and has continued to be 

stopped by eco-extremists, abusing the California Environmental 

Quality Act, and the federal Endangered Species Act, in order to 

stop all growth and kill jobs. 

There are a couple of schools in San Diego, the same thing. 

They’re ready to build but the Endangered Species Act is being 

used by eco-extremists to stop those jobs and kill those projects. So 

let us remember, as we’re looking at this, that a lot of the problem 

before us is regulatory, and if we just sweep that out of the way, 

there’s a lot of projects, some publicly-funded, a lot privately funded, that are ready to go and will go if we get the regulatory problems out of the way. 

But that being said, financing this in the future is a problem, so 

I wanted to run by you an idea I’ve had and have been kicking 

around for a couple of years here now, which is a public-private 

partnership type idea, which is to form a new class of master limited partnership for infrastructure, specifically for building public 

infrastructure using private funds. 

That this master limited partnership would have greatly accelerated depreciation, so the investors in it get a very rapid return. If 

it’s for public infrastructure, there would need to be a tax increment or a fee increment or something that went to that master limited partnership to fund that. 

But that I am aware of a number of investors and a lot of people 

that would be very interested in having private money go into fund 

public infrastructure under this kind of a structure, if it existed. So 

I open that up for anyone on the panel to comment, as to it’s a good 

idea, a lousy idea, an interesting idea, whatever. 

Mr. Puentes. Just very quickly, I think that it actually gets to 

your initial point about the barriers that are facing some of these 

projects. As we work with state and local partners all across the 

country, particularly in private sector folks, the barriers that 

they’re facing to getting projects done are regulatory. But it’s not 

just the environmental kind of regulations, which are frequent target. 

But there are many states that actually prevent these kind of 

public-private partnerships from happening. There’s only a handful 

of states that have the legislation in place. There are certain states 

that require each project to go through a legislative conversation. 

So the private sector is not looking at states where there are a tremendous amount of regulatory hurdles for them to enter the game. 

They’re looking for those states that have the legislation in place, 

and where they know they’re going to get a fair shake when it 

comes to negotiating these things. 

Representative Campbell. So those sorts of things would prevent this kind of activity, is what you’re saying? 

22 

Mr. Puentes. Indeed. There are many states where you just 

couldn’t get to the table to do those. 

Mr. Edwards. Right. Virginia is probably the most advanced in 

PPP. It’s because they passed the 1988 law on PPP, and they’re 

going gangbusters on it. I would say that of these international 

global firms, mainly four of them that do this PPP stuff, I’ve read 

a number of quotes from the leaders of these companies. They say 

there’s more money ready to invest in these projects, but they don’t 

see the projects in the United States. 

So it’s got to come—the states have to throw up the projects, and 

then there will be more than enough money going after them. You 

hear that from Wall Street people too, that you know, a lot of them 

don’t want to compete on these projects, because they’re all competing on them. So there’s more money there than—— 

Mr. Herrmann. One of the things that’s interesting, I’ve been 

traveling around the country, talking about infrastructure, talking 

about ASCE’s report card. When I came to Orange County, they 

had a local report card, and it had better grades than the National. 

So I asked them why, and they said they had an educated public. 

They increased their sales tax to improve their infrastructure. So 

I think we just have to educate the public that we have to make 

these investments. 

Dr. de Rugy. But we could also educate, if I may—— 

Representative Campbell. Please. 

Dr. de Rugy. Educate the public that, you know, the private sector, it doesn’t have to be funded through taxes. It can actually— 

there is a lot of money on the, private money, who is willing to be 

invested in these roads. They may have toll roads, but that means 

that basically the people who use these roads are going to be the 

ones paying for them. 

Representative Campbell. Right, and of course in Orange 

County, we have three different toll roads now, and this is—the 

one that’s being blocked now is just the completion of one of those. 

So there’s a number of this sort of thing being done, trying to be 

done, where people are trying to respond to some of the roadblocks 

that are out there, and create their own solutions. My time is up, 

so I thank you very much. 

Chairman Casey. We were about to move to a second round, 

but Senator Klobuchar has just joined us. The second round will 

be the lightening round, three minutes. Senator Klobuchar is still 

in the first round, so she will have her five minutes. 

Senator Klobuchar. So I’ll just take my time then, Senator 

Casey. 

Chairman Casey. Do whatever you’d like. 

