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To Stay Competitive, U.S. Needs More Digital Infrastructure

A new Information Technology and Innovation Foundation report argues that any U.S. infrastructure plan should bank on digital infrastructure because it offers the greatest long-term social and economic gains.

A person using an iPad to digitally add infrastructure to an image of a city.
A new report suggests if President Joe Biden and Congress don’t invest enough in digital infrastructure, the U.S. will lose out in terms of global long-term competitiveness.

The report, written by Information Technology and Innovation Foundation (ITIF) President Robert Atkinson, plays off of Biden’s “build back better” motto. Atkinson implies the country won’t be “better” if a comprehensive infrastructure plan overemphasizes physical infrastructure while other countries invest heavily in things like smart cities, modernized electric grids and 5G.

“America will lose a critical opportunity if the infrastructure package focuses on 20th century infrastructure while China leapfrogs ahead with 21st century infrastructure,” Atkinson wrote.

While infrastructure like road capacity improvements “should not be ignored,” Atkinson explains that investments in physical infrastructure don’t pay off as much as they used to. On the other hand, investment in broadband and smart-grid infrastructure could lead to financial returns in the tens of billions.

“A widely cited 1989 paper finds that increasing traditional infrastructure investments in projects such as roads, transmission lines, and bridges by 1 percent increases productivity by 0.23 percent,” Atkinson wrote. “But as the U.S. interstate system has become built out, the efficiency of these investments has declined. One study finds that U.S. highway investments generated annual total economic returns of 18 percent in the 1970s, 5 percent in the 1980s, and just 1 percent in the 1990s.”

Another issue is that America’s traditional infrastructure has become more susceptible to cyber attacks. Many types of physical infrastructure are now hybridized with digital parts. As such, protecting infrastructure in the 21st century will require significant investment in cybersecurity, as argued by the report.

“Vulnerable physical infrastructure, especially the industrial control systems running dams to wastewater systems to the electric grid, exposes the United States to potential attacks from adversaries that could cause considerable economic and physical damage,” Atkinson wrote. “Investing in digital infrastructure creates opportunities to modernize these systems and address urgent vulnerabilities.”

The report also contends that the prospect of short-term job creation shouldn’t lead the country to put all of its eggs into the physical infrastructure basket. Citing new jobs to justify a focus on physical infrastructure is “misleading,” as digital infrastructure tends to cost less while also adding jobs and other economic benefits.

“[A]ny deficit-financed spending would create jobs as the money got spent,” Atkinson wrote. “The government could create jobs, to paraphrase Keynes, even if it put $100 bills in old wine bottles and buried them in abandoned mines.”

The report provides several policy recommendations relevant to state and local areas. Specifically, the infrastructure plan should include money for the following: state and local IT system modernization; smart city pilot programs for municipalities; “access to next-generation supercomputing and quantum computing” for all local areas; and broadband for unserved areas.

Additionally, states should receive support for “hybrid digital technology solutions, including using funds to upgrade cybersecurity measures,” according to the report.

Government Technology is a sister site to Governing. Both are divisions of e.Republic.
Jed Pressgrove has been a writer and editor for about 15 years. He received a bachelor’s degree in journalism and a master’s degree in sociology from Mississippi State University.
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