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 receiving attention is accelerated investments in the nation's public infrastructure—that is, highways, mass transit, airports, water supply and wastewater, dams, locks, canals, passenger rail, and other facilities—in order to create jobs while also promoting long-term economic growth. This report presents policy issues associated with using infrastructure as a mechanism for economic stimulus. 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 stimulating a faltering economy. It discusses key issues, such as setting priorities, resource and governance, and the possible role of "green" infrastructure as part of economic stimulus. Finally, it includes an Appendix with descriptions of a number of infrastructure categories that have recently been mentioned for inclusion in economic stimulus legislation in the 111 th Congress. Interest in government spending to stimulate economic recovery has intensified recently in response to economic indicators showing significant and continuing deterioration of the national economy. In the third quarter of 2008, real gross domestic product (GDP, the economy's total output of goods and services) fell by 0.5%, and the December 2008 Blue Chip Economic Indicators consensus forecast was for real GDP to decline by 1.1% for all of 2009 and for the unemployment rate to reach 8.1% by the end of 2009. In November, the unemployment rate stood at a 15-year high of 6.7%. Further, on December 1, the nonpartisan National Bureau of Economic Research officially declared that the U.S. economy has been in recession since December 2007; a recession is defined as a broad contraction of the economy not confined to one sector. The economy reportedly lost jobs every month in 2008 for a total of 1.9 million for the year. Fiscal problems are affecting all levels of government. In December, the National Association of State Budget Officers and the National Governors Association reported significant weakening of fiscal conditions in nearly every state and budget gaps for the current fiscal year of approximately $30 billion, in addition to more than $12 billion that has already been cut from state budgets. States face growing expenditure pressures as the economy deteriorates, including increased funding of public assistance programs such as Medicaid. States also face long-term issues such as funding pensions and maintaining and repairing infrastructure. Local governments also are dealing with fiscal pressures. A September survey by the National League of Cities found that city finance officers expect revenue from property, sales, and income taxes to decrease by 4.3% in 2008. The survey also found that 79% of cities expect their finances to worsen in 2009, because of a lag between current economic conditions and effects on city revenue. Consequently, cities are laying off workers, raising fees, closing municipal facilities such as libraries, and cancelling or postponing projects. Much of the public responsibility to build, operate, and maintain infrastructure resides with localities. Cities and states that normally rely on the bond market to finance long-term projects recently have found that market less accessible, as a fallout from financial turmoil on Wall Street, meaning that it is more difficult to borrow money. Municipal bonds, if they can be sold, are lately commanding higher interest rate yields, making it more costly for states and cities to borrow. These higher rates are causing officials to scale back, delay, or cancel projects. As a result of these conditions, states, which under their constitutions are not permitted to operate in deficit, and cities are increasingly looking to the federal government for assistance on a range of policies and projects. 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 infrastructure, health care reform, housing, benefit programs for individuals, budget relief and help in accessing capital, and governance. The concept of countering the effect of recessions 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. At least two factors are new this time. One is the severity of the economic downturn (reportedly the worst in 50 years ) which is widely expected to be of long duration, not short. Another is the fact that the current debate about a job-creating stimulus program is merging 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 the 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 3.06% in 1959 to 2.40% of GDP in 2004. During this same period, spending has shifted from predominantly on capital (63% in 1959, compared with 46% in 2004) to operation and maintenance (37% in 1959, compared with 54% in 2004). In a growing economy, infrastructure should hold its own, but other data show that spending by government at all levels has declined from a high of $1.37 per capita in 1960 to $0.94 per capita in 2004 (in 2006 dollars). During the presidential campaign, candidate Barack Obama pledged to invest in rebuilding the nation's infrastructure, especially transportation systems, in order to create jobs. Since November, President-elect Obama has highlighted immediate investments in infrastructure projects as a key element of his plans to revitalize the economy: The Obama-Biden emergency plan would make $25 billion immediately available in a Jobs and Growth Fund to help ensure that in-progress and fast-tracked infrastructure projects are not sidelined, and to ensure that schools can meet their energy costs and undertake key repairs starting this fall. This increased investment is necessary to stem growing budget pressures on infrastructure projects. In addition, in an environment where we may face elevated unemployment levels well into 2009, making an aggressive investment in urgent, high-priority infrastructure will serve as a triple win: generating capital deployment and job creation to boost our economy in the near-term, enhancing U.S. competitiveness in the longer term, and improving the environment by adopting energy efficient school and infrastructure repairs. In total, Obama and Biden's $25 billion investment will result in 1 million jobs created or saved, while helping to turn our economy around. For now, details of the new Administration's economic stimulus plan, including how much of the total will be devoted to infrastructure and to which infrastructure sectors, are unclear. 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 might 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. The current discussion includes no single definition of infrastructure or list of categories or types of infrastructure that might receive assistance as part of economic stimulus, and ultimately it will be defined by those who are responsible for crafting the legislation. The lack of a definition is not unlike infrastructure discussions that have occurred in the past (see the box "What is Infrastructure?" below). Today, policymakers and stakeholder groups appear inclined to 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). See Table A-1 in the Appendix for information on the level(s) of government or the private sector that typically are responsible for infrastructure. 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 sectors—through contract operations, full ownership and other arrangements—to provide functions and services that typically are thought of as public. Examples include prisons, 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). The Appendix to this report provides descriptions of a number of infrastructure categories that have recently been mentioned for inclusion in economic stimulus legislation in the 111 th Congress. The descriptions include information on conditions, performance, and funding needs; discussion of investment in each category as a mechanism for economic stimulus; and longer term issues. Academics, economists, and policymakers debate two key issues concerning the contribution of infrastructure investment to the economy. One is the general issue of the effects of infrastructure spending and investment on productivity and growth. The second related issue is the role of infrastructure spending, including short-term job creation, as a countercyclical tool in stimulating a faltering economy.