by Chris Edwards
Cato Institute
July 17, 2014
Tax & Budget Bulletin
Despite huge and ongoing budget deficits, some policymakers are proposing to increase federal spending on infrastructure. Our economy certainly needs infrastructure. The important policy issue, however, is who can deliver it most efficiently – the federal government, state and local governments, or the private sector. To maximize benefits, infrastructure spending should be allocated to the highest-valued projects and constructed in the most cost-effective manner. Yet decades of experience show that when the federal government gets involved in infrastructure, investment often gets bogged down in politics, mismanagement, and cost overruns. The best way forward is for the federal government to cut subsidies and reduce its control over national infrastructure. At the same time, states should innovate with privatization and PPPs to the fullest extent possible. State governments would be more likely to make sound infrastructure decisions if they were free of the distortions created by federal spending programs and regulations.

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