Senator Klobuchar. Thank you very much. Thank all of you for 

being here. Obviously, the transportation issues for our country 

came to everyone’s attention when that bridge fell down in the middle of a day in Minneapolis, six blocks from my house, actually an 

eight-lane highway road that I drive over all the time with my family, and there it went down. I said that do a bridge just shouldn’t 

fall down in the middle of America, but it did. 

Since then, I’ve been very involved in these infrastructure issues. 

We obviously rebuilt that bridge in record time, an example, I 

think, for everyone of how we can get things done. But the second 

23 

thing is that I carried the infrastructure bill that we just nearly 

passed in the Senate. We had 51 votes. In any other body, that 

would be a majority, which it is. But it was blocked by the filibuster. 

So I’m very focused on trying to get this done again, with the infrastructure bank and other things that we’d like to get done. As 

you pointed out in your testimony, Mr. Herrmann, inefficiencies in 

infrastructure are expected to drive up the cost of doing business 

by an estimated $430 billion in the next decade, and I think most 

Americans think about this in terms of delays in traffic and the billions of hours people sit in traffic. 

But it’s also a drag, because we have a deteriorating system. If 

the future of our country, which I believe it is, is building through 

exports, we need to get our goods to market. We need to get them 

on barges and on GPS system that works for our airplanes, on the 

roads and the bridges, on the trains. So could you talk a little bit 

more about how this is interrelated with our business, and the effect if we just put our heads in the ground and don’t do anything? 

Mr. Herrmann. Our economic study did show that transpor- tation costs for businesses would increase by $430 billion by 2020, 

and that’s due to the inefficiencies. It’s going to take longer to deliver finished products to market, and also to get the raw materials 

to the factories, the manufacturing areas where they’re going to 

put it together. 

So our bad infrastructure is slowing down our economy, but it’s 

also adding to costs because we’re damaging our vehicles, due to 

the bad roads. I mean there’s studies that come out that show, you 

know, we’re wasting how many billions of hours in traffic every 

day. But there’s also numbers in terms of dollars of another, I believe it’s $70 billion, due to damages to our vehicles. So it’s costing 

us several ways, due to bad infrastructure, not only just the delays 

to get our goods to market. 

Senator Klobuchar. Very good. Could you talk a little bit, and 

anyone can join here, about the infrastructure bank and how that 

could work? You’re familiar with Senator Kerry—Senator 

Hutchison’s proposal, which was incorporated in this bill, but how 

that would provide an incentive for the creation of public-private 

partnerships? Anyone want to—— 

Mr. Herrmann. Sure. We talked a little bit about the infrastructure banks earlier. If they can truly act as a bank, that they can 

look at projects and look at them from an economic basis, a standpoint, to see if they will be successful, if they will affect regional 

areas, if they’re coordinating regional areas, state and local, they 

should be successful. 

They also should have a stream of income to pay back the bank, 

so it can truly act as a bank. So this is what is, can be enacted, 

this will be very—should be very successful for the country. 

Senator Klobuchar. Ms. de Rugy. 

Dr. de Rugy. If I can add, I mean the infrastructure bank, while 

it looks good on paper, and I’m assuming that a lot of economists 

would kind of welcome this idea of incentivizing the private sector 

to invest in infrastructure, my worry is that it may, it has the potential to become the public work version of Freddie Mac and 

Fannie Mae, and that we know is not a good thing. 

24 

The other thing is like with all of these projects that are guaranteed by the Federal Government, there is also a risk of the project 

being hijacked for political reasons, and basically instead of having 

this project, you know, focused on building roads and picking the 

right project, it will be focused on hiring, you know, unemployed 

people, of hiring the right type of people, imposing some social 

goals to the process, which then would make it extremely inefficient. 

Senator Klobuchar. I don’t think Senator Hutchison would 

want to make it inefficient, is what I’m thinking. 

Dr. de Rugy. I mean there’s a political process, right, which 

makes it risky. 

Senator Klobuchar. And how else would you fund these other, 

all these projects that we need to get done? 

Mr. Edwards. I would say, you know, there is—you know, one 

of the problems with getting a lot of these private projects done is 

that the private finance is at a disadvantage to public finance. So 

in Northern Virginia 15 years ago, the private investors built the 

Dulles Greenway, which is a 15-mile private toll road, completely 

privately financed. But you know, they are against competition 

from nearby free government highways. 

So the drivers on private toll roads pay the gas tax, and also the 

funders of private toll roads have to raise monies through taxable 

bonds. So there is a problem there, and if Congress could, you 

know, should consider ways to even the playing field here, so that 

private sector projects aren’t put at a disadvantage to the public 

sector projects. We may get more private sector, you know, money 

coming in to fund projects. 

