Is There a Shartfall in Public Capital Investment? An Overview

A nation can use its current output to provide for the future in numerous ways: it can undertake private capital investment, add to the stock of public capital, enhance income-producing assets abroad, invest in human capital through education and health programs, conserve natural resources and the environment, and invest in science and technology. During the 1980s none of these approaches were pursued vigorously and most of the country’s increase in output went for consumption rather than the enhancement of future production; the adverse effects of debt-financed consumption on private investment, net foreign investment, and human capital have been well documented. In the past few years, however, academic work, commission reports, and natural disasters have highlighted the fact that the nation has also been neglecting its stock of public capital. Stories abound of deteriorating roads, bridges, and sewer systems, which have often led to serious collapses or other disasters. Almost everyone has experienced the frustration and delay of congestion on overburdened roads and airports. Political developments have also raised the importance of public capital investment on the national agenda. At the federal level, dissolution of Cold War tensions has spurred debate on the reallocation of spending from military to other uses, although this has been mitigated somewhat by recent developments in the Persian Gulf. The impending re-authorization of the federal highway bill also has sparked a great deal