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Infrastructure Investment in the United States | U.S. Department of the Treasury
U.S. DEPARTMENT OF THE TREASURY
Infrastructure Investment in the United States
November 15, 2023
Eric Van Nostrand, Assistant Secretary for Economic Policy (P.D.O.)
Two well-documented facts characterize infrastructure investment in the United States: it has
fallen in recent decades and reversing that decline would deliver meaningful economic
benefits.1 Investing in our infrastructure can strengthen our long-term productive capacity while
creating opportunity for Americans in disadvantaged communities. That combined focus on
growth and broadly spreading economic opportunity is the foundation of what Secretary Yellen
has called “modern supply-side economics,” an important element of President Biden’s
Investing in America agenda.
Two years ago, President Biden signed the Bipartisan Infrastructure Law (“BIL”) into law. The BIL
directs $1.2 trillion of federal funds towards transportation, energy, and climate infrastructure
projects, most of which is distributed via state and local governments. On the BIL’s second
anniversary, we review recent trends in the economics of American infrastructure. We offer
three key conclusions:
State and local capital investment—a major component of U.S. infrastructure spending—
has grown as a share of state and local spending over the past two years by the largest
amount since 1979. Even though infrastructure investment typically falls as a share of the
economy at the beginning of economic recoveries, the United States has bucked that trend
during this recovery.
BIL funding announced to date is flowing to the states that need it most: states with the
lowest-rated infrastructure are receiving more funding per capita than states with the
highest-rated infrastructure.
Historically, states with higher median household incomes tended to invest more in
infrastructure. But the BIL has helped reverse that pattern, as lower-income states have
tended to receive more BIL funding per capita.
MACROECONOMIC PERSPECTIVE
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The multi-decade downward trend in U.S. infrastructure investment before the BIL is well
documented.2 Since most federal infrastructure funding flows through state and local
governments, one way to gauge the overall trend is to consider state and local gross investment
in equipment and structures (“capital investment” hereafter). Because most federal BIL funding
also flows through state and local governments, we consider the history of state and local
capital investment as a proxy for infrastructure investment. 3
Figure 1. Infrastructure investment has trended down for decades and
fell sharply during the pandemic, but has rebounded over the past two
years.
As shown in Figure 1, the share of their budgets that state and local governments devote to
capital investment fell sharply in the 1970s and early 1980s before stagnating and drifting
downwards over the decades that followed. During the COVID-19 pandemic, state and local
capital investment fell in lockstep with broader economic output. But during the first year of the
recovery, it did not keep pace with the sharp rebound in economic activity and fell sharply as a
share of the economy. Since the BIL passed, though, state and local capital investment has
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rebounded and returned to pre-pandemic levels. The two-year increase in state and local
capital investment as a share of state and local spending—1.6 percentage points—is the largest
since 1979.
Indeed, state and local capital investment typically falls as a share of total state and local
spending during economic recoveries, as governments tend not to increase their infrastructure
investment just as the economy is rebounding. Figure 2 shows that this recovery conformed to
that typical pattern for about the first year and a half of the recovery, into the beginning of 2022.
In some sense, such countercyclical investment is intuitive: perhaps infrastructure investment is
most beneficial in recessions when job creation is most important. But the initial response to
the COVID recession was understandably not focused on conventional public infrastructure.
Since the BIL was passed in 2021, capital investment has bucked the typical trend and
recovered sharply.
Figure 2. Infrastructure investment tends to fall as a share of total state
and local spending during the first few years of an economic recovery,
but since 2022, this recovery has bucked that trend as infrastructure has
rebounded.
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THE BIPARTISAN INFRASTRUCTURE LAW: DIRECTING
FUNDS TO STATES THAT NEED IT MOST
The pre-BIL decline in infrastructure investment has been broad-based. Figure 3 plots the
change in state and local capital investment across states (as a share of GDP by state) from 20092021, from the business cycle trough in the Great Recession to the passage of the BIL. Forty-two
states saw declining infrastructure investment as a share of their economies over this period.
