[Joint House and Senate Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 112-263
 
       MANUFACTURING IN THE USA: PAVING THE ROAD TO JOB CREATION

=======================================================================


                                HEARING

                               before the

                        JOINT ECONOMIC COMMITTEE

                     CONGRESS OF THE UNITED STATES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 16, 2011

                               __________

          Printed for the use of the Joint Economic Committee





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                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

SENATE                               HOUSE OF REPRESENTATIVES
Robert P. Casey, Jr., Pennsylvania,  Kevin Brady, Texas, Vice Chairman
    Chairman                         Michael C. Burgess, M.D., Texas
Jeff Bingaman, New Mexico            John Campbell, California
Amy Klobuchar, Minnesota             Sean P. Duffy, Wisconsin
Jim Webb, Virginia                   Justin Amash, Michigan
Mark R. Warner, Virginia             Mick Mulvaney, South Carolina
Bernard Sanders, Vermont             Maurice D. Hinchey, New York
Jim DeMint, South Carolina           Carolyn B. Maloney, New York
Daniel Coats, Indiana                Loretta Sanchez, California
Mike Lee, Utah                       Elijah E. Cummings, Maryland
Pat Toomey, Pennsylvania

                 William E. Hansen, Executive Director
              Robert P. O'Quinn, Republican Staff Director


                            C O N T E N T S

                              ----------                              

                     Opening Statements of Members

Hon. Robert P. Casey, Jr., Chairman, a U.S. Senator from 
  Pennsylvania...................................................     1
Hon. Kevin Brady, Vice Chairman, a U.S. Representative from Texas     3

                               Witnesses

Mr. Andrew Herrmann, President, American Society of Civil 
  Engineers, Washington, DC......................................     6
Dr. Veronique de Rugy, Senior Research Fellow, Mercatus Center at 
  George Mason University, Arlington, VA.........................     8
Mr. Chris Edwards, Director of Tax Policy Studies, Cato 
  Institute, Washington, DC......................................     9
Mr. Robert Puentes, Senior Fellow, Metropolitan Policy Program, 
  Brookings Institution, Washington, DC..........................    12

                       Submissions for the Record

Prepared statement of Representative Kevin Brady.................    30
Prepared statement of Mr. Andrew Herrmann........................    32
Prepared statement of Dr. Veronique de Rugy......................    38
Prepared statement of Mr. Chris Edwards..........................    44
Prepared statement of Mr. Robert Puentes.........................    54
Prepared statement of Representative Michael C. Burgess..........    59


       MANUFACTURING IN THE USA: PAVING THE ROAD TO JOB CREATION

                              ----------                              


                      WEDNESDAY, NOVEMBER 16, 2011

             Congress of the United States,
                          Joint Economic Committee,
                                                    Washington, DC.
    The committee met, pursuant to call, at 2:07 p.m. in Room 
216 of the Hart Senate Office Building, the Honorable Robert P. 
Casey, Jr., Chairman, presiding.
    Senators present: Casey and Klobuchar.
    Representatives present: Brady, Burgess, Campbell, 
Mulvaney, and Hinchey.
    Staff present: Gail Cohen, Will Hansen, Colleen Healy, 
Jesse Hervitz, Dan Neumann, Brian Phillips, Christina Forsberg, 
and Jeff Schlagenhauf.

  OPENING STATEMENT OF HON. ROBERT P. CASEY, JR., CHAIRMAN, A 
                 U.S. SENATOR FROM PENNSYLVANIA

    Chairman Casey. We will get started. The hearing will come 
to order. I want to thank our witnesses. First, let me say an 
apology for being late. We have House Members who are here. 
They had a longer distance to travel and they were here on 
time, so our Vice Chairman was leading that team.
    I will present an opening statement, and then our Vice 
Chairman Brady will as well, and then we will get to our 
witnesses. But I am grateful to our witnesses for being here, 
for your presence, your testimony and the experience and 
scholarship that you bring to these issues.
    Today's hearing is the fourth in a series by the Joint 
Economic Committee that we have been holding, to determine the 
best strategies for revitalizing manufacturing in the United 
States of America. Previously, we looked at how trade policies 
affect manufacturing, and the need for a comprehensive national 
manufacturing strategy. We also looked at the importance of job 
training and preparing our workers to compete in a global 
economy.
    With today's hearing, we will examine the positive impact 
that infrastructure investment would have on economic growth 
and job creation in the manufacturing sector. When the economy 
is operating below full capacity, investing in infrastructure 
boosts aggregate demand and paves the way for long-term 
economic growth.
    In the immediate term, I should say, rebuilding roads and 
bridges and improving and modernizing our ports and airports 
will create needed construction and manufacturing jobs. These 
sectors, which were hardest-hit in the Great Recession, are 
also the ones that most positively are impacted by an 
infrastructure investment.
    In the longer term, improving our infrastructure will help 
strengthen our Nation's competitiveness, by enabling producers 
to move their products to market more quickly and at less cost. 
Since manufacturers rely upon roads, rails and ports to 
transport their goods domestically, and to export abroad, 
infrastructure improvements will have a significant, positive 
impact on U.S. manufacturers.
    The U.S. has underinvested in infrastructure. That's an 
understatement. I'm not sure many people would contest that. 
The United States spends just two percent, just two percent of 
gross domestic product on infrastructure, half of what we spent 
in the year 1960. We also invest far less than our 
international competitors. China spends nine percent of GDP, 
not two percent, nine percent of GDP on infrastructure, and 
Europe is at five percent.
    The quality of U.S. infrastructure is poor, ranking 23rd in 
the world behind countries such as Spain and Chile. In fact, 
the American Society of Civil Engineers has identified up to $2 
trillion, that's with a `T', $2 trillion of infrastructure 
investments needed to get back on equal footing with 
competitors abroad. I don't think there is anyone on this 
Committee who would say we can afford $2 trillion today. But I 
would also assert that we cannot afford not to begin to invest 
in infrastructure, and we certainly cannot afford to do 
nothing.
    While private sector funding on infrastructure projects is 
across the board, there have been many worthy projects that 
simply won't deliver the financial return required by the 
private sector, but will deliver enormous benefits to the 
public and should go forward.
    The role for the Federal Government is even greater today 
than is typically the case. Normally, state and local 
governments shoulder about three-quarters of the cost of 
infrastructure projects. But state and local governments are 
continuing to feel the effects of the Great Recession, 
contending with reduced revenues and increased spending on 
other services.
    There is a great deal of research showing that 
infrastructure investments are highly efficient in the use of 
federal funding. The Congressional Budget Office cites 
infrastructure spending as one of the most effective policies 
for boosting both growth and employment. Moody's Analytics 
estimates that every dollar of infrastructure spending leads to 
$1.44 of increases in GDP, the usual bang for the buck 
analysis. You spend a buck, what do you get in return? 
Infrastructure. Spend a buck, you get a buck-44 in return.
    The Treasury Department and the Council of Economic 
Advisers analysis found that 61 percent of jobs created by 
infrastructure investment would be in construction, and 12 
percent would be in manufacturing. So more infrastructure 
investments are needed to boost demand, put skilled 
construction and manufacturing workers back to work, and ensure 
that U.S. companies have the physical infrastructure needed to 
compete against international competitors.
    Just by way of example, in my home State of Pennsylvania, 
the Delaware River Deepening Project is the kind of 
infrastructure project that we should fund. By deepening the 
main channel of the Delaware River, providing access to the 
Port of Philadelphia for larger vessels, we can bring down 
transportation costs for business, increase productivity, boost 
exports and increase jobs in the region.
    In addition to making U.S. products more competitive around 
the globe, this project would create thousands of construction 
jobs immediately, and lead to more than 1,000 long term jobs 
through the increased activity at the Port of Philadelphia. I'm 
sure other members could cite projects in their own states and 
their own districts.
    Other traditional infrastructure repairs are also badly 
needed. More than a quarter of the bridges in Pennsylvania are 
structurally deficient, with a staggering 23 million vehicles 
passing over a deficient bridge in a state like ours each and 
every day.
    Nationwide, there are more than 69,000 bridges in need of 
repair--69,000. To delay rebuilding our rails, roads and 
bridges would be short-sighted, costing our economy jobs in the 
short run and eroding our competitive position in the long 
term. Unfortunately, that is precisely what the Senate did 
earlier this month, when on party lines it voted down 
legislation that would have invested in our Nation's 
infrastructure, by creating an Infrastructure Bank, in addition 
to other provisions in the bill.
    We must figure out a bipartisan path forward in the months 
ahead on infrastructure, not to mention so many other 
priorities. Today, we are fortunate to have a distinguished 
panel of experts who have deep knowledge of infrastructure 
investments, thoughtful ideas on where the U.S. should invest, 
and useful analysis of how the U.S. competes and how we compare 
to our competitors across the globe.
    So I want to thank our witnesses. We are going to get to 
you in a moment, I look forward to your testimony, but I would 
turn the microphone now to Vice Chairman Brady.

