A Cornerstone of our Nation ’ s Economy
The Financial History of Infrastructure
By Gregory DL Morris
It has never been possible , and may not ever be possible , to move people safely and comfortably as a profitable business . That was the startling consensus among many sources contacted for what was intended to be a simple article on the financial history of infrastructure .
To be sure , there are specific operations that have been financially successful in covering operating costs , but on an all-in , full-cost basis , transportation is no different than other forms of infrastructure : the opex by itself just can ’ t support the capex over the long run .
With bills for many billions of dollars in spending over many years currently winding their way through Congress , infrastructure spending is in the headlines and on the minds of taxpayers and policy makers .
Infrastructure is as old as civilization . Indeed , it is not too much exaggeration to say that infrastructure is civilization . Greek theaters and markets , Roman roads and aqueducts , and Aztec irrigation systems all attest to that . In virtually all
New York Governor DeWitt Clinton opens the Erie Canal , 1825 . cases a central authority — a city , a king , an empire — alone was able to amass and commit the planning and funding , often from taxes , for the initial capital expense . Taxes also supported operating expenses , supplemented by tolls or other user fees .
Throughout history there has usually been broad agreement among voters and elected officials that roads , bridges , public transportation , water and sewer systems , and power grids are a necessary public good . The major debates have mostly been about how to pay for them . In stark contrast , the constitution of the Confederate States of America explicitly prohibited spending on “ internal improvements .”
In the notoriously fractious United States , a nation founded in large part on a tax revolt , the proper scope and scale of public funding for what used to be called “ internal improvements ” have been hotly debated since colonial times . From the ambitious plans for the Erie Canal , supported by New York Governor DeWitt Clinton , to the lavish land grants for the transcontinental railroad , supported by President Abraham Lincoln , to the massive funding for the interstate highway system , supported by President Dwight Eisenhower , the decision has usually swung to broad scope and epic scale .
The glaring exception in the US has been passenger rail . Amtrak ( formally the National Railroad Passenger Corporation ) turned 50 this year , and for all that time , almost every discussion or news coverage has branded it with the scarlet letter of red ink : “ money-losing .” That is not untrue in the sense of all-in , full-cost accounting , but that standard is never applied to other forms of transportation .
For fiscal year 2019 , the President ’ s budget submission for the Federal Aviation Administration was $ 16.1 billion , including $ 3.4 billion “ grants-in-aid ” to airports . Was that called a subsidy to the airlines ? Hardly . It was painted as a sound investment : Aviation is “ a cornerstone of our nation ’ s economy , it contributes approximately $ 1.5 trillion annually to the national economy , provides 12 million jobs and constitutes 5.4 % of the gross domestic product .”
In the same vein , car and truck companies could never be profitable if they had to build and maintain roads and bridges .
“ The 1971 legislation that created Amtrak included the idea that it should at least try to become a profitable operation ,” said Jim Mathews , president and CEO of the Association of Railroad Passengers . “ The congressional staffers at the time
24 FINANCIAL HISTORY | Summer 2021 | www . MoAF . org