Home/Articles/What is infrastructure and what does the government have to do with it?
The federal government has a long history of investing in infrastructure, dating at least as far back as 1806 when Congress authorized the construction of the National Road, the first highway built entirely with federal money.
In the centuries since, federal, state, and local governments have spent trillions of dollars on the networks and facilities necessary to help the country function. There is no agreed-upon definition of infrastructure, but broadly it refers to facilities, structures, and utilities intended for long-term use.
Democratic and Republican presidents have called for further investment in transportation infrastructure, including bridges, highways, and railways. Energy — including power plants and electric grids — is also considered infrastructure.
Other categories of investment that may fall under infrastructure include drinking water systems, wastewater systems, broadband access, and buildings like schools.
The Cybersecurity and Infrastructure Security Agency, part of the Department of Homeland Security, identifies 16 critical infrastructure sectors as vital to the security, economy, public health, or safety of the US. Beyond transportation and energy, the sectors also include commercial facilities, food and agriculture needs, and financial services.
President Joe Biden’s American Jobs Plan, which as of April 15, 2021, has yet to be submitted as legislation, aims to spend $2 trillion over 10 years, including infrastructure projects. The preliminary proposal covers transportation, water, energy, broadband, and building modernization.
How much is spent on infrastructure annually?
There are a few ways to calculate how much infrastructure spending occurs each year.
The Bureau of Economic Analysis (BEA) definition of infrastructure includes three subsets: basic, social, and digital. Basic infrastructure refers to traditional concepts of transportation and utilities. Social infrastructure refers to facilities like schools and hospitals. Digital infrastructure refers to “assets that enable the storage and exchange of data through a centralized communication system.”
In 2017, private companies and the government spent a combined $769 billion (about 4% of that year’s GDP) on infrastructure as defined by the BEA. The spending was 10 times higher, after adjusting for inflation, than in 1946, the earliest year in the BEA data.
Basic infrastructure like roads, sewers, and power plants accounted for $326 billion or 42% of total infrastructure spending in 2017. Digital infrastructure accounted for 26% or $197 billion in infrastructure spending, while social infrastructure accounted for 32% or $246 billion in infrastructure spending.
Breaking down this spending into smaller categories shows how priorities have changed. In 1946, power and transportation made up 61% of infrastructure spending. Accounting for inflation, power and transportation spending increased from $37.8 billion in 1946 to $284.2 billion in 2017. That year, the two categories had dropped to 34% of infrastructure spending. During the same period, the share of digital and communications spending increased from 16% or an inflation-adjusted $10.9 billion in 1946 to $197 billion or 26% of infrastructure spending in 2017.
Digital and communication spending made up more than a quarter of 2017 infrastructure spending.
How do federal and state governments split up infrastructure spending?
The federal government spends on infrastructure in a few ways:
Direct spending on infrastructure it owns, such as the air traffic control system and dams.
Grants and loans to state and local governments or nongovernmental entities.
Provisions that allow state and local governments to issue tax-exempt loans.
Most transportation spending comes from state and local governments. In 2018, the latest year that data is available, state and local governments spent $169 billion on transportation infrastructure. In 2020, the federal government spent $63 billion directly on transportation and granted an additional $83 billion in transportation infrastructure funding to state and local governments.
Federal transportation infrastructure spending increased 49% between 2019 and 2020.
A different measure from the nonpartisan Congressional Budget Office (CBO) found that federal, state, and local governments spent a combined $440.5 billion on transportation and water infrastructure in 2017. Government infrastructure spending in 2017 was nearly triple the infrastructure spending of 1956, accounting for inflation. That was the year Congress approved the Interstate Highway System. State and local governments account for most of the spending in these categories, including 78% of the spending in 2017.
Highway spending is the largest segment of spending in the CBO data. Governments spent $177 billion in 2017, about 40% of total infrastructure spending.
In 2017, governments spent more than $177 billion on highways.
While infrastructure spending increased, it is a smaller share of the current economy
Government transportation and water infrastructure spending as a share of the US GDP has trended down over the decades, according to the CBO data. In 1956, such spending made up 3.0% of the GDP while in 2017, it was 2.28%.
As a share of the GDP, government spending on transportation and water infrastructure hit a 61-year-low in 2017.