 OPENING STATEMENT OF HON. KEVIN BRADY, VICE CHAIRMAN, A U.S. 
                   REPRESENTATIVE FROM TEXAS

    Vice Chairman Brady. Thank you, Chairman Casey, for 
convening this important hearing. I want to welcome our 
witnesses as well. A good infrastructure is vitally important 
to the U.S. economy, providing Americans with millions of miles 
of roads, hundreds of thousands of bridges, tens of thousands 
of airports, dams, waterways and transit lines, and hundreds of 
train stations and ports.
    Pro-growth policies such as low taxes, balanced regulation 
and free market innovations drive the need for additional 
infrastructure in America. As a former local Chamber of 
Commerce executive, I can attest to the need for 
infrastructure, as a critical precursor to spark economic 
development and attract businesses in communities large and 
small across America.
    Though America's infrastructure remains among the most 
advanced in the world, the American Society of Civil Engineers 
gave our infrastructure a letter grade D, highlighting we have 
a long way to go until we can meet the current and future 
infrastructure needs of our growing country.
    The manufacturing sector is a critical input in 
infrastructure, with the provision of raw materials, industrial 
equipment, and the manufacturing sector is the beneficiary. It 
relies on the Nation's infrastructure to transport goods to 
compete in the global economy. In fact, the manufacturing 
sectors open up the prospect for major energy infrastructure 
development.
    An excellent opportunity for long-term economic growth 
exists today in the form of the Keystone XL pipeline, from 
Alberta to Texas, which would result in at least 20,000 new 
jobs affiliated with the pipeline. Long-term investment in 
infrastructure will help American manufacturing, including 
energy manufacturing, remain internationally competitive. Mr. 
President, I hope you would stop delaying these needed 20,000 
American jobs.
    No one disputes the value of good infrastructure. However, 
planning and building infrastructure takes years, sometimes 
decades. Higher infrastructure spending cannot create a 
significant number of jobs in the near term. President Obama 
himself remarked months ago, ``shovel-ready was not as shovel 
ready as we expected.''
    According to the Federal Highway Administration, the 
federal project delivery process can take up to 15 years, from 
planning through construction. Environmental regulations and 
constraints on federal funding can extend this time line even 
farther, resulting in costly delays and routine cost overruns.
    The current system of federal infrastructure spending is 
inefficient. U.S. taxpayers are not getting good value for 
their dollars that they are currently spending on 
infrastructure. Research over the past decade indicates that 
the growth benefits from federal infrastructure spending have 
been extremely low. The current system of federal 
infrastructure spending is broken, and must be fixed to make 
smart investments in good infrastructure projects.
    As an example, the GAO reviewed the Department of 
Transportation's system of 6,000 employees administering over 
100 separate surface transportation programs, with separate 
funding streams for highway, transit, rail and safety 
functions. The GAO determined this system was extremely 
fragmented, and lacked accountability, impeding effective 
decision-making and limiting the ability to provide solutions 
to complex challenges.
    Analysis by the National Surface Transportation Policy and 
Revenue Committee found the project that should cost $500 
million would actually take 14 years to complete and cost twice 
as much, due to the impact of delays and inflation. Examples 
already abound at the state level of diverted funds originally 
allocated to infrastructure, going to other budget items 
suspended or altogether forfeited.
    All too frequently infrastructure funding fails to reach 
high-priority projects, diverted instead to projects with 
little or no real benefit. Federal regulations, such as project 
labor agreements, high road contracting, Buy American 
provisions and the Davis-Bacon Act have unnecessarily increased 
the cost and lengthened the completion time of infrastructure 
projects.
    For example, the Davis-Bacon Act's prevailing wage 
requirements have led contractors to pay an average of 22 
percent above the market wage rates, and have bogged down 
contractors with extra paperwork. An environmental impact 
statement alone can take up to two years to complete. Major 
infrastructure projects often require the approval of other 
federal agencies, such as the U.S. Fish and Wildlife Service, 
the Advisory Council on Historic Preservation and the U.S. Army 
Corps of Engineers.
    For the good of manufacturing, infrastructure, and American 
workers, federal regulators must consider how both proposed new 
rules and the cumulative burden of existing rules, affect the 
ability of American businesses to create jobs at home by 
selling in global markets. Federal regulators must also begin 
to perform retrospective analysis, to determine if existing 
regulations are meeting their goals in cost-effective ways.
    Congress should make it easier for the private sector to 
invest in transportation infrastructure, reducing the stress on 
already cash-strapped federal resources. Major economies 
worldwide have demonstrated success in partially and fully 
privatized roads, water and sewage systems, seaports and 
airports. America is behind the times when it comes to 
involving private capital in infrastructure development.
    The United States is capable of keeping up with other 
countries and excelling as the leader in infrastructure 
development. We strive to achieve an ``A'' in infrastructure, 
by addressing the systemic problems with our current means of 
funding infrastructure, in conjunction with reform of 
burdensome regulations that impede the ability, both public and 
private provisions of infrastructure.
    Mr. Chairman, thank you and I look forward to the witness' 
testimony.
    [The prepared statement of Representative Brady appears in 
the Submissions for the Record on page 30.]
    Chairman Casey. Thank you, Vice Chairman Brady. I will 
provide a brief introduction of our witnesses, and then we will 
get right to their testimony. We do have a distinguished panel. 
First of all, I would like to introduce Mr. Andrew Herrmann, a 
principal with Hardesty and Hanover, LLP and president of the 
American Society of Civil Engineers. Mr. Herrmann's experience 
includes design, inspection, rehabilitation, and construction, 
along with managing some of the firm's major bridge projects. 
He is a registered professional engineer in 29 states and 
Ontario, and is a resident of Pittsburgh, Pennsylvania. That, 
of course, is a good helper for you here today. We are grateful 
you are here. Thank you so much. The Vice Chairman knows that 
we invite Pennsylvanians once in a while. We get some Texans 
too.
    Next, we have Dr. Veronica de Rugy, and she is the senior 
research fellow at the Mercatus Center at George Mason 
University. She was previously a resident fellow at the 
American Enterprise Institute, a policy analyst at the Cato 
Institute, and a research fellow at the Atlas Economic Research 
Foundation.
    Her primary research interests include the federal budget, 
homeland security, taxation, tax competition and financial 
privacy issues. Doctor, thank you for being here. That is quite 
a lineup of tough issues. Thank you.
    Next, Mr. Chris Edwards is the Director of Tax Policy 
Studies at Cato. He is an expert on federal and state tax and 
budget issues. Before joining Cato, Mr. Edwards was a senior 
economist on the Congressional Joint Economic Committee, a 
manager with PriceWaterhouseCoopers, and an economist with the 
Tax Foundation. Thank you very much, Mr. Edwards, for being 
here, and I guess I should say welcome back.
    Mr. Robert Puentes is a fellow with the Brookings 
Institution, Metropolitan Policy Program, where he also directs 
the program's Metropolitan Infrastructure Initiative. His work 
focus is on the broad array of policies and issues related to 
metropolitan growth and development.
    He is an expert on transportation and infrastructure, urban 
planning, growth management, suburban issues and housing. He is 
also an affiliated professor with the Georgetown University's 
Public Policy Institute. Mr. Puentes, thank you for being here.
    So we will start with Mr. Herrmann and we will go from my 
left to right. Thank you very much. Oh, and I should say before 
you start, if you have a longer statement, it will be made part 
of the record, and if you could try to keep the summary of your 
remarks or any comments you make to within a five minute time 
period. Thank you.

 STATEMENT OF MR. ANDREW HERRMANN, PRESIDENT, AMERICAN SOCIETY 
               OF CIVIL ENGINEERS, WASHINGTON, DC

    Mr. Herrmann. Thank you. Mr. Chairman, Members of the 
Committee, my name is Andrew Herrmann, and I am the president 
of the American Society of Civil Engineers. It is an honor for 
me to appear before this Committee to discuss the critical link 
between our Nation's infrastructure and the Nation's economic 
competitiveness, specifically as it relates to the vital 
American manufacturing sector.
    ASCE's 2009 report card for America's infrastructure gave 
an overall grade of D for 15 of the Nation's essential 
infrastructure categories, and estimated that a total of $2.2 
trillion would be needed to bring these categories into a state 
of good repair. More specifically, the report card assessed 
that the Nation's roads should receive a grade of D minus, its 
bridges a C, and transit a D.
    If the Nation continues to underinvest in infrastructure 
and ignores this backlog until systems fail, we'll incur even 
greater costs and risk public safety. Money invested in 
essential public works can create jobs, provide for economic 
growth and ensure public safety through a modern, well-
engineered national infrastructure.
    For example, the Nation's transportation infrastructure 
systems have an annual output of $120 billion in construction 
work, while also contributing $244 billion in total economic 
activity to the Nation's gross domestic product.
    These economic benefits translate into real jobs as well. 
The Federal Highway Administration estimates that every $1 
billion invested in the Nation's highways supports almost 
28,000 jobs, including over 9,000 onsite construction jobs, 
over 4,000 jobs in supplier industries, and nearly 14,000 jobs 
throughout the rest of the economy.
    Equally as important as infrastructure's job creation 
potential are the economic benefits to a region's long-term 
growth and productivity. This past July, ASCE released the 
first in a series of economic studies, which measured the 
impacts to the economy in 2020 and 2040, if the Nation 
maintains just current levels of surface transportation 
investments.
    Other pending studies, which will be coming out as the year 
progresses, will address water and waste water, energy 
transmission and air and marine ports. The present study, 
entitled Failure to Act found that if investments in 
transportation are not made in conjunction with significant 
policy reforms, families will have a lower standard of living, 
businesses will be paying more and producing less, and our 
Nation will continue to lose ground in the global economy.
    The results show that the Nation's deteriorating surface 
transportation will cost the American economy more than 876,000 
jobs, and suppress the growth of the Nation's GDP by almost 
$900 billion in 2020. The study results also estimate that more 
than 100,000 manufacturing jobs will be lost by 2020.
    Failure to Act also assesses how a failing infrastructure 
will drive up the cost for businesses by adding $430 billion to 
transportation costs in the next decade. It will cost firms 
more to ship finished goods and needed raw materials will cost 
more due to increased transportation costs.
    Lastly, the report shows that productivity will fall, with 
businesses underperforming by $240 billion over the next 
decade. As a result, U.S. exports will fall by $28 billion in 
key sectors. In particular, 10 sectors of the U.S. economy will 
account for more than half of this unprecedented loss in export 
value--among them, key manufacturing sectors, including 
communications equipment, medical devices, and machinery.
    In contrast, the study from the Alliance for American 
Manufacturing shows that roughly 18,000 new manufacturing jobs 
are created for every $1 billion in new infrastructure 
spending. These jobs will be created in fabricated metals, 
concrete, cement, glass, rubber, plastic, steel and wood 
product industries.
    Furthermore, that same study shows that using American-made 
materials for these infrastructure products yields a total of 
77,000 additional jobs, based on investment of $148 billion a 
year. By making infrastructure investments now, the Nation can 
grow the economy. Failure to Act estimates that in order to 
bring the Nation's surface transportation up to a grade of B 
from its D, policy makers would need to invest approximately 
$1.7 trillion between now and 2020 in the Nation's highways and 
transit systems.
    The U.S. is currently on track to only spend a portion of 
that, a projected $877 billion during the same time frame. 
However, by making these investments in infrastructure at this 
critical time, the Nation could protect nearly 1.1 million 
jobs, relieve congestion and grow the economy.
    ASCE looks forward to working with Congress as it develops 
legislation which brings the Nation's infrastructure into the 
21st century. For instance, by updating, maintaining and 
building our roads, bridges and transit systems, the Nation can 
create jobs in both the public and private sector, while 
fostering and growing manufacturing in the United States.
    Therefore, the first step towards a modernized 
transportation system must include passing a multi-year surface 
transportation authorization at or above the current levels of 
investment, followed by legislation funding other critical 
infrastructure needs.
    Thank you. I would be happy to answer any questions.
    [The prepared statement of Mr. Andrew Herrmann appears in 
the Submissions for the Record on page 32.]
    Chairman Casey. Thanks very much. Dr. de Rugy.