Mr. Puentes. I just wanted to pull us back a bit from the publicprivate partnerships. I’m very much in favor of the National Infrastructure Bank. We think that this is a critical entity that needs 

to be established in the U.S. We’ve seen it work in other countries. 

We know that we don’t have this kind of decision-making kind of 

process now to make decisions for projects that are truly of national significance. 

We have 50 states operating pretty much independently. When 

we have projects that are related to things like doubling exports, 

for example, those are national projects. They have national significance and we don’t really have the mechanism for making decisions 

based on that kind of level. 

So we think that there’s definitely a need for this. But we have 

to understand that this is really just a niche, and there are certainly projects that are going to be filled through an infrastructure 

bank. But this doesn’t obviate the need to continue to raise revenues, to continue to pay for those kinds of projects that is just, I 

mean, the mundane kind of stuff that we need every day. 

I mean there’s still trucks that are driving over roads that are 

in bad condition. You mentioned the bridge as a great example of 

projects that probably aren’t ripe necessarily for a infrastructure 

bank. It may or may not be. But we have to understand this not 

a silver bullet that’s going to solve all of our problems. It’s obviously something we need to do, but it’s just one arrow in the quiver. It’s just one thing that we need to do with a whole menu of 

things. 

25 

Senator Klobuchar. I agree. I’m going to over the Secretary 

with it right now, but another bridge that I’m working on with 

Representative Bachman, between Minnesota and Wisconsin, in 

which people are deciding whether or not we should allow an 80- 

year-old lift bridge to exist, that’s falling into the river. Hopefully, 

they will decide the right thing. 

Chairman Casey. Thanks, Senator Klobuchar. I think what I’ll 

do is I’ll cede my time, just to make one quick statement, because 

I think we need a lot more time on this topic. I hope that folks listening to this don’t think that somehow there’s a choice here, that 

in order to meet this challenge, we’ve got to have all private sector. 

That is, it’s all the responsibility of the private sector or it’s all the 

responsibility of the public sector. 

It has to be both. There’s no other way it’s going to work. But 

I hope that the conclusion here, the path we don’t go down is that 

we do nothing, because I think if there’s one thing we can agree 

on, we cannot allow this problem to persist, even if it means just 

getting a start on it. So I’m going to give my time up to Vice Chairman Brady or anyone else, but we need more work on this obviously. We don’t have all the time today. Thank you. 

Vice Chairman Brady. Chairman, thank you very much. I’ll be 

brief as well. I think Senator Klobuchar made a key point about 

the quick response in rebuilding the Minneapolis bridge, which collapsed because of a design flaw, of undersized steel gusset plates 

that eventually factored and generated the collapse. It points out 

what we’re capable of doing when we want to cut through the red 

tape, and move projects to completion. 

Mr. Herrmann, when you talk to state highway officials, do they 

clamor for an infrastructure bank, or for Congress to finally fix the 

Highway Trust Fund? 

Mr. Herrmann. I think the Highway DOT people are looking for 

long-term funding. They need that for their planning. 

Vice Chairman Brady. Yes. 

Mr. Herrmann. They need to reauthorize the Surface Transportation Act. 

Vice Chairman Brady. When you talk to ports, do they seek an 

infrastructure bank or do they want the Harbor Maintenance Fund 

fixed and distributed? 

Mr. Herrmann. I think they probably want both. 

Vice Chairman Brady. I’ll bet you that’s not the case. Do you 

talk to airport managers? Are they asking for an infrastructure 

bank or for Congress to finally fix the Aviation Trust Fund long 

term? 

Mr. Herrmann. The FAA, they want to fix that. 

Vice Chairman Brady. I think so. In every case, they’re talking 

about local officials making those decisions. They want the longterm certainty. One of the points Mr. Edwards makes that I found 

intriguing, is that at one point in America’s history, it was public 

sector funding of the infrastructure. Then it moved to more private 

sector funding, and now we’ve sort of reverse course and moved 

back into a great deal of public sector funding. 

But other countries have moved the other direction in order to 

finance. Can you, really quickly; I only have about 30 seconds left, 

26 

can you tell us why they’re doing that, and why we ought to look 

at that model? 

Mr. Edwards. Well, I think a lot of European airports, for example, are private. London’s Heathrow, of course, and Gatwick are 

private. Sydney and Melbourne, Australia are private airports, and 

as I said, seaports have been privatized all over the place. In 1983, 

Thatcher privatized most British seaports. Seaport dredging in 

Britain is private. There’s a company called UK Dredging that basically goes around. They contract with the private ports if they 

want dredging. 

