Policymakers at all levels of government are debating a wide range of options for addressing the nation's faltering economic conditions. One option that is once again receiving attention is accelerated investments in the nation's public infrastructure—that is, highways, mass transit, airports, water supply and wastewater, and other facilities—in order to create jobs while also promoting long-term economic growth. This report discusses policy issues associated with using infrastructure as a mechanism to benefit economic recovery. It begins with two contextual aspects of this discussion, what is the current economic condition and how to define infrastructure. The report then reviews the role of infrastructure investment in economic growth generally and in contributing to bolstering a faltering economy. It discusses key issues including the potential role of traditional and "green" infrastructure in creating jobs, timing, and setting priorities. Debate about direct government spending to accelerate economic recovery has intensified recently in response to economic indicators showing significant and continuing weakness of the national economy. Although the U.S. economy officially began to emerge in June 2009 from the recession that began in December 2007, the recovery has been sluggish, and the economy has continued to feel the recession's impact in terms of both budget deficits and high unemployment. In August 2011, the nation's unemployment rate was 9.1%, slightly improved from the 2010 average rate of 9.6%, but still stubbornly higher than in 2007 (4.6%) and 2008 (5.6%). Also in August, the Congressional Budget Office (CBO) projected continuing but modest economic growth for the next few years. Under its baseline projections, CBO estimated that deficits will fall from 8.5% of gross domestic product (GDP) in FY2011 to 6.2% in FY2012 and 3.2% in FY2013, although part of the expected change reflects policy changes, such as the expiration of the George W. Bush-era tax cuts in 2013 and expiration of the payroll tax cut in 2012. Fiscal problems are affecting all levels of government. In May, the National Association of State Budget Officers reported that state fiscal conditions in 2011 are somewhat improved from conditions in 2009 and 2010. However, the slow economic recovery and wind down of significant federal funding enacted in 2009 will continue to present states with tight fiscal conditions. State revenue collections continue to be affected by the economic downturn and soft consumer spending, while demand for healthcare and social services remains high. State general fund revenue collections are forecast to increase in 2011 and 2012, but state finances can take many months to recover from recessions. States also face long-term issues such as funding pensions and maintaining and repairing infrastructure. Local governments also are dealing with fiscal pressures. In June, the U.S. Conference of Mayors projected that by the end of 2011, 25 metropolitan economies will have unemployment rates higher than 12%, 75 will still be in double digits, and 193 (53% of all such areas) will have rates higher than 8%. The mayors group projected that by the close of 2014, over half of metropolitan areas will have returned to their peak employment levels, but that 48 are not expected to regain jobs lost during the recession in the next decade. Similarly, the National League of Cities has observed that state-local fiscal pressures require layoffs and difficult choices about cuts to necessary services like schools, fire, and police. Much of the public responsibility to build, operate, and maintain infrastructure resides with states and localities. Cities and states normally rely on the bond market to finance long-term projects, meaning that turmoil in financial markets creates concern for financing economic development and infrastructure projects. Virtually all state and local governments have balanced budget requirements and, before undertaking any borrowing, must carefully ensure their ability to repay. Thus, their capacity to self-finance needed projects is more constrained during economic downturns than when the economy is growing rapidly. Facing budgetary pressures and more difficult access to financing, officials may scale back, delay, or cancel projects. As a result of these conditions, organizations representing states and municipalities have issued agenda documents with both policy and short-term and long-term assistance recommendations for Congress and the Administration, including those in areas of infrastructure, economic development, businesses, manufacturing, and trade. The concept of countering the effect of economic downturn with legislation to spur job creation through increased spending on public works infrastructure is not new. In recent decades, Congress has done so on several occasions. For example, in 1983 ( P.L. 98-8 ) and 1993 ( P.L. 103-50 ), Congress appropriated funds to a number of existing federal infrastructure and public works programs in hopes that projects and job creation would be stimulated quickly. During the recent recession, policymakers took a number of monetary and fiscal policy actions to stimulate the economy. On the monetary policy side, the Federal Reserve has used both conventional tools (lowering short-term interest rates) and unconventional tools (purchasing equity interest in financial firms, long-term Treasury debt, and mortgage-backed securities). On the