  STATEMENT OF DR. VERONIQUE de RUGY, SENIOR RESEARCH FELLOW, 
   MERCATUS CENTER AT GEORGE MASON UNIVERSITY, ARLINGTON, VA

    Dr. de Rugy. Good afternoon, Chairman Casey, Vice Chairman 
Brady and members of the Committee. It is a privilege to be 
here today to discuss the important topic of government-funded 
infrastructure spending and economic growth. My name is 
Veronique de Rugy. I am a senior research fellow at the 
Mercatus Center at George Mason University, where I study 
budget and tax issue.
    In my written testimony, I make three points. First, 
infrastructure spending is a particularly bad way to stimulate 
the economy. Second, while no one disputes the value of good 
infrastructure, public work projects typically suffer from 
massive cost overruns, and hence rarely make for good 
investments.
    Third, the Federal Government shouldn't be in the business 
of overseeing the construction of infrastructure. Privatization 
and state government public-private partnership are better 
alternative. In my oral testimony, however, I would like to 
focus on the misconception that infrastructure spending can 
create jobs. This morning on NPR, Jerry Bernstein, a former 
economist at the Council of Economic Advisers, explained that 
Keynesian economics amounts to the government doing all it can 
to foster job creation.
    Bernstein then described the President's America Jobs Act, 
which includes $60 billion for infrastructure spending, as 
precisely the right way to help grow the economy and create 
jobs. Unfortunately, the evidence suggests otherwise. My 
colleague Matt Mitchell and I just finished a research project 
that looks specifically at this question, and here is what we 
find.
    First, there is no consensus among economists about the 
ability of stimulus to boost the economy, and there's no 
consensus that this is actually the number. Moreover, the 
studies that find that such spending is effective assume 
conditions that are not found in the U.S. right now, such as 
low debt level. We don't have this right now. Fixed exchange 
rates, we certainly don't have this right now, and lower levels 
of government spending. We don't have this right now.
    Second, the greatest problem with infrastructure spending 
as stimulus is the way it's implemented. In a perfect Keynesian 
world, stimulus spending needs to be timely, targeted and 
temporary. Infrastructure spending fails to satisfy these 
criteria. Infrastructure spending is not timely. Even when the 
money is available, it can be months, if not years before it is 
spent. It is because infrastructure projects involving 
planning, bidding, contracting, construction and evaluation.
    Second, the only thing harder than getting the money out 
the door promptly is properly targeting spending for 
stimulative effect. The idea is to give the money a jolt, the 
economy a jolt by employing idle resources, firm and equipment, 
while data from recovery dug up showed that the stimulus money 
in the most recent bill, in general, and infrastructure funds 
in particular, wasn't targeted to those areas with the highest 
rate of unemployment.
    However, there is also evidence that even properly targeted 
infrastructure spending would fail to stimulate the economy. 
Many of the areas hardest hit by the recession are in decline, 
because they have been producing goods and services that are 
not and may never be in great demand. Building or improving the 
roads and other infrastructure in these areas won't change the 
structural factors behind their decline.
    Finally, infrastructure spending isn't temporary. Even in 
Keynesian models, stimulus is only effective as a short-run 
measure. In fact, Keynesians also call for surpluses during an 
upswing. In reality, however, the political process prefers to 
implement the first Keynesian prescription, deficit, but not 
the second one, surpluses to pay off the debt.
    The inevitable result is a persistent deficit that year-in 
and year-out, adds to the National debt. This is important 
because as former Presidential economic advisor Lawrence 
Summers has argued, fiscal stimulus ``can be counterproductive 
if it is not timely targeted and temporary.'' As I've 
explained, infrastructure spending simply does not meet those 
criteria.
    Now even if we could somehow do a better job at 
implementing the spending, other factor would get in the way of 
job creation, things like the prevailing wage requirements, 
because they often impose financial costs through increased 
wage for construction project.
    According to economists Garrett Jones and Dan Rothschild, 
in the case of the last stimulus, this increasing cost may have 
prevented the creation of 55,000 jobs. In their words, the 
difference between the market wage and the required Davis-Bacon 
wage represent, from a Keynesian perspective, a lost 
opportunity for job creation.
    So basically, if you are a Keynesian economist, you really 
want to do away with prevailing wage requirement. To conclude, 
economists have long-recognized the value of infrastructure, 
roads, bridges, airports or waterways are the conduit through 
which goods are exchanged. In many circumstances, private firms 
should be the one providing this infrastructure. In other 
cases, there may be a role for public provision at the local 
level.
    But whatever its merits, infrastructure spending won't 
provide much of a stimulus, particularly not the sustainable 
job the Nation needs. In fact, it may even make it worse. Thank 
you.
    [The prepared statement of Dr. Veronique de Rugy appears in 
the Submissions for the Record on page 38.]
    Chairman Casey. Thank you, Doctor. Mr. Edwards.

STATEMENT OF MR. CHRIS EDWARDS, DIRECTOR OF TAX POLICY STUDIES, 
                 CATO INSTITUTE, WASHINGTON, DC

    Mr. Edwards. Thank you very much, Chairman Casey, for 
having me testify today. In the description of today's hearing, 
the Committee asked how infrastructure can help promote jobs 
growth in manufacturing. The short answer to that is that we 
can spur growth in jobs and manufacturing by making 
infrastructure spending as efficient as possible.
    Infrastructure spending should go to the highest value 
projects, and it should be constructed and maintained in the 
most efficient manner. In my view, we can do that by reducing 
the federal role in infrastructure, to increase the efficiency 
of our investment.
    Let's take a look at the overall data. Most infrastructure 
spending in the United States is by the private sector. 
Department of Commerce data shows that private sector 
infrastructure spending is more than four times greater than 
government infrastructure spending by all levels of government 
in the United States, about $1.7 trillion a year, to about $400 
billion in the government sector. So my takeaway from that is 
the first thing we should do is remove hurdles to private 
sector infrastructure investment.
    The second point I would make, and unfortunately it 
contradicts something you said, Senator Casey. If you look at 
OECD data, they've got a new report out on infrastructure. It 
shows that U.S. government infrastructure spending is about the 
same share of the economy as the average in the OECD, about 3.5 
percent of GDP. So I'm happy to compare notes with your staff 
on that. But I don't think we're underinvesting compared to 
other countries.
    Most of looking just at the Federal Government, most 
federal infrastructure spending, in my view, is really properly 
state, local and private sort of activities. Our urban transit 
systems, highways, community development and that sort of 
stuff. The biggest problem I see with federal involvement in 
infrastructure spending is that the Federal Government makes 
mistakes, and it replicates those mistakes across the country.
    So you can look historically at something like the huge 
federal involvement in public housing construction during the 
mid-20th century. It was a disaster. The Federal Government 
built these massive high-rise public housing structures in 
dozens of cities across the country. Everyone agrees now it was 
a disaster.
    The problem is that because of federal involvement, every 
city made that same mistake. You can see the same sort of thing 
going on now with high speed rail. If California, in my view, 
wants to spend its own money, its own taxpayer money to finance 
its own high speed rail system, great. I think it's a bit of an 
economic boondoggle. But the problem with federal involvement 
is it takes money and induces states to make that same mistake 
over and over.
    The states, in my view, should be laboratories of democracy 
and laboratories of innovation and infrastructure, and a big 
exciting thing in the area of infrastructure, as Veronique 
mentioned, is public-private partnerships and privatization. 
This has swept the world. Unfortunately, the United States is a 
laggard in this, but there's all kinds of exciting projects 
being done even in the United States.
    I'll point to one, which I think is very interesting. Down 
in Chesapeake, Virginia, an engineering company, FIGG 
engineering, is building a $100 million bridge across the 
Elizabeth River down there. The old bridge had run out of its 
useful life. This private company came to the city and said, 
you know, we want to build a new bridge. It's completely owned 
and financed, $100 million project, and looking on the Web site 
it's really a beautiful project.
    So it's complete privatization. It seems to me we ought to 
be doing that sort of thing where we can. The OECD notes that 
the United States lags far behind Australia, Canada and other 
countries on privatization and PPPs for roads and bridges and 
that sort of stuff. There's an infrastructure magazine called 
Public Works Financing that looks at these PPP and 
privatization projects.
    Of the 40 biggest companies in the world doing this sort of 
privatization for infrastructure, only two of the 40 are 
American, which I think is really unfortunate, and the United 
States has less of these sort of privatized infrastructure 
projects even than Canada, which has a population only one-
tenth of ours.
    One big advantage, it seems to me, of privatizing the 
infrastructure is that infrastructure will get a more stable 
financing source. If you look at our air traffic control system 
in this country, it's really--it has a very unstable financing. 
Congress keeps fighting over the level of financing for air 
traffic control, which is of course a crucial thing.
    I would suggest Canada as a model here. Canada privatized 
its air traffic control system 15 years ago. It's a self-
funded, non-profit corporation. It's got government and labor 
on the board of directors. It works extremely well. It's won 
international awards, and the funding source is stable, because 
they don't rely on government subsidies.
    The Brookings Institution actually has a very good new 
report out on PPP, privatization of infrastructure, which I 
would recommend your staff take a look at. So to conclude, the 
Committee asked how can infrastructure help U.S. manufacturing, 
and how can it help us be competitive in the global economy?
    That is a crucial question. You know, I am very concerned 
when our manufacturing is getting hit from around the world, 
when there are things we could be doing to make our 
manufacturing more competitive. I think privatizing 
infrastructure is one way to go here. You mentioned the World 
Economic Forum rankings on U.S. competitiveness.
    To give you one example, the World Economic Forum puts U.S. 
and American seaports 23rd in the world, which is about right. 
The Maritime Administration, MARAD, has the same sort of 
assessment of U.S. seaports. Well U.S. seaports are almost all 
owned by state and local governments. There are, by contrast, 
privatized seaports around the world, which do very well in 
Britain and Hong Kong and other places, and indeed, the two 
highest, the first and third highest-ranked seaports in the 
world, according to the World Economic Forum, are in Singapore 
and Hong Kong, and those seaports are completely private.
    So I think we can get quality infrastructure in the private 
sector. Governments can't afford infrastructure much anymore 
because of the giant deficits they're running.
    So let's look at these experiments going on around the 
world, and see what we can adopt here in the United States. 
Thank you.
    [The prepared statement of Mr. Chris Edwards appears in the 
Submissions for the Record on page 44.]
    Chairman Casey. Thanks, Mr. Edwards. Mr. Puentes.

