Securing Perpetual Growth and Lower Inflation Through Infrastructure

Modern, effective infrastructure is an essential requirement for national commerce—and for growing and widely shared prosperity—even as changes in technology drive changes in infrastructure requirements. Investments in infrastructure help reduce inflation by lowering costs firms and households endure from poor transportation networks and energy inefficient structures. Infrastructure investment also induces long-term GDP growth by increasing the productiveness of the economy (also known as total factor productivity) through improvements to the built environment. 

While definitions vary, infrastructure projects include those relating to surface transportation; aviation; ports; water resources projects; energy production, generation storage, transmission, and distribution; broadband internet; pipelines; stormwater and sewer infrastructure; drinking water infrastructure; and cybersecurity. Efficient investment in cutting-edge infrastructure connects businesses and workers to more opportunities, increases productivity, and undergirds national competitiveness. 

For the US, the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA), passed in 2021, was step in the right direction (see Policy Brief: Infrastructure Investment and Jobs Act (IIJA) Rollout). For any economy, policymakers can deploy a variety of tactics to support infrastructure investment that helps lower inflation and promote economic growth, including: 

1. Improving infrastructure planning and decision making through adherence to credible cost-benefit analysis and increased stakeholder coordination and collaboration to prioritize the broader public interest.
2. Encouraging innovation, including goal and outcome-oriented approaches to state and local funding that break down silos and increase flexibility for responding to the needs of emerging or developing technologies.
3. Modernizing and streamline regulatory burdens to reduce duplication and maximize the public benefit.
4. Improving private-sector involvement through greater use of public-private partnerships.
5. Exploring alternative approaches for utilizing private investment resources to advance public infrastructure goals.
6. Moving toward user fees to more sustainably support a greater share of the US’ infrastructure portfolio.
7. Incorporating climate risk into evaluations of potential infrastructure investments. 

For more detailed policy recommendations for the United States in particular, see Today’s Infrastructure Improvements Will Drive Tomorrow’s Economy.