fiscal policy side, Congress enacted several measures in 2009 and 2010 that were intended to increase demand for goods and services through increases in federal spending and reduction in taxes. The largest of these was the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ), a $787 billion package consisting of $286 billion in tax cuts and the remainder in spending. The spending in ARRA included more than $62 billion in infrastructure investment. While the fiscal stimulus from ARRA added to demand over time, this effect diminished as spending authority was spent and tax cuts expired. By CBO's estimate, ARRA funds will continue to be spent out through 2020, but the economic effects of ARRA—including direct and indirect effects—peaked in the first half of 2010. After that, the stimulus still adds to demand but by smaller amounts, and its effect eventually turns negative. At least two factors are bringing renewed attention to these issues, including whether another round of fiscal stimulus—including infrastructure spending—is needed. One is the slow pace of the current recovery. ARRA was controversial when enacted. While most economists believe it was effective, there is dispute among some economists. Nevertheless, there is widespread desire to accelerate job creation and economic recovery, although consensus on how to do so is not apparent. Another factor is that debate about additional job-creating programs has merged with discussion among infrastructure advocates that has been ongoing for years about the need for investment to address problems of aging and deteriorating public works. These infrastructure problems have been increasingly recognized by policymakers and the public at large. It is argued that U.S. investments in public infrastructure have declined significantly in recent decades, to the point that this country is underinvesting in its critical assets, and is failing to construct new facilities or adequately maintain existing systems. The perception that current investment levels are inadequate is in part supported by data which show that, relative to GDP, infrastructure spending has declined about 20%, from 3.0% of GDP in 1960 to 2.4% in 2007. During this same period, spending shifted from predominantly on capital (60% in 1960, compared with 45% in 2007) to operation and maintenance (40% in 1960, compared with 55% in 2007). In a growing economy, infrastructure should hold its own, but other data show that that has not been the case. While total government spending on infrastructure increased from $92 billion in 1960 to $161 billion in 2007, it declined from a high of $1.17 per capita in 1960 to $0.85 per capita in 2007 (in 2009 dollars). In response to these multiple concerns, on September 8, 2011, President Obama proposed the American Jobs Act ( S. 1549 ), legislation that includes tax cuts for businesses, extended unemployment insurance, expanded payroll tax cuts, $80 billion in spending on transportation infrastructure and school repair and modernization, and establishment of a national infrastructure bank to finance large infrastructure projects. Congress is to soon consider the President's proposal and possibly others for job creation and economic recovery. Most people probably think about roads, airports, or water supply when they refer to infrastructure, having in mind the types of systems or facilities that are publicly provided and are important to the productive capacity of the nation's economy. But some analysts argue that such a conception is too narrow. Accordingly, the term can be defined more broadly to also include spending by the private sector, such as by private utilities that provide electricity or natural gas. In addition, other types of public investment, such as public buildings, may not add directly to the productive capacity of the economy but do represent assets in the nation's capital stock. There is no single definition of infrastructure (see the box "What Is Infrastructure?" below). Today, many policymakers and stakeholder groups define the term broadly to include facilities and categories that vary considerably in the degree of historic federal investment in building or rebuilding physical structures (e.g., highways compared with public schools) and systems that have a long history of combined public and private ownership (water resource projects as well as electric transmission systems, some of which are federally owned, for example). Indeed, today there is considerable blurring between public and private infrastructure, raising more frequent questions about what should be the role of government, including the federal government, in providing infrastructure services. In part, this is due to increasing reliance on the private sector—through contract operations, full ownership and other arrangements—to provide functions and services that typically are thought of as public. Examples include prisons, highways, passenger rail, and postal services and mail delivery. A relatively new dimension in today's context is the notion of coupling public works with investments in environmentally friendly systems that incorporate renewable technologies or energy efficiency—called "green infrastructure" (see discussion below). Academics, economists, and policymakers debate two key issues concerning the contribution of infrastructure investment to the economy. One is the issue of the effects of infrastructure spending and investment on productivity and growth.