 STATEMENT OF MR. ROBERT PUENTES, SENIOR FELLOW, METROPOLITAN 
     POLICY PROGRAM, BROOKINGS INSTITUTION, WASHINGTON, DC

    Mr. Puentes. Thank you very much, Chairman Casey, Vice 
Chairman Brady and Members of the Committee. I am pleased to be 
here today. I very much appreciate the invitation.
    Throughout most of our Nation's history, I think we have 
always had a clear understanding of the role of strategic 
investments in our physical infrastructure in advancing the 
American economy.
    But the conversation, I think, has new meaning today, 
because the understanding now seems to be that we are too 
broke, both financially and in spirit, to make similar 
investments in our Nation's economic future, or to beset by 
various political, regulatory or institutional barriers, to get 
anything really important done.
    I don't think we should let this be the case. Today, we 
really need targeted and smart ways to drive economic growth, 
create jobs, restore fiscal health and regain our lead in 
manufacturing, innovation and productivity.
    One critical economic imperative is to boost exports and 
manufacturing, as we talked about, and to fully connect 
American firms and metropolitan areas to the global 
marketplace, particularly with nations that are rapidly 
urbanizing and industrializing.
    Today, exports in the U.S. make up only 13 percent of our 
GDP, compared to 30 percent in China and in Canada, and higher 
levels in India and Japan. We need to reorient our economy to 
take advantage of this new, rising global demand. But doing so 
not only means opening up foreign markets to American goods and 
services; we also need to build and retool the next generation 
of advanced production facilities, and the underlying 
infrastructure to move goods, services and ideas quickly and 
efficiently by air, land and sea.
    But to do that, we need systemic reform. That means fixing 
the infrastructure and the institutional partnerships that 
exist today, as well as the process for choosing those 
infrastructure projects. We need to address a range of 
overlapping financial, regulatory and institutional hurdles 
that currently stand in the way of these investments, and 
understanding these barriers and where reform can really be 
achieved should help us craft policy solutions, to streamline 
processes and invest in transformative projects that truly can 
catalyze economic growth.
    There are several critical areas that demand attention. 
First, in collaboration with states and metropolitan areas, the 
Federal Government should develop a comprehensive policy for 
national goods movement. This process should build off the bill 
that was just passed by the Environment and Public Works 
Committee, to conceive a national freight program, and 
prioritize corridors and projects on a cost-benefit analysis 
that includes all of these modes: air, rail, sea and road.
    Today, we are one of the only industrialized countries on 
the planet that takes a compartmentalized rather than holistic 
approach to goods movement. Programs like the Department of 
Transportation's TIGER Program have been helpful in this 
regard, but there is clearly much more to do.
    Another idea is for the Federal Government to help states 
reform their own state infrastructure banks. The problem is 
that rather than bringing a tough, merit-based approach to 
funding and project selection, many state infrastructure banks 
are simply used to pay for projects selected through a state's 
wish list of infrastructure improvements, without filtering 
these projects through a competitive application process.
    A better approach, we think, would be for states to use 
their infrastructure banks more strategically, such as to 
directly support exports, manufacturing and the things we're 
talking about today.
    On a national level, the creation of an infrastructure bank 
would leverage federal dollars for large projects whose impact 
is of national significance, like border crossings and ports 
that are integral to our National trade strategy. This is 
especially crucial for projects that cross multiple state 
borders, and require funding and coordination across a number 
of public agencies, and from the private sector in particular.
    Recent polling shows strong willingness for public sector 
agencies to consider private investments, rather than 
increasing taxes, cutting budgets or taking on more debt. It's 
not a silver bullet, but while half of the states have enacted 
enabling statutes for public-private partnerships, the wide 
differences between them makes it time-consuming and costly for 
private partners wishing to engage in PPPs in multiple states 
to handle the different procurement and management processes.
    For this reason, we think the Federal Government should 
play a helpful role with states and metropolitan partners, by 
helping them think through the potential costs and tradeoff of 
these deals, as well as assessing true significant national 
interests. Over 25 countries have been implementing specialized 
units throughout various government agencies to assist with the 
expanding opportunities for public-private partnerships.
    These units fulfill different functions such as quality 
control, policy coordination, and project promotion. We think 
that in the U.S., the primary purpose would be to provide 
technical non-binding information, assistance and advice to 
states and metropolitan governments.
    Entities like PPP units or an infrastructure bank would 
ideally help infrastructure investments, by leveraging existing 
funding and finance sources. These approaches epitomize a new 
21st century style self-help that the National government 
should fully recognize and embrace. Mr. Chairman, we know that 
our global competitors in both mature and emerging markets 
alike are in the process of making these kinds of investments, 
and in doing so, they're supporting their national economies.
    These investments at their core are the physical means to 
an economy shaping end, rather than the ends in and of 
themselves. Thank you again for the invitation to appear before 
you today.
    [The prepared statement of Mr. Robert Puentes appears in 
the Submissions for the Record on page 54.]
    Chairman Casey. Thank you very much. We will start our 
round of questions. I will start with Mr. Herrmann, and this is 
obviously a Pennsylvania-specific question, which is okay once 
in a while, right?
    We have talked a little bit today about the Port of 
Philadelphia. We have in Pittsburgh, as you know better than I, 
I think, based upon your expertise, we have an inland port in 
Pittsburgh, and it's the reason or the source of a lot of jobs 
in Pittsburgh.
    We are told that 38 million tons of cargo go through that 
port every year. It has an $800 million benefit to the region, 
and as I said, a huge job impact, 45,000 jobs in the 
southwestern corner of our state.
    One of the problems they have is in the lock and dam 
system, they have some basic, fundamental infrastructure needs 
or deficiencies that we're all trying to work on together. Some 
of the Recovery Act money was helpful, but I mean right now, it 
has come down to the Army Corps, and everyone here knows what 
good work that they do, but the Army Corps of Engineers, we are 
trying to construct, and have used some of the Recovery Act 
dollars to do this, river and guard walls, something that 
fundamental, just guard walls for the lock and dam system.
    I wanted to get your assessment of that, of that kind of 
investment, and then in a larger sense, the impact of that kind 
of an infrastructure investment, not only in a community like 
southwestern Pennsylvania, but more broadly. Can you speak to 
that?
    Mr. Herrmann. Sure, yes. It's funny. If we had waited a 
couple of months, we would have had another economic study on 
water ports coming out, probably the beginning of next year. 
But just to talk to that right now, the number of ports on the 
East Coast have to be dredged, they have to get wider, they 
have to, in some instances, raise bridges. Because of the 
improvements to the Panama Canal, there are going to be larger 
vessels coming through the Canal and the Northeast on this side 
is going to be at an economic disadvantage if we don't improve 
our ports.
    So to stay competitive in the world market, and to be able 
to take that shipping and not have that shipping go to other 
countries, we're going to have to improve our ports. The rails, 
the side walls, that's all part of improving the ports, the 
levies, the dams. That is just part of it. So yes, we're going 
to have to do that improvements, so that we can stay 
competitive, so that the shipping actually comes to the U.S. 
and doesn't go to other countries.
    Chairman Casey. I wanted to pick up on some of the 
discussion here. Obviously we have, based upon testimony from 
here and by our witnesses, there is a debate about how to do 
this. I think there's a recognition that we need to figure out 
some way forward on investing in infrastructure, that it is a 
priority, no matter how you arrive at the solution, that 
government can play a role, obviously, the private sector as 
well.
    We have a number of parts of our economy that are fortified 
by and strengthened by public-private partnerships. We see that 
all the time in economic development. Infrastructure is another 
example of that. But how do we do that? In other words, if we 
agree on the goal, how do we get there in this kind of an 
economy, where there are limitations on what the Federal 
Government can do? State governments have very little in the 
way of resources to dedicate to this. How do you get there?
    One of the reasons why I was so, not just supportive of, 
but encouraged by the bipartisan agreement in the Senate to 
form an infrastructure bank--a $10 billion investment which 
would leverage many, many multiples of that initial investment.
    We had a Democrat from Massachusetts, Senator Kerry and 
Senator Hutchison from the State of Texas. So you had Democrats 
and Republicans from different parts of the country agreeing on 
at least one idea, the infrastructure bank. It didn't pass. So 
I guess I'd ask, and I know it's a tough question. We're low on 
time, but you can amplify it later. How do we move forward on 
this priority that we all agree is important? How do we move 
forward, not only philosophically, but how do we move forward 
within the limitations of our fiscal constraints, our political 
gridlock that we often see here in Washington, as well as the 
limitations at the state and federal level?
    I am at zero (time) now, so why don't you hold that answer 
in abeyance, as they might say, and I want to turn to our Vice 
Chairman, because I don't want to cut off your answer. But 
thank you for your testimony.
    Vice Chairman Brady. Chairman, thank you, and again, thank 
you to the witnesses. There are clearly some different 
viewpoints on how to move forward best in infrastructure, but 
we need to hear the whole, full range of options. Clearly, you 
know, this economy is our number one concern. Clearly, the 
President inherited a very poor economy. But now after three 
years, many of his policies, in my mind, have made things 
worse.
    Certainly, the stimulus failed to jumpstart the economy or 
restore consumer confidence. We were predicted to have a 6-1/2 
percent unemployment rate today. Clearly, we missed it by a 
highway mile. The stimulus, after all that money spent, we 
actually have 2.1 million fewer Americans working today than 
when the stimulus began. We actually have fewer Americans 
working than when we began to spend all that borrowed money.
    The infrastructure was a significant part of the first 
stimulus, and it was predicted that manufacturing and 
construction would see the greatest job growth as a result of 
it. But the opposite proved to be true, that construction jobs 
were predicted and projected at the end of last year, to be a 
gain of 678,000 jobs in construction.
    In truth, we still today have lost 903,000 construction 
jobs, not gained but lost 900,000 jobs. In manufacturing, in 
the last quarter of 2010 we were predicted to have gained 
408,000 jobs from the stimulus. Again, we've actually lost more 
than 600,000 jobs in manufacturing. Clearly, the infrastructure 
in the first stimulus has not stimulated the economy.
    Today, we face a second round of stimulus and 
infrastructure again. In this case, the President has proposed 
a $50 billion infrastructure bank, to stimulate job creation. 
My question is, and I'll start with Dr. de Rugy, today a pretty 
compelling case has been made that our infrastructure system is 
a leaky bucket, and before we pour more funding in it, we 
probably ought to fix those leaks, if we want to get the best 
bang for the buck.
    I look at your study that was done this year, reading 
through it that estimated, because of paper work, permits, 
labor laws, environmental assessments, that drive out and delay 
projects, that that drives cost overruns in infrastructure. On 
average, unit cost overruns have reached $55 billion annually.
    So here we have a $50 billion proposed stimulus, second 
round. First, is the prospect that a concerted effort to reduce 
those delays and that paper work and the permitting, could 
actually give us bang for the buck equal or, over time, larger 
than the expenditure today? Dr. de Rugy, could you tell us 
about how you formulated those cost overruns, and is it 
