Infrastructure Funds Are Flowing, but Impact Won’t Be Known for Years
Adie Tomer, a senior fellow at Brookings Metro, says implementation of the Infrastructure Investment and Jobs Act is on track. But it will take years to understand its economic impact.
Federal lawmakers spent years talking about making a big investment in infrastructure before they finally struck a deal two years ago. President Joe Biden signed the Infrastructure Investment and Jobs Act (IIJA) in November 2021, calling it “a blue-collar blueprint to rebuild America.”
The bill, also referred to as the Bipartisan Infrastructure Law, invests an additional $550 billion in roads, bridges, airports, water systems, broadband connections and other aspects of national infrastructure over a five-year period. It’s split between formula programs, which send a set proportion of federal funding to individual states, and competitive grants, which states and cities apply to directly.
Adie Tomer, a senior fellow at the liberal think tank Brookings Metro, has been tracking the national infrastructure debate since before the passage of the IIJA, and a related piece of legislation, the Inflation Reduction Act (IRA), the following year. In a recent analysis, Tomer wrote that the IIJA implementation is “just now hitting its stride.”
“Formula and direct federal spending continue to move at a steady pace, already pumping $306 billion into state coffers and direct investment projects,” he wrote. “And like an athlete who grows into a game, competitive grantmaking is steadily increasing, with 80 percent of all competitive funding still left to be awarded. Just as importantly, the Biden administration has shown no flagrant political bias in splitting awards among states — certainly welcome news to the bipartisan legislators who authored the bill.”
Tomer recently spoke with Governing about the implementation of the law. The conversation has been edited.
Governing: It’s been two years since the IIJA was passed and in your latest piece I think you sound fairly sanguine about the bill and the progress it’s made so far. Can you start by giving me your overall take on how implementation is going?
Adie Tomer: It’s been a prosperous two years for American federalism when it comes to infrastructure governance. The focus of our piece, and most of the analyses done by others so far, has been on the federal government. The way the law works — and these mechanics really matter to be able to analyze it well — the federal government is really in the driver’s seat right now, by the law’s design. And that’s for three reasons.
One, roughly 75 percent of the bill is direct spending, mostly formula. So it’s just paint by numbers: They just have to send the money out. That’s at the federal level and that’s where the big dollars move. Second, the administration has control over the other 25 percent in terms of standing up new programs, and for all of the competitive programs, deciding who wins. Third, it takes a while to start infrastructure projects. It’s a lot easier to see where the money is awarded to, almost like a transfer. It doesn’t mean the account receiving it has necessarily spent the money yet. It takes longer for state and local governments to stand up their spending.
So there’s a whole other conversation about, when will we see all the IIJA and IRA numbers in the economic data? There’s a reason we’re not presenting that as much yet; it’s a little bit of a tricky business to know when you’re going to see it. To sum up, the federal government is the natural focus area right now.
So am I sanguine? Absolutely. It is a massive lift. It is the largest infrastructure investment at the federal level since at least the late 1970s and early 1980s, which effectively correlates with the final stages of the original interstate highway build-out. So there’s a ton of money to move and they’ve been moving it quite well. The progress is where you’d expect. So my sanguineness is because they’re doing their job.
Governing: I was going to ask if you could put the IIJA in perspective, which you’ve just sort of done in terms of scale. Qualitatively, too, how does it compare to what was being discussed during the Trump administration, the early years of the Biden administration, and to other infrastructure investments over the past few decades?
Adie Tomer: It’s different. If what we care about is building out a healthier infrastructure system in the U.S. — and if you want to peel beneath that, I would say a more sustainable and resilient and inclusive or equitable infrastructure system — then the IIJA is absolutely a shift in a positive direction from past federal proposals in at least two key ways.
First, to compare with the Trump administration, this system is not as dependent on private profitability to grow the scale of investment. The way the Trump administration designed their proposal was that they wanted a significant amount of private capital to come in, and they were willing to subsidize it. We have seen through the IRA that that can be effective, but the IRA is focused on privately owned assets, particularly energy utilities. Those are heavily regulated, but I’m sure you know from whoever you write your bill to, it ain’t the government. And then, of course, all the manufacturing-related investments, whether it’s electric vehicles, or batteries, et cetera: Those are private companies too.
That is not how our transportation or water systems work. IIJA makes sure we invest more in infrastructure that has broader social returns rather than first prioritizing private returns. They’re not mutually exclusive, but IIJA leads with that. There’s profit to be had in transport and water too, just like there’s public good to be had in our energy systems. It’s just a different approach. In that sense, it’s a positive development.
Secondly, the IIJA proved that the federal government, both Congress and the executive branch and agencies, can in fact coordinate multiple infrastructure sectors at once. Typically we pass these bills as separate authorizing legislation: a transport bill, a water bill, et cetera. IIJA proved we can pass this as an omnibus authorizing bill. That is a long-term positive development for how legislators and their staff approach these bills in the future.
Governing: You’ve written about how macroeconomic forces are going to define the scope of the achievement. Do you have any sense of how things are shaking out macroeconomically and how the overall scope of work is going to differ from what we might have thought two years ago?
Adie Tomer: Infrastructure is built to help the economy grow. You don’t build infrastructure just for infrastructure’s sake. And we are not going to know the full extent of IIJA’s impact, not just until it is complete, but until at least another five years after that. Emphasis on probably. When does the economy fully respond to these types of investments? You never know. But let’s just say, at least 10 years from bill signing is when we’re going to start to feel maybe confident.