I think in a lot of countries it’s not an ideological thing. They 

just, you know, the government sector doesn’t have the money anymore, so the same problem we have. Deficits are high, and so 

they’re going to the private sector. So again, I don’t think it’s an 

ideological thing. I think they’re getting good results, and as I said, 

you know, because of that, these companies that are at the forefront of this privatization, they’re virtually all foreign these days, 

Australian, Canadian, Spanish. 

These companies are going around the world and building infrastructure, and you know, these should be American companies. I 

would love American companies to become the infrastructure experts, and then go around the world exporting this knowledge. But 

unfortunately, it’s the other way around. 

Vice Chairman Brady. Again, thank you to all the witnesses 

today. 

Chairman Casey. I have to run out the door, but I want to 

make sure that Congressman Hinchey and then Congressman 

Mulvaney have the last words. Thank you. 

Representative Hinchey. Well, thank you very much. The Congressional Budget Office, as you know, which is objective and independent, estimates that infrastructure spending is one of the most 

effective fiscal policies for increasing economic growth and employment over the short term. Moody’s Analytics determined that every 

dollar of infrastructure spending as a multiplier of a $1.44 out of 

every dollar. 

We made significant investments in manufacturing, in infrastructure here when we passed the American Recovery and Reinvestment Act. So Mr. Herrmann, Mr. Puentes, in your opinion, 

what would our current economy look like if we had not passed the 

American Recovery and Reinvestment Act, and what will it take for 

our Nation’s roads to be upgraded from its current rating, which 

is D? Please. 

Mr. Herrmann. I think, as stated a little bit earlier, we needed 

$1.7 trillion over a period of years, to upgrade our roads from that 

D. I think it’s a D minus for the roads, up to a B level. That also 

includes bridges and transit. We’ve been neglecting our infrastructure for years. I mean the last time we really put money into it was 

the interstate highway system, and that was back to the 1950s, 

maybe the early 1960s. 

So we really haven’t been investing in our surface transportation, 

and it’s starting to show. Our bridges have an average age of 43 

years. The life span when they were designed probably was 50 

years. Now bridges can be maintained; they can be—their lives can 

27 

be extended by repairs, rehabilitations. But we have to invest, and 

we just haven’t been doing that in the last couple of decades. 

So to answer your question, how do we move forward? We have 

to invest in our transportation infrastructure and all our infrastructure, to make sure it lasts for our children, because right now, 

we’re living on our grandparents’ investments. 

Representative Hinchey. Thank you. Mr. Puentes. 

Mr. Puentes. Thank you. I think we know that things would be 

much worse. The states were in particular financial distress. 

Transportation spending makes up eight, nine percent, something 

like that, of most states’ budgets. So it’s a big share, and this is 

really a helpful shot in the arm to them. But that money is now 

gone, and so they’re facing some challenges again. 

But in order to make sure that we don’t continue to fall behind, 

and that the condition of the infrastructure is maintained, I think 

we need to look at what was just passed by the bipartisan Environment and Public Works Committee. I think MAP 21 is the acronym. 

This is starting to make sure that the money that is spent is 

done so on more of a performance-based kind of level. So to monitor 

the conditions of the roadways today, and to frankly hold states 

and metropolitan areas accountable for how that money is spent. 

Make sure that we’re not just pouring money into a black hole, 

that we’re not just getting the short-term injections that we need, 

but that we’re actually getting long-term value out of this enormous investment. 

This is how we’ve done it in the past. We had the Federal Government has been kind of absent, right, and this has just been a 

block grant that’s gone to the states, with no real accountability or 

transparency for how that money is spent. The legislation that’s 

moving through now and is being discussed is trying to change 

that. I think it’s a really good example of how we can have the Federal Government be present where they’ve been absent. 

Representative Hinchey. Thank you very much. 

Vice Chairman Brady. Mr. Mulvaney. 

Representative Mulvaney. Thank you. Dr. de Rugy, before I 

move on to my last question for Mr. Edwards, I wanted—it occurred to me, as we were having that discussion about timely and 

targeted, we actually had a circumstance in my district where a 

road was deemed to be too shovel-ready to participate in the stimulus program. 

It had actually—part of a phase had started and was partially 

funded, and for that reason, additional phases were not allowed to 

be funded with stimulus money. So it goes back to my point originally about the difficulty of the government operating efficiently. 