possible for Congress, in a concerted effort, to lower that 
number considerably?
    Dr. de Rugy. So the study was--there are two studies that 
you are talking about, and neither of them were mine. I was 
just reporting on them. The cost overrun was a pretty broad 
study that was done by a Danish economist, and they're 
specialized in planning, in infrastructure planning. They found 
that overall, nine out of ten federal public jobs are cost 
overruns.
    The other one is for my colleague Garrett Jones and Dan 
Rothschild, who looked at the impact on this round of stimulus 
of the prevailing wage. They did two separate ways. They did 
the theory and then they went and looked and interviewed people 
who had received stimulus money. What they found is in fact 
that people think they would have been able to hire more people 
if they weren't subjected to these laws.
    That being said, I mean while I'm entirely in favor, and 
even if you're a Keynesian economist, as I said, of getting rid 
of these prevailing wages law and all the other things that 
actually artificially increase the cost of infrastructure 
spending, we really need to remember that it's not going to 
create jobs. It just can't, and it is because even in the 
context of Keynesian theories, infrastructure spending takes a 
lot of time to put in place. It can't be timely.
    As such, I think your question is a good one, but even if 
we get rid of all the inefficiency in the system, it would 
still not be a good idea. Let the private sector do it.
    Vice Chairman Brady. Thank you. Mr. Edwards, comments?
    Mr. Edwards. I'd say two bullets on sort of different 
issues. One is the whole issue of jobs. I direct your 
attention, and I can send it to your staff, there's a new 
report out by Wells Fargo a couple of weeks ago, which was kind 
of surprising. It was about U.S. manufacturing, and it actually 
gave a very glowing sort of look at U.S. manufacturing, which 
kind of surprised me.
    Their argument is is that U.S. manufacturing has gone 
extremely capital-intensive and high tech. They've cut jobs, 
jobs, jobs. We know that, but because of that, the end of fact 
is the remaining U.S. manufacturing companies are very 
productive actually in world markets, and they see looking 
ahead that U.S. manufacturing companies are going to be doing 
better and better, because labor costs in places like China and 
Brazil keep rising, and U.S. companies have already made this 
transition to a very high tech mode of production.
    On infrastructure, I would add that the new Brookings study 
on infrastructure is very interesting. They point out some of 
the advantages that private infrastructure has over government 
infrastructure. One of them is in these PPP deals, where you 
get a lot of private finance and management, the same private 
sector company both constructs and then maintains and manages 
the piece of infrastructure, like a bridge, over the long term.
    By doing that, they can be a lot more efficient from sort 
of a life cycle point of view. The current system, you've got 
one company, you know, building it. The government manages----
    Vice Chairman Brady. I'm sorry, Mr. Edwards. You're running 
out of time. I apologize. But I appreciate both points. I wish 
they were somewhat close to the question I asked. But still, I 
think those were important points to make. Thanks, Chris.
    Chairman Casey. Congressman Hinchey.
    Representative Hinchey. Thank you very much, Mr. Chairman, 
and thank you very much. It was very interesting so far, and 
I'm sure it's going to continue to be very interesting. We're 
dealing with a very serious situation here in the United 
States. We have an unemployment rate now that is nine percent. 
That's the official rate, but the real unemployment rate is 
much higher than that. Many more people are unemployed and not 
working.
    This is something that really needs to be addressed. You 
have basic operations in this country that are very, very 
essential-- roads and bridges, for example--that are beginning 
to decline. Infrastructure in this country is being neglected. 
All of that needs to be adressed; it needs to be invested in 
and upgraded.
    When you upgrade it, you generate very substantial numbers 
of jobs. All of these things and a lot more really needs to be 
done. This is something that really has to happen over now. 
We're looking at this Congress here, right now. It's almost 
been a year, and nothing has been done to stimulate the 
economy.
    So this has to happen. There are a number of things that 
are being talked about now. For example, one of them is the 
National Infrastructure Bank which is something that I think 
would stimulate the economy, generate jobs and overall would be 
very, very important.
    So I would like to ask Mr. Puentes and Mr. Herrmann, if you 
would please talk about that. What do you think about the 
National infrastructure bank, and what do you think should be 
done and what could be done in the context of that, to generate 
growth and stimulate this economy which would make these 
economic circumstances here in the United States much more 
effective?
    Mr. Puentes. Thank you. I think that, and it builds off the 
conversation we've already had here today. I think the first 
round of stimulus that we saw from the recovery package was 
about speed, was about putting people back to work in the 
immediate term. It was helping local governments, it was 
helping state governments through the tremendous fiscal 
challenges they were facing.
    When we talked about the infrastructure bank though, 
particularly in this current context, we're really talking 
about something much different. We're talking about making 
longer-term type investments that aren't things that are going 
to be done in the short term necessarily. This isn't about 
pothole refilling and the repaving and the things that we 
certainly need to do. But this is about connecting 
infrastructure investments to the next American economy.
    We're at a point now where we need to move away from this 
consumption-based economy that predated the recession, focused 
on the real estate markets and financial shenanigans, to 
something that's really more about getting Americans back to 
work, in a productive manufacturing-based society, so making 
those infrastructure investments that are going to support 
that.
    So we have to get away from just infrastructure or 
transportation for its own sake, and connecting it directly to 
things like exports, for example. If we believe that doubling 
exports in five years is the right kind of national goal that 
we need to have, great. What kind of infrastructure investments 
do we need to make then, to achieve that goal?
    It's about ports, it's about trade corridors. It's about 
the things we're talking about here today. If we're going to 
move to more of a low carbon-based economy, not just as an 
environmental imperative, but as a market imperative, what kind 
of infrastructure do we need to put in place? Where is it going 
to go? What's the federal role in that?
    Those are the kind of questions we need to ask. It's got to 
come through an economic lens, rather than through an 
infrastructure lens, and I think we'll have a very, very 
different conversation. That's what an infrastructure bank 
really should be doing, choosing projects, setting the 
framework and making sure that those investments are made to 
advance the American economy, not just for infrastructure for 
its own sake.
    Representative Hinchey. Thank you very much. Mr. Herrmann.
    Mr. Herrmann. Yes. The first stimulus bill, I think there 
is a little confusion. They said a significant part of it 
actually went to infrastructure, when out of the $787 billion 
originally obligated, less than $100 billion went to actually 
infrastructure. So a very small portion, less than ten percent. 
So it really didn't have that much of a chance at that point.
    The other thing, the infrastructure banks that you 
mentioned. The way they're proposed, they would actually act as 
a bank. They would look at a project, prioritize it, make sure 
there would be a return on investment. So that an 
infrastructure bank could be self-sufficient. It could actually 
get repaid.
    Representative Hinchey. And what else do you think about 
it? What kind of strong stimulus would it create?
    Mr. Herrmann. It would provide not only a stimulus to start 
projects, but also make a judgment on which projects are the 
best, which projects have the basis of repaying to be 
successful. So I think that's a very strong part of the 
infrastructure bank concept.
    Representative Hinchey. But actually put them into play 
then?
    Mr. Herrmann. Yes.
    Representative Hinchey. Not just speculate, but actually 
put them into operation?
    Mr. Herrmann. Oh definitely, because they would be truly 
acting as a bank. So they would have to make the judgments that 
these projects are critical for hopefully the region, the 
state, the local area, and then also make sure there's a stream 
of revenue to pay them back.
    Representative Hinchey. Thank you very much.
    Chairman Casey. Congressman Mulvaney, I want to note that 
for the record, my staff tells me that you arrived at 1:45. 
There's no prize for that, but maybe an extra minute. But thank 
you very much.
    Representative Mulvaney. Thank you, Mr. Chairman. Mr. 
Herrmann, I enjoyed your testimony. I enjoyed all the 
testimony, had a chance to read through some of yours before 
the hearing. You do a pretty good job of presenting some of the 
numbers. I always find it a little bit helpful around here to 
actually dig down into the numbers, and when you look at your 
testimony, there's some statistics from the Federal Highway 
Administration that would suggest that a billion dollars 
invested in the Nation's highways supports about 28,000 jobs.
    You're absolutely correct, your last comment about 
somewhere under $100 billion of the last stimulus program going 
to infrastructure, and I think the number for actual roads was 
closer to $48 or $50 billion dollars. We take the number 50, 
because I don't have my calculator and I'm doing this the old 
fashioned way up here.
    That if you assume that that is correct, and that that $50 
billion should have created $28,000 per billion spent, that's 
1.4 million jobs that would have been created from just that 
part of the stimulus bill, just the part spent on roads. 
Clearly, that cannot be the case. The very largest number that 
I have seen anybody try and lay claim to from the stimulus is 
three million jobs. That's from the Obama administration, and 
that was jobs saved or created.
    So on the very best day, the very best argument I've seen 
is that the stimulus created three million jobs, yet the FHA 
would have us believe that 1.4 million of those came from 
roads, leaving 1.6 million jobs to have been created from the 
other $800 billion. That's 16 times larger than the amount of 
money we spent on roads, supposedly created only 1.6, and 
that's on the very best day.
    By the way, as you dig down into it a little bit and you 
look at the weaknesses of numbers, while the Federal Highway 
Administration says a billion dollars in spending creates 
28,000 jobs, the Alliance for American Manufacturing says it 
only creates 18,000 jobs. So almost 40 percent less.
    Clearly, it didn't work. Clearly, it didn't work. The 
definition of insanity to me is doing the same thing again and 
again, and expecting a different outcome. So as we sit here 
today and hear calls for new and expanded stimulus, why should 
we expect that the next time it would be any different than 
last time?
    So Dr. de Rugy, I'll ask you this question. You mentioned 
Dr. Summers' line about if it's not done correctly, if it's not 
targeted, if it's not timely and not temporary, that it could 
actually be counterproductive. Is that what we saw here, and if 
so, why is that?
    Dr. de Rugy. Well so the Keynesian theory, at least as it 
goes, is that you need to inject money quickly into the 
economy, and then you will have this multiplier effect. So not 
only do you need to do it quickly and timely, but you also 
needed to do it in a very targeted manner, which means the 
assumption is that you're going to be picking up people from 
the unemployment line and putting them back to work.
    Representative Mulvaney. Is your experience--sorry to cut 
you off, but again, we're on a time clock. Is it your 
experience that the Federal Government is able to do that on a 
$50 billion project?
    Dr. de Rugy. No, and that's one of the things that happened 
with the stimulus bill, is that rather than actually thinking 
of how to spend the money productively, they basically went 
through the common and already-existing channels. But more 
importantly, when it comes to infrastructure and targeting the 
spending, I mean people have to understand that the people who 
are unemployed right now, people who were usually before the 
recession building houses, are not the ones who have the skill 
sets to go and start building bridges and roads.
    So this idea that you're able to actually get people from 
the unemployment lines, who were doing different type of 
construction and make them and train them and get them prepared 
to have the skills to actually build roads, is completely a 
misconception of how the way it's done.
    The study by Garrett Jones and Dan Rothschild showed that 
half of the jobs that were supposedly created or saved, were 
