HomeBudget & Tax NewsInflation Eating Infrastructure Construction Funds (Commentary)

Inflation Eating Infrastructure Construction Funds (Commentary)

Inflation is eating into construction funds transportation agencies received from the 2021 infrastructure bill.

In addition to restoring allegedly crumbling highways and transit lines, the 2021 infrastructure bill was supposed to provide tens of billions of dollars for building new infrastructure. Now it appears that inflation will eat away most of the new money provided by the bill, leaving highway and transit agencies with no real increase in funding.

According to Jim Tyman, CEO of the American Association of State Highway and Transportation Officials, inflation in construction costs is “wiping out that increase [in funding] from the federal government that [state officials] were so excited about earlier in the year.” As a result, the increased dollars from the bill “are essentially evaporating.”

Last month, I observed that many transit projects were experiencing huge cost overruns. Most of those overruns took place before the infrastructure bill, but they along with inflation-related costs are likely to consume most of the funds for transit projects, meaning the bill is not likely to fund any projects that aren’t already under construction.

Is this irony or just political idiocy? Democrats were persuaded by Modern Monetary Theory that they could spend all they wanted on COVID relief funds, infrastructure, and anything else without having to worry about the effects of spending on inflation. Now I suspect if you asked people whether they would be willing to give up the $2,000 in COVID funds they received in 2020 and 2021 in order to avoid having to pay more than $5 a gallon for gasoline and other inflated costs today, most would say “yes.” Similarly, many transportation agencies would be better off today if Congress hadn’t passed the infrastructure bill and COVID relief programs.

Originally published by The Antiplanner. Republished with permission. For more Budget & Tax News.

The Antiplanner
The Antiplanner
The Antiplanner is an economist with forty-five years of experience critiquing public land, urban, transportation, and other government plans.

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