Mr. Edwards, earlier today, the Chairman mentioned and several 

folks from the panel up here have talked about the states lacking 

the fiscal ability, the financial ability right now to sort of get involved heavily in infrastructure. I think we’ve failed to take it to 

the next step of the analysis, and admit that we don’t have the 

money either, and that what you’ve described today, which is something more along the lines of a privatized system, holds some appeal. 

28 

It sounds like maybe the European and Asian countries have 

been driven to that type of model out of a similar type of necessity, 

and as a result, they have a system that seems to be beating us 

at various different levels. 

So I ask you sir, if we wanted to explore that possibility in this 

country, of moving towards more private funding of infrastructure, 

getting down to brass tacks, what would this Federal Government 

need to do, and how much would it cost? 

Mr. Edwards. It’s mainly the states are, I think as was mentioned, are in substantially different positions to bring more private 

sector funding in. I think something like about 30 of the 50 states 

have PPP laws on the books. Again, Virginia, the most advanced. 

I’d encourage the states to look, you know, at what Virginia has 

done. 

I think with the passage of federal transportation bills, we need 

to sort of look at evening the playing field between public and private. You know, one of the big advantages of public infrastructure 

is that it’s tax-free finance, municipal bonds are federally tax free. 

That puts the private sector at a disadvantage automatically. 

Congress partly takes a response to that with so-called private 

activity bonds. These are, there’s a certain amount of bonds that 

can be used, that states can use for private projects which are taxfree. I’d look into, you know, that in expanding or extending that. 

That seems reasonable to me. 

I mean ultimately, I would eliminate the tax-free nature of muni 

bonds, because I think it does unfairly favor the public over private 

sector. So for example, when Intel Corporation builds a new factory, they’ve got to use taxable finance. When a local government 

builds, you know, a new courthouse, they use tax free. That seems 

unfair to me. 

So I think that the Federal Government can do a lot to encourage the PPP movement in the state governments, but it’s mainly 

the state governments. 

Representative Mulvaney. Thank you, Mr. Edwards. Thank 

you, Mr. Chairman. 

Vice Chairman Brady. Our witnesses, on behalf of Chairman 

Casey and myself, thank you again for bringing insight into an awfully complex issue, and I appreciate the members being here as 

well. With that, the hearing is adjourned. Thank you all very 

much. 

[Whereupon, at 3:32 p.m., Wednesday, November 16, 2011, the 

hearing was adjourned.] 

(29) 

SUBMISSIONS FOR THE RECORD 

30 

PREPARED STATEMENT OF REPRESENTATIVE KEVIN BRADY, VICE CHAIRMAN, JOINT

ECONOMIC COMMITTEE

Thank you, Chairman Casey, for convening this important hearing. 

A good infrastructure is vitally important to the U.S. economy, providing Americans with millions of miles of roads; hundreds of thousands of bridges; tens of thousands of airports, dams, waterways, and transit lines; and hundreds of train stations and ports. Pro-growth policies such as low taxes, balanced regulation, and free 

market innovations drive the need for additional infrastructure in America. As a 

former local Chamber of Commerce executive, I can attest to the need for infrastructure as a critical precursor to spark economic development and attract businesses 

in communities large and small across America. 

Though America’s infrastructure remains among the most advanced in the world, 

the American Society of Civil Engineers gave our infrastructure a letter grade of 

‘‘D,’’ highlighting that we have a long way to go until we can meet the current and 

future infrastructure needs of Americans. 

The manufacturing sector is a critical input in infrastructure with the provision 

of raw materials and industrial equipment, and the manufacturing sector is a beneficiary that relies on the nation’s infrastructure to transport goods to compete in the 

global economy. 

In fact, the manufacturing sector has opened up the prospect for major energy infrastructure development. An excellent opportunity for long-term economic growth 

exists today in the form of the Keystone XL pipeline from Alberta to Texas, which 

would result in at least 20,000 new jobs affiliated with the pipeline. Long-term investment in infrastructure will help American manufacturing remain internationally competitive. 

No one disputes the value of good infrastructure. However, planning and building 

infrastructure takes years, often decades. Higher infrastructure spending cannot 

create a significant number of jobs in the near term. As President Obama remarked 

months ago, ‘‘shovel ready was not as shovel-ready as we expected.’’ 

According to the Federal Highway Administration, the federal project delivery 

process can take up to 15 years from planning through construction. Environmental 

regulations and constraints on federal funding can extend this timeline even farther, 

resulting in costly delays and routine cost overruns. 