actually jobs that were poached from other existing jobs, other 
companies, and that it is very likely that these other 
companies didn't hire behind, because they actually used these 
poaching to shrink the size of their labor force as they were 
struggling. So it can't work.
    Representative Mulvaney. Thank you, Doctor. Mr. Puentes, I 
heard both you and Mr. Herrmann talk about the relative small 
size of the first stimulus. It was only $50 billion, or I think 
the total infrastructure spending was about $100 billion, after 
you add things like the electrical grid, and that there's a lot 
of folks, I take it you're one of them, claiming or calling for 
a larger stimulus next time.
    Have you ever seen gentlemen, I'll put it to you, Mr. 
Puentes first, any academic studies whatsoever that suggest 
there's any economies of scale when it comes to infrastructure 
spending, that if $50 billion didn't work, $50 billion didn't 
get us the 1.4 million jobs that it was supposed to, that $100 
billion will. Have you ever seen any academic studies that show 
that?
    Mr. Puentes. Well, I'm not sure I understand. The concept, 
I think that we're talking about something now that is very 
different from what we were talking about just three years ago, 
and this idea of using this money to capitalize an 
infrastructure bank, gets back to this larger point about what 
we want--again, what we want the American economy to do, and 
how do we make those investments strategically, right, in 
projects that it's not--this is not just a general grant 
program. The idea is for the money not just to go out to the 
states, and to hope that the money is spent in ways that are--
--
    Representative Mulvaney. I'm going to cut you off, because 
we're out of time and I'm trying to be respectful. I'll save my 
extra minute for another time. What you're really saying is 
that next time we're going to do it better than we did last 
time?
    Mr. Puentes. It has to be fundamentally different. I think 
the idea is to do it very differently.
    Representative Mulvaney. Thank you, sir. Thank you, Mr. 
Chairman.
    Chairman Casey. Thank you, Congressman. Congressman 
Campbell.
    Representative Campbell. Thank you, Mr. Chairman. I wanted 
to start out, before I get to a question by amplifying 
something that was pointed out. A lot of the reason we don't 
have some of the infrastructure going on is not actually 
financial or fiscal, but it's regulatory.
    In my district in Orange County, California, there is a 
toll road that we are ready to build. It has been ready to 
build for years. It is ready to build right now, and it is a 
toll road. It is entirely privately funded. It is being stopped 
and has continued to be stopped by eco-extremists, abusing the 
California Environmental Quality Act, and the federal 
Endangered Species Act, in order to stop all growth and kill 
jobs.
    There are a couple of schools in San Diego, the same thing. 
They're ready to build but the Endangered Species Act is being 
used by eco-extremists to stop those jobs and kill those 
projects. So let us remember, as we're looking at this, that a 
lot of the problem before us is regulatory, and if we just 
sweep that out of the way, there's a lot of projects, some 
publicly-funded, a lot privately funded, that are ready to go 
and will go if we get the regulatory problems out of the way.
    But that being said, financing this in the future is a 
problem, so I wanted to run by you an idea I've had and have 
been kicking around for a couple of years here now, which is a 
public-private partnership type idea, which is to form a new 
class of master limited partnership for infrastructure, 
specifically for building public infrastructure using private 
funds.
    That this master limited partnership would have greatly 
accelerated depreciation, so the investors in it get a very 
rapid return. If it's for public infrastructure, there would 
need to be a tax increment or a fee increment or something that 
went to that master limited partnership to fund that.
    But that I am aware of a number of investors and a lot of 
people that would be very interested in having private money go 
into fund public infrastructure under this kind of a structure, 
if it existed. So I open that up for anyone on the panel to 
comment, as to it's a good idea, a lousy idea, an interesting 
idea, whatever.
    Mr. Puentes. Just very quickly, I think that it actually 
gets to your initial point about the barriers that are facing 
some of these projects. As we work with state and local 
partners all across the country, particularly in private sector 
folks, the barriers that they're facing to getting projects 
done are regulatory. But it's not just the environmental kind 
of regulations, which are frequent target.
    But there are many states that actually prevent these kind 
of public-private partnerships from happening. There's only a 
handful of states that have the legislation in place. There are 
certain states that require each project to go through a 
legislative conversation. So the private sector is not looking 
at states where there are a tremendous amount of regulatory 
hurdles for them to enter the game. They're looking for those 
states that have the legislation in place, and where they know 
they're going to get a fair shake when it comes to negotiating 
these things.
    Representative Campbell. So those sorts of things would 
prevent this kind of activity, is what you're saying?
    Mr. Puentes. Indeed. There are many states where you just 
couldn't get to the table to do those.
    Mr. Edwards. Right. Virginia is probably the most advanced 
in PPP. It's because they passed the 1988 law on PPP, and 
they're going gangbusters on it. I would say that of these 
international global firms, mainly four of them that do this 
PPP stuff, I've read a number of quotes from the leaders of 
these companies. They say there's more money ready to invest in 
these projects, but they don't see the projects in the United 
States.
    So it's got to come--the states have to throw up the 
projects, and then there will be more than enough money going 
after them. You hear that from Wall Street people too, that you 
know, a lot of them don't want to compete on these projects, 
because they're all competing on them. So there's more money 
there than----
    Mr. Herrmann. One of the things that's interesting, I've 
been traveling around the country, talking about 
infrastructure, talking about ASCE's report card. When I came 
to Orange County, they had a local report card, and it had 
better grades than the National. So I asked them why, and they 
said they had an educated public. They increased their sales 
tax to improve their infrastructure. So I think we just have to 
educate the public that we have to make these investments.
    Dr. de Rugy. But we could also educate, if I may----
    Representative Campbell. Please.
    Dr. de Rugy. Educate the public that, you know, the private 
sector, it doesn't have to be funded through taxes. It can 
actually--there is a lot of money on the, private money, who is 
willing to be invested in these roads. They may have toll 
roads, but that means that basically the people who use these 
roads are going to be the ones paying for them.
    Representative Campbell. Right, and of course in Orange 
County, we have three different toll roads now, and this is--
the one that's being blocked now is just the completion of one 
of those. So there's a number of this sort of thing being done, 
trying to be done, where people are trying to respond to some 
of the roadblocks that are out there, and create their own 
solutions. My time is up, so I thank you very much.
    Chairman Casey. We were about to move to a second round, 
but Senator Klobuchar has just joined us. The second round will 
be the lightening round, three minutes. Senator Klobuchar is 
still in the first round, so she will have her five minutes.
    Senator Klobuchar. So I'll just take my time then, Senator 
Casey.
    Chairman Casey. Do whatever you'd like.
    Senator Klobuchar. Thank you very much. Thank all of you 
for being here. Obviously, the transportation issues for our 
country came to everyone's attention when that bridge fell down 
in the middle of a day in Minneapolis, six blocks from my 
house, actually an eight-lane highway road that I drive over 
all the time with my family, and there it went down. I said 
that do a bridge just shouldn't fall down in the middle of 
America, but it did.
    Since then, I've been very involved in these infrastructure 
issues. We obviously rebuilt that bridge in record time, an 
example, I think, for everyone of how we can get things done. 
But the second thing is that I carried the infrastructure bill 
that we just nearly passed in the Senate. We had 51 votes. In 
any other body, that would be a majority, which it is. But it 
was blocked by the filibuster.
    So I'm very focused on trying to get this done again, with 
the infrastructure bank and other things that we'd like to get 
done. As you pointed out in your testimony, Mr. Herrmann, 
inefficiencies in infrastructure are expected to drive up the 
cost of doing business by an estimated $430 billion in the next 
decade, and I think most Americans think about this in terms of 
delays in traffic and the billions of hours people sit in 
traffic.
    But it's also a drag, because we have a deteriorating 
system. If the future of our country, which I believe it is, is 
building through exports, we need to get our goods to market. 
We need to get them on barges and on GPS system that works for 
our airplanes, on the roads and the bridges, on the trains. So 
could you talk a little bit more about how this is interrelated 
with our business, and the effect if we just put our heads in 
the ground and don't do anything?
    Mr. Herrmann. Our economic study did show that 
transportation costs for businesses would increase by $430 
billion by 2020, and that's due to the inefficiencies. It's 
going to take longer to deliver finished products to market, 
and also to get the raw materials to the factories, the 
manufacturing areas where they're going to put it together.
    So our bad infrastructure is slowing down our economy, but 
it's also adding to costs because we're damaging our vehicles, 
due to the bad roads. I mean there's studies that come out that 
show, you know, we're wasting how many billions of hours in 
traffic every day. But there's also numbers in terms of dollars 
of another, I believe it's $70 billion, due to damages to our 
vehicles. So it's costing us several ways, due to bad 
infrastructure, not only just the delays to get our goods to 
market.
    Senator Klobuchar. Very good. Could you talk a little bit, 
and anyone can join here, about the infrastructure bank and how 
that could work? You're familiar with Senator Kerry--Senator 
Hutchison's proposal, which was incorporated in this bill, but 
how that would provide an incentive for the creation of public-
private partnerships? Anyone want to----
    Mr. Herrmann. Sure. We talked a little bit about the 
infrastructure banks earlier. If they can truly act as a bank, 
that they can look at projects and look at them from an 
economic basis, a standpoint, to see if they will be 
successful, if they will affect regional areas, if they're 
coordinating regional areas, state and local, they should be 
successful.
    They also should have a stream of income to pay back the 
bank, so it can truly act as a bank. So this is what is, can be 
enacted, this will be very--should be very successful for the 
country.
    Senator Klobuchar. Ms. de Rugy.
    Dr. de Rugy. If I can add, I mean the infrastructure bank, 
while it looks good on paper, and I'm assuming that a lot of 
economists would kind of welcome this idea of incentivizing the 
private sector to invest in infrastructure, my worry is that it 
may, it has the potential to become the public work version of 
Freddie Mac and Fannie Mae, and that we know is not a good 
thing.
    The other thing is like with all of these projects that are 
guaranteed by the Federal Government, there is also a risk of 
the project being hijacked for political reasons, and basically 
instead of having this project, you know, focused on building 
roads and picking the right project, it will be focused on 
hiring, you know, unemployed people, of hiring the right type 
of people, imposing some social goals to the process, which 
then would make it extremely inefficient.
    Senator Klobuchar. I don't think Senator Hutchison would 
want to make it inefficient, is what I'm thinking.
    Dr. de Rugy. I mean there's a political process, right, 
which makes it risky.
    Senator Klobuchar. And how else would you fund these other, 
all these projects that we need to get done?
    Mr. Edwards. I would say, you know, there is--you know, one 
of the problems with getting a lot of these private projects 
done is that the private finance is at a disadvantage to public 
finance. So in Northern Virginia 15 years ago, the private 
investors built the Dulles Greenway, which is a 15-mile private 
toll road, completely privately financed. But you know, they 
are against competition from nearby free government highways.
    So the drivers on private toll roads pay the gas tax, and 
also the funders of private toll roads have to raise monies 
through taxable bonds. So there is a problem there, and if 
Congress could, you know, should consider ways to even the 
playing field here, so that private sector projects aren't put 