The numbers that we will see most clearly will be on employment during the build-out. What is harder, if not impossible to know in real time, is the amount of projects we construct relative to if we had more favorable economic conditions.
There’s two big factors there that folks know about so they’re pretty easy to communicate. One is inflation in materials and labor. About a year ago we wrote about both. And the other part of it is, of course, the interest rate environment. Government entities go to the municipal bond markets to borrow and pay for things up front. It’s no different than buying a home or putting a new roof on the home. Those are real headwinds right now. It doesn’t feel good to say it, but actually, a recession could create a more favorable environment for the infrastructure agencies to invest. On net, a recession is not good, but for them it is.
Governing: The bill invests a lot of money in the status quo for transportation — driving-focused infrastructure. There’s money to eliminate emissions from vehicles, too. But you’ve suggested that cities and states can help set up transformations in the overall investment picture by how they take advantage of some of the smaller competitive programs that are focused on community design, like Safe Streets and Roads for All. Can you say how that could work?
Adie Tomer: IIJA has created a bona fide opportunity for state DOT staff to develop new cultural approaches to project development. That is a profound opportunity. There’s clearly a cultural shift happening on transportation. It’s no different inside these agencies. Folks who came up through the agencies, their teaching was focused almost exclusively on automobiles, how to move them faster and safer. For decades in universities, particularly in engineering and even business management, there wasn’t a focus on environmental consequences. That cultural shift needs to take root. And that takes time. I’m a big believer that rather than expect people to just change their entire perspective, especially on their careers, just because someone tells them to, you have to show people. You have to demonstrate differences.
Rather than wholesale change what we do with the surface transportation programming — which is extremely flexible — IIJA is a chance to demonstrate a few projects and design them differently, and that includes community outreach. How agencies listen to communities, when they have the meetings, how they get input, that could be improved dramatically. How they design them, how they build them. IIJA has benefits on the procurement side on how to make sure you create wealth-building opportunities for different market actors.
Most large and midsize metro areas have an award. They have something that demonstrates this new way. So there’s not just a new path, there’s this relative ubiquity to the action itself. That is enormous. It’s going to be very easy to discount it right now because we kind of can’t see it.
It’s the same thing we’re talking about with the economic question. It’s kind of happening in real time. IIJA and these competitive grants give us the opportunity to actually shift culture. Also huge credit [goes] to the legislators: They’ve already written in more flexibility to the formula programs. It’s going to be interesting to see what information bubbles up as successes and failures that can inform the next authorization so we can keep this iterative process moving in the right direction.
Governing: Two more things. You’ve said the onus now is on cities and states to implement the project. What are the most promising things cities and states are already doing, and how should they be spending their energy over the next few years?
Adie Tomer: The most promising element is that we are seeing record amounts of applications: states, local governments, nonprofits and other partners actually trying to compete for these competitive grants. There is clearly an appetite to rebuild America. Those places want to build. They have to come up with their own money. Most of these competitive grant programs have far larger local match rates, so they are putting up their own money and oftentimes it’s a significant nominal amount. Communities of all political persuasions want to build differently. They want to modernize America. That is a really promising sign.
The area that we need to continue to work on, I’d argue, is what the state recipients do with formula funds. There is more of an awakening inside federal Washington — not just folks who are empowered but folks like me on the outside looking at it — that the formulas bestow tremendous power on the states, and there’s no guarantee that the states are going to be pursuing national objectives with the funding.
That is a feature of the system — I’m not suggesting that the folks on Capitol Hill want to change — but there is an awakening that if 75 percent of your bill is oriented around formulas that go to the states, then you really are leaving it up to the states on how they want to spend that money. I think there’s a growing recognition that we have to have a purpose-built approach to this.
Governing: I’ve heard you say that infrastructure is something that people want to ignore and it’s not something that gets people to the polls. Do you think that’s true forever? Is there any way a smart administration could create political capital out of a program like this? Based on what you just published it doesn’t seem like they’re trying to. But is any of what comes out of this bill likely to influence future political support for more spending?
Adie Tomer: I continue to believe that at the national level you don’t win campaigns on infrastructure. It’s an area where you govern once elected. That’s as true about legislators as it is about a president. It is incredibly difficult to know the challenges of selling infrastructure politically; is that a reason why Biden’s poll numbers are relatively low? To me that’s an impossible needle to thread, even for the best of pollsters.
My sense is that it’s an area where people expect government to just work for them. They want the water to come out of the tap and be clean. They don’t want to think about what it would take to make it clean. It’s not something people are interested in, and I don’t blame them.
As you get more and more local, that’s where infrastructure becomes much more politically resonant. Part of the challenge is how Biden can possibly sell projects in one place to someone who lives somewhere else. There are massively, nationally important projects happening in the Northeast rail corridor. But how do you explain to someone in California or in Oklahoma that the Northeast Corridor investments matter to them. Say they don’t work in finance and they’re never in New York. That’s a hard sell.
On the other hand, if you’re going to build a new set of bike lanes in L.A. or a repaving project in Oklahoma City, they will see and feel that. I just question how much they’re going to connect that back to even the Biden administration, to say nothing of their federal legislators. It’s probably more likely their mayor or county official they’re going to associate with that.
It’s a tough sell. But it’s still the right thing to do. Both of these bills, the IIJA and the IRA, they were the right thing to do for both sides of the aisle, and they also don’t come at political consequence. Everyone probably wins a little bit. It builds trust in the government, and that’s a far bigger national project for our politicians. And we should all feel good about that. But chances are it will not have a big part to play in the 2024 presidential campaign.