The current system of federal infrastructure spending is inefficient. U.S. taxpayers are not getting a good value for their dollars that are currently spending on 

infrastructure. 

Research over the past decade indicates that the growth benefits from federal infrastructure spending have been extremely low. The current system of federal infrastructure spending is broken, and must be fixed to make smart investments in good 

infrastructure projects. 

As an example, the Government Accountability Office reviewed the Department 

of Transportation’s system of 6,000 employees administering over 100 separate surface transportation programs with separate funding streams for highways, transit, 

rail, and safety functions. The GAO determined this system was extremely fragmented and lacked accountability, impeding effective decision-making and limiting 

the ability to provide solutions to complex challenges. Analysis by the National Surface Transportation Policy and Revenue Committee found a project that should cost 

$500 million would actually take 14 years to complete and cost twice as much due 

to the impact of delays and inflation. 

Examples already abound at the state level of diverted funds, originally allocated 

to infrastructure, going to other budget items, suspended, or altogether forfeited. All 

too frequently, infrastructure funding fails to reach high-priority projects, diverted 

instead to projects with little or no real benefit. 

Federal regulations—such as project labor agreements, high-road contracting, 

‘‘Buy American’’ provisions, and the Davis-Bacon Act—have unnecessarily increased 

the cost and lengthened the completion time of infrastructure projects. For example, 

the Davis-Bacon Act’s prevailing wage requirements have led contractors to pay an 

average of 22 percent above market wage rates and have bogged down contractors 

with extra paperwork. 

An Environment Impact Statement alone can take up to 2 years to complete. 

Major infrastructure projects often require the approval of other federal agencies 

such as the U.S. Fish and Wildlife Service, the Advisory Council on Historic Preservation, and the U.S. Army Corps of Engineers. 

For the good of manufacturing, infrastructure, and American workers, federal regulators must consider how both proposed new rules and the cumulative burdens of 

existing rules affect the ability of American businesses to create jobs at home by 

selling in global markets. Federal regulators must also begin to perform retrospecVerDate Nov 24 2008 12:05 Feb 22, 2012 Jkt 071697 PO 00000 Frm 00034 Fmt 6601 Sfmt 6621 C:\DOCS\71697.TXT DPROCT
31 

tive analysis to determine if existing regulations are meeting their goals in cost effective ways. 

Congress should make it easier for the private sector to invest in transportation 

infrastructure, reducing the stress on already cash-strapped federal resources. Major 

economies worldwide have demonstrated success in partially and fully privatized 

roads, water and sewage systems, seaports, and airports. America is behind the 

times when it comes to involving private capital in infrastructure development. 

The United State is capable of keeping up with other countries and excelling as 

a leader in infrastructure development. We can strive to achieve an ‘‘A’’ in infrastructure by addressing the systemic problems with our current means of funding 

infrastructure in conjunction with reform of burdensome regulations that impede 

the ability of both public and private provision of infrastructure. 

Thank you, and I look forward to the witnesses’ testimonies. 

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PREPARED STATEMENT OF REPRESENTATIVE MICHAEL C. BURGESS, MD 

Thank you Mr. Chairman for the recognition. I’m glad to be here today to discuss 

this important subject. 

One of the best ways our economy could rebound, and benefit the manufacturing 

industry, would be to pass a long-term highway reauthorization bill. On November 

28th I will be holding a transportation summit back in my district in Texas where 

engineers, consultants, design firms, and state and local officials will gather to discuss the importance of a highway reauthorization bill. I would like people here in 

Washington to know that reauthorization is the goal that people should be focusing 

upon, not political messaging bills. 

Reauthorization is not the one-off political proposals used to get on the news, but 

instead the long-term proposals that require hard work from both sides of the aisle. 

If passed, this law would put thousands of people to work over the next several 

years. This includes engineers, road workers, and design firms. It also includes the 

factories that produce large equipment like road graders, and the companies that 

provide the raw materials for our highways and transit systems that will all benefit 

from such a law. 

This is one of the areas of agreement in Washington that we should focus on. We 

should take our attention away from messaging bills and quick political points, and 

we should do the hard work it takes to pass a highway bill. Both parties agree we 

need a reauthorization of these programs. My only hope is we can actually sit down 

and agree and pass such legislation. 

I am eager to hear from our witnesses today to hear what Congress can do to help 

our economy. Thank you Mr. Chairman and I yield back. 

Æ