Figure 3. The decline in infrastructure investment over the prior
business cycle was broad-based across states.
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To track project announcements related to the BIL, the White House launched Invest.gov. We
previously examined Invest.gov data on private investments related to the Inflation Reduction
Act; here, we review Invest.gov data on announced projects financed by the BIL, including
specific discretionary projects and formula-based allocations to state and local governments.4
Analyzing announcement data requires particular care, but there are important lessons to be
gleaned in the robust set of investments announced so far.
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Invest.gov tracks more than $350 billion in announced BIL funding through October 2023. About
half the BIL announcements to date focus on major projects like roads and bridges, but a variety
of other uses are included as shown in Figure 4. Broadband, public transportation, water
infrastructure, and clean energy are especially important contributors.
Figure 4. About half of BIL project announcements focus on roads,
bridges, and other major projects.
One conclusion from these data is that BIL funding is concentrated in the areas that need it
most. The American Society of Civil Engineers (ASCE) grades states on the quality of their
infrastructure across several dimensions including roads, bridges, water, and public transit.
Overall infrastructure grades for U.S. states range from C+ to D—itself a recognition of the
challenged state of our infrastructure overall that the BIL looks to address. Figure 5 shows the
announced BIL funding per capita for states at each grade level, showing that states with lower
overall grades are receiving more funding per capita. This finding increases confidence that the
money is going to the places that outside experts suggest need it most.
Figure 5. States with the lowest-rated public infrastructure are receiving
more BIL funding per capita than states with the highest-rated
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infrastructure.
GEOGRAPHIC DISTRIBUTION OF BIL ANNOUNCEMENTS
While pre-pandemic infrastructure investment tended to be higher in states with higher
household incomes, BIL announcements have the opposite pattern: lower income states are
tending to capture more infrastructure investment.
Figure 6 shows that states with higher incomes historically tend to invest more in infrastructure
per capita than lower-income states. In 2019, state-level capital investment per capita was 38
percent correlated with state-level household income. In some sense, that is to be expected:
states with higher household incomes have more tax revenue per capita to invest in
infrastructure.
Figure 6. Before the pandemic, state and local infrastructure investment
was higher in states with higher household incomes…
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Notably, though, BIL announcements do not show this pattern. As shown in Figure 7, there is no
significant relationship between BIL funding per capita and household income across states.
This suggests that BIL announcements reflect a more equitable distribution of infrastructure
investment than is normally the case.
Figure 7. …but announced BIL data does not show this relationship, as
state income levels are not related to their BIL funding…
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Moreover, it is clear from Figure 7 that four states—Alaska, North Dakota, Montana, and
Wyoming—have seen disproportionate BIL funding per capita. These states have low
populations, so one or two significant infrastructure investments greatly increases capital
spending per resident. Figure 8 shows that without these four outliers, the relationship between
BIL funding and GDP per capita turns negative, suggesting that BIL funding is being directed
toward states with lower incomes.
Figure 8. …and when removing the distortion from the four rural states
with low populations, the relationship flips: BIL funding is tending to go
toward lower-income states.
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Moreover, investments in lower-income areas are not only good for equity: they can also offer
higher economic returns, as areas with more distressed job markets or other disadvantages
have more economic slack that can be closed with public investment.5
To illustrate this point further, we consider BIL announcements on public transportation—an
especially important component of our national infrastructure with respect to equity and the
environment. Less wealthy Americans are more likely to rely on public transit, and reliable
public transit encourages everyone to reduce gasoline use. Historically, capital investment on
public transportation has been strikingly small—about 0.1 percent of GDP as shown in Figure 9.