at a disadvantage to the public sector projects. We may get 
more private sector, you know, money coming in to fund 
projects.
    Mr. Puentes. I just wanted to pull us back a bit from the 
public-private partnerships. I'm very much in favor of the 
National Infrastructure Bank. We think that this is a critical 
entity that needs to be established in the U.S. We've seen it 
work in other countries. We know that we don't have this kind 
of decision-making kind of process now to make decisions for 
projects that are truly of national significance.
    We have 50 states operating pretty much independently. When 
we have projects that are related to things like doubling 
exports, for example, those are national projects. They have 
national significance and we don't really have the mechanism 
for making decisions based on that kind of level.
    So we think that there's definitely a need for this. But we 
have to understand that this is really just a niche, and there 
are certainly projects that are going to be filled through an 
infrastructure bank. But this doesn't obviate the need to 
continue to raise revenues, to continue to pay for those kinds 
of projects that is just, I mean, the mundane kind of stuff 
that we need every day.
    I mean there's still trucks that are driving over roads 
that are in bad condition. You mentioned the bridge as a great 
example of projects that probably aren't ripe necessarily for a 
infrastructure bank. It may or may not be. But we have to 
understand this not a silver bullet that's going to solve all 
of our problems. It's obviously something we need to do, but 
it's just one arrow in the quiver. It's just one thing that we 
need to do with a whole menu of things.
    Senator Klobuchar. I agree. I'm going to over the Secretary 
with it right now, but another bridge that I'm working on with 
Representative Bachman, between Minnesota and Wisconsin, in 
which people are deciding whether or not we should allow an 80-
year-old lift bridge to exist, that's falling into the river. 
Hopefully, they will decide the right thing.
    Chairman Casey. Thanks, Senator Klobuchar. I think what 
I'll do is I'll cede my time, just to make one quick statement, 
because I think we need a lot more time on this topic. I hope 
that folks listening to this don't think that somehow there's a 
choice here, that in order to meet this challenge, we've got to 
have all private sector. That is, it's all the responsibility 
of the private sector or it's all the responsibility of the 
public sector.
    It has to be both. There's no other way it's going to work. 
But I hope that the conclusion here, the path we don't go down 
is that we do nothing, because I think if there's one thing we 
can agree on, we cannot allow this problem to persist, even if 
it means just getting a start on it. So I'm going to give my 
time up to Vice Chairman Brady or anyone else, but we need more 
work on this obviously. We don't have all the time today. Thank 
you.
    Vice Chairman Brady. Chairman, thank you very much. I'll be 
brief as well. I think Senator Klobuchar made a key point about 
the quick response in rebuilding the Minneapolis bridge, which 
collapsed because of a design flaw, of undersized steel gusset 
plates that eventually factored and generated the collapse. It 
points out what we're capable of doing when we want to cut 
through the red tape, and move projects to completion.
    Mr. Herrmann, when you talk to state highway officials, do 
they clamor for an infrastructure bank, or for Congress to 
finally fix the Highway Trust Fund?
    Mr. Herrmann. I think the Highway DOT people are looking 
for long-term funding. They need that for their planning.
    Vice Chairman Brady. Yes.
    Mr. Herrmann. They need to reauthorize the Surface 
Transportation Act.
    Vice Chairman Brady. When you talk to ports, do they seek 
an infrastructure bank or do they want the Harbor Maintenance 
Fund fixed and distributed?
    Mr. Herrmann. I think they probably want both.
    Vice Chairman Brady. I'll bet you that's not the case. Do 
you talk to airport managers? Are they asking for an 
infrastructure bank or for Congress to finally fix the Aviation 
Trust Fund long term?
    Mr. Herrmann. The FAA, they want to fix that.
    Vice Chairman Brady. I think so. In every case, they're 
talking about local officials making those decisions. They want 
the long-term certainty. One of the points Mr. Edwards makes 
that I found intriguing, is that at one point in America's 
history, it was public sector funding of the infrastructure. 
Then it moved to more private sector funding, and now we've 
sort of reverse course and moved back into a great deal of 
public sector funding.
    But other countries have moved the other direction in order 
to finance. Can you, really quickly; I only have about 30 
seconds left, can you tell us why they're doing that, and why 
we ought to look at that model?
    Mr. Edwards. Well, I think a lot of European airports, for 
example, are private. London's Heathrow, of course, and Gatwick 
are private. Sydney and Melbourne, Australia are private 
airports, and as I said, seaports have been privatized all over 
the place. In 1983, Thatcher privatized most British seaports. 
Seaport dredging in Britain is private. There's a company 
called UK Dredging that basically goes around. They contract 
with the private ports if they want dredging.
    I think in a lot of countries it's not an ideological 
thing. They just, you know, the government sector doesn't have 
the money anymore, so the same problem we have. Deficits are 
high, and so they're going to the private sector. So again, I 
don't think it's an ideological thing. I think they're getting 
good results, and as I said, you know, because of that, these 
companies that are at the forefront of this privatization, 
they're virtually all foreign these days, Australian, Canadian, 
Spanish.
    These companies are going around the world and building 
infrastructure, and you know, these should be American 
companies. I would love American companies to become the 
infrastructure experts, and then go around the world exporting 
this knowledge. But unfortunately, it's the other way around.
    Vice Chairman Brady. Again, thank you to all the witnesses 
today.
    Chairman Casey. I have to run out the door, but I want to 
make sure that Congressman Hinchey and then Congressman 
Mulvaney have the last words. Thank you.
    Representative Hinchey. Well, thank you very much. The 
Congressional Budget Office, as you know, which is objective 
and independent, estimates that infrastructure spending is one 
of the most effective fiscal policies for increasing economic 
growth and employment over the short term. Moody's Analytics 
determined that every dollar of infrastructure spending as a 
multiplier of a $1.44 out of every dollar.
    We made significant investments in manufacturing, in 
infrastructure here when we passed the American Recovery and 
Reinvestment Act. So Mr. Herrmann, Mr. Puentes, in your 
opinion, what would our current economy look like if we had not 
passed the American Recovery and Reinvestment Act, and what 
will it take for our Nation's roads to be upgraded from its 
current rating, which is D? Please.
    Mr. Herrmann. I think, as stated a little bit earlier, we 
needed $1.7 trillion over a period of years, to upgrade our 
roads from that D. I think it's a D minus for the roads, up to 
a B level. That also includes bridges and transit. We've been 
neglecting our infrastructure for years. I mean the last time 
we really put money into it was the interstate highway system, 
and that was back to the 1950s, maybe the early 1960s.
    So we really haven't been investing in our surface 
transportation, and it's starting to show. Our bridges have an 
average age of 43 years. The life span when they were designed 
probably was 50 years. Now bridges can be maintained; they can 
be--their lives can be extended by repairs, rehabilitations. 
But we have to invest, and we just haven't been doing that in 
the last couple of decades.
    So to answer your question, how do we move forward? We have 
to invest in our transportation infrastructure and all our 
infrastructure, to make sure it lasts for our children, because 
right now, we're living on our grandparents' investments.
    Representative Hinchey. Thank you. Mr. Puentes.
    Mr. Puentes. Thank you. I think we know that things would 
be much worse. The states were in particular financial 
distress. Transportation spending makes up eight, nine percent, 
something like that, of most states' budgets. So it's a big 
share, and this is really a helpful shot in the arm to them. 
But that money is now gone, and so they're facing some 
challenges again.
    But in order to make sure that we don't continue to fall 
behind, and that the condition of the infrastructure is 
maintained, I think we need to look at what was just passed by 
the bipartisan Environment and Public Works Committee. I think 
MAP 21 is the acronym.
    This is starting to make sure that the money that is spent 
is done so on more of a performance-based kind of level. So to 
monitor the conditions of the roadways today, and to frankly 
hold states and metropolitan areas accountable for how that 
money is spent. Make sure that we're not just pouring money 
into a black hole, that we're not just getting the short-term 
injections that we need, but that we're actually getting long-
term value out of this enormous investment.
    This is how we've done it in the past. We had the Federal 
Government has been kind of absent, right, and this has just 
been a block grant that's gone to the states, with no real 
accountability or transparency for how that money is spent. The 
legislation that's moving through now and is being discussed is 
trying to change that. I think it's a really good example of 
how we can have the Federal Government be present where they've 
been absent.
    Representative Hinchey. Thank you very much.
    Vice Chairman Brady. Mr. Mulvaney.
    Representative Mulvaney. Thank you. Dr. de Rugy, before I 
move on to my last question for Mr. Edwards, I wanted--it 
occurred to me, as we were having that discussion about timely 
and targeted, we actually had a circumstance in my district 
where a road was deemed to be too shovel-ready to participate 
in the stimulus program.
    It had actually--part of a phase had started and was 
partially funded, and for that reason, additional phases were 
not allowed to be funded with stimulus money. So it goes back 
to my point originally about the difficulty of the government 
operating efficiently.
    Mr. Edwards, earlier today, the Chairman mentioned and 
several folks from the panel up here have talked about the 
states lacking the fiscal ability, the financial ability right 
now to sort of get involved heavily in infrastructure. I think 
we've failed to take it to the next step of the analysis, and 
admit that we don't have the money either, and that what you've 
described today, which is something more along the lines of a 
privatized system, holds some appeal.
    It sounds like maybe the European and Asian countries have 
been driven to that type of model out of a similar type of 
necessity, and as a result, they have a system that seems to be 
beating us at various different levels.
    So I ask you sir, if we wanted to explore that possibility 
in this country, of moving towards more private funding of 
infrastructure, getting down to brass tacks, what would this 
Federal Government need to do, and how much would it cost?
    Mr. Edwards. It's mainly the states are, I think as was 
mentioned, are in substantially different positions to bring 
more private sector funding in. I think something like about 30 
of the 50 states have PPP laws on the books. Again, Virginia, 
the most advanced. I'd encourage the states to look, you know, 
at what Virginia has done.
    I think with the passage of federal transportation bills, 
we need to sort of look at evening the playing field between 
public and private. You know, one of the big advantages of 
public infrastructure is that it's tax-free finance, municipal 
bonds are federally tax free. That puts the private sector at a 
disadvantage automatically.
    Congress partly takes a response to that with so-called 
private activity bonds. These are, there's a certain amount of 
bonds that can be used, that states can use for private 
projects which are tax-free. I'd look into, you know, that in 
expanding or extending that. That seems reasonable to me.
    I mean ultimately, I would eliminate the tax-free nature of 
muni bonds, because I think it does unfairly favor the public 
over private sector. So for example, when Intel Corporation 
builds a new factory, they've got to use taxable finance. When 
a local government builds, you know, a new courthouse, they use 
tax free. That seems unfair to me.
    So I think that the Federal Government can do a lot to 
encourage the PPP movement in the state governments, but it's 
mainly the state governments.
    Representative Mulvaney. Thank you, Mr. Edwards. Thank you, 
Mr. Chairman.
    Vice Chairman Brady. Our witnesses, on behalf of Chairman 
Casey and myself, thank you again for bringing insight into an 
awfully complex issue, and I appreciate the members being here 
as well. With that, the hearing is adjourned. Thank you all 
very much.
    [Whereupon, at 3:32 p.m., Wednesday, November 16, 2011, the 
hearing was adjourned.]
                       SUBMISSIONS FOR THE RECORD

