Infrastructure investment is a catalyst for economic growth according to a report from the McKinsey Global Institute. Additional investment of $150m-$180m annually is needed.
A report from McKinsey Global Institute highlighted a factor we all know and should serve as a wake-up call for action by Congress to fund transportation: infrastructure investment is a catalyst for growing the US economy. The July 2013 report from McKinsey Global Institute highlighted infrastructure investment as one of the top 5 catalysts for economic growth.
McKinsey found that years of chronic underinvestment in infrastructure are now catching up with the United States. With economic activity returning to more normal levels after the Great Recession, the report said, capacity constraints are once again looming. The backlog of necessary maintenance and upgrades is reaching critical levels—and the need is particularly acute for roads, highways, and transit as well as water systems.
According to the McKinsey report, the United States cannot defer hard decisions indefinitely while backbone systems deteriorate. The combination of high unemployment in the construction sector and the large economic multiplier effects associated with these projects makes a compelling case for investing now to accelerate recovery and avoid a legacy of deferred maintenance for the next generation. Currently low borrowing rates present a unique window of opportunity—but that window will not remain open indefinitely. In addition, the right infrastructure must be in place to enable the other game changers described in this report, from domestic shale gas and oil production to increased trade competitiveness.
The McKinsey analysis shows that the United States will need to increase infrastructure spending by 1 percentage point of GDP on a sustained annual basis to compensate for past underinvestment and set the stage for future growth. This equates to additional investment of $150 billion to $180 billion annually for the next 15 to 20 years.