Most wealthy countries are spending more, and China spends ten times as much.6 Somewhat
encouragingly, though, U.S. transit spending has been on a gradual uptrend over the past few
decades. BIL announced funding includes more than $34 billion for public transportation
already, itself more than a year’s worth of all capital spending on public transit by federal, state,
and local governments.
Figure 9. Capital investment in public transportation is small in
aggregate—about 0.1 percent of GDP—but has grown steadily over the
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past few decades.
It will surprise no one that capital spending on public transportation is typically concentrated in
large states with large cities. And it makes sense that densely populated areas will see more
value in public transit than lower-density areas. Nonetheless, BIL announcements include
important transit investments in a wider range of states than has been the case in the past. In
2019, only five states accounted for about two thirds of all investment in public transit. Those
five states account for only about 40 percent of announced BIL funding.
Figure 10 compares per-capita pre-pandemic capital spending on public transportation by state
with per-capita BIL funding announcements. The red bars plot 2019 investment; the blue bars
plot BIL announcements. In 2019, Hawaii and Washington invested the most per capita on
public transportation, followed by New York, Massachusetts, and California. The blue bars show
the distribution of BIL announcements, which is much more even across states. Thirty-eight
states are receiving more than twice as much BIL transit funding per capita as their prepandemic annual transit investment; twenty states are receiving five times as much; and ten
states are receiving ten times as much.
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Figure 10. Per-capita public transportation announcements from BIL
funding are much more evenly distributed across states than typical
transit investments.
CONCLUSION
It is still too early to assess the full economic benefits of the Bipartisan Infrastructure Law: much
of the BIL’s impact on productivity growth will materialize only in the long term. However, there
is much reason to be encouraged by the trends observed so far. Not only is the surge in state
and local capital spending macroeconomically significant—the largest two-year increase since
1979—but the funding is landing in the places that need it most, those states with lower-rated
infrastructure and those states with lower median household incomes. The BIL is an important
example of President Biden’s commitment to grow our economy for the long run in an
especially equitable manner.
1. Labonte, Marc. 2018. “Economic Impact of Infrastructure Investment.” Congressional Research Service, report no. R44896,
January 24, 2018. https://crsreports.congress.gov/product/details?prodcode=R44896.; Gechert, Sebastian. 2015. “What fiscal
policy is most effective? A meta-regression analysis.” Oxford Economic Papers, vol. 67, no. 3, July 2015, pp. 553–580.
https://doi.org/10.1093/oep/gpv027.; Ramey, Valerie A. 2021. “The Macroeconomic Consequences of Infrastructure Investment.”
In Economic Analysis and Infrastructure Investment, edited by Edward L. Glaeser and James M. Poterba, pp. 219–268. University
of Chicago Press.
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2. Labonte (2018).
3. See, for example, McNichol, Elizabeth. 2019. “It’s Time for States to Invest in Infrastructure.” Center on Budget and Policy
Priorities, March 19, 2019. https://www.cbpp.org/research/its-time-for-states-to-invest-in-infrastructure.
4. Data is derived from the White House’s Invest.gov data at https://www.whitehouse.gov/wpcontent/uploads/2023/11/Invest.gov_PublicInvestments_Map_Data_Updated11062023.xlsx
,
“BIL_StateLevelSummary_Data” tab, last updated November 6, 2023, reflecting BIL announced funding as of October 31, 2023.
Data includes only project announcements that went to a single state; therefore, announcements for projects that cross
multiple states are excluded from the dataset.
5. See, for example, Bartik, Timothy J. 2020. “Using Place-Based Jobs Policies to Help Distressed Communities.” Journal of
Economic Perspectives vol. 34, no. 3, Summer 2020, pp. 99–127.; Austin, Benjamin, Edward Glaeser, and Lawrence Summers.
2018. “Jobs for the Heartland: Place-Based Policies in 21st-Century America.” Brookings Papers on Economic Activity, Spring
2018, pp. 151–232.
6. McBride, James, Noah Berman, and Anshu Siripurapu. 2023. “The