Prepared Statement of Representative Kevin Brady, Vice Chairman, Joint 
                           Economic Committee
    Thank you, Chairman Casey, for convening this important hearing.
    A good infrastructure is vitally important to the U.S. economy, 
providing Americans with millions of miles of roads; hundreds of 
thousands of bridges; tens of thousands of airports, dams, waterways, 
and transit lines; and hundreds of train stations and ports. Pro-growth 
policies such as low taxes, balanced regulation, and free market 
innovations drive the need for additional infrastructure in America. As 
a former local Chamber of Commerce executive, I can attest to the need 
for infrastructure as a critical precursor to spark economic 
development and attract businesses in communities large and small 
across America.
    Though America's infrastructure remains among the most advanced in 
the world, the American Society of Civil Engineers gave our 
infrastructure a letter grade of ``D,'' highlighting that we have a 
long way to go until we can meet the current and future infrastructure 
needs of Americans.
    The manufacturing sector is a critical input in infrastructure with 
the provision of raw materials and industrial equipment, and the 
manufacturing sector is a beneficiary that relies on the nation's 
infrastructure to transport goods to compete in the global economy.
    In fact, the manufacturing sector has opened up the prospect for 
major energy infrastructure development. An excellent opportunity for 
long-term economic growth exists today in the form of the Keystone XL 
pipeline from Alberta to Texas, which would result in at least 20,000 
new jobs affiliated with the pipeline. Long-term investment in 
infrastructure will help American manufacturing remain internationally 
competitive.
    No one disputes the value of good infrastructure. However, planning 
and building infrastructure takes years, often decades. Higher 
infrastructure spending cannot create a significant number of jobs in 
the near term. As President Obama remarked months ago, ``shovel ready 
was not as shovel-ready as we expected.''
    According to the Federal Highway Administration, the federal 
project delivery process can take up to 15 years from planning through 
construction. Environmental regulations and constraints on federal 
funding can extend this timeline even farther, resulting in costly 
delays and routine cost overruns.
    The current system of federal infrastructure spending is 
inefficient. U.S. taxpayers are not getting a good value for their 
dollars that are currently spending on infrastructure.
    Research over the past decade indicates that the growth benefits 
from federal infrastructure spending have been extremely low. The 
current system of federal infrastructure spending is broken, and must 
be fixed to make smart investments in good infrastructure projects.
    As an example, the Government Accountability Office reviewed the 
Department of Transportation's system of 6,000 employees administering 
over 100 separate surface transportation programs with separate funding 
streams for highways, transit, rail, and safety functions. The GAO 
determined this system was extremely fragmented and lacked 
accountability, impeding effective decision-making and limiting the 
ability to provide solutions to complex challenges. Analysis by the 
National Surface Transportation Policy and Revenue Committee found a 
project that should cost $500 million would actually take 14 years to 
complete and cost twice as much due to the impact of delays and 
inflation.
    Examples already abound at the state level of diverted funds, 
originally allocated to infrastructure, going to other budget items, 
suspended, or altogether forfeited. All too frequently, infrastructure 
funding fails to reach high-priority projects, diverted instead to 
projects with little or no real benefit.
    Federal regulations--such as project labor agreements, high-road 
contracting, ``Buy American'' provisions, and the Davis-Bacon Act--have 
unnecessarily increased the cost and lengthened the completion time of 
infrastructure projects. For example, the Davis-Bacon Act's prevailing 
wage requirements have led contractors to pay an average of 22 percent 
above market wage rates and have bogged down contractors with extra 
paperwork.
    An Environment Impact Statement alone can take up to 2 years to 
complete. Major infrastructure projects often require the approval of 
other federal agencies such as the U.S. Fish and Wildlife Service, the 
Advisory Council on Historic Preservation, and the U.S. Army Corps of 
Engineers.
    For the good of manufacturing, infrastructure, and American 
workers, federal regulators must consider how both proposed new rules 
and the cumulative burdens of existing rules affect the ability of 
American businesses to create jobs at home by selling in global 
markets. Federal regulators must also begin to perform retrospective 
analysis to determine if existing regulations are meeting their goals 
in cost effective ways.
    Congress should make it easier for the private sector to invest in 
transportation infrastructure, reducing the stress on already cash-
strapped federal resources. Major economies worldwide have demonstrated 
success in partially and fully privatized roads, water and sewage 
systems, seaports, and airports. America is behind the times when it 
comes to involving private capital in infrastructure development.
    The United State is capable of keeping up with other countries and 
excelling as a leader in infrastructure development. We can strive to 
achieve an ``A'' in infrastructure by addressing the systemic problems 
with our current means of funding infrastructure in conjunction with 
reform of burdensome regulations that impede the ability of both public 
and private provision of infrastructure.
    Thank you, and I look forward to the witnesses' testimonies.
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      Prepared Statement of Representative Michael C. Burgess, MD
    Thank you Mr. Chairman for the recognition. I'm glad to be here 
today to discuss this important subject.
    One of the best ways our economy could rebound, and benefit the 
manufacturing industry, would be to pass a long-term highway 
reauthorization bill. On November 28th I will be holding a 
transportation summit back in my district in Texas where engineers, 
consultants, design firms, and state and local officials will gather to 
discuss the importance of a highway reauthorization bill. I would like 
people here in Washington to know that reauthorization is the goal that 
people should be focusing upon, not political messaging bills.
    Reauthorization is not the one-off political proposals used to get 
on the news, but instead the long-term proposals that require hard work 
from both sides of the aisle. If passed, this law would put thousands 
of people to work over the next several years. This includes engineers, 
road workers, and design firms. It also includes the factories that 
produce large equipment like road graders, and the companies that 
provide the raw materials for our highways and transit systems that 
will all benefit from such a law.
    This is one of the areas of agreement in Washington that we should 
focus on. We should take our attention away from messaging bills and 
quick political points, and we should do the hard work it takes to pass 
a highway bill. Both parties agree we need a reauthorization of these 
programs. My only hope is we can actually sit down and agree and pass 
such legislation.
    I am eager to hear from our witnesses today to hear what Congress 
can do to help our economy. Thank you Mr. Chairman and I yield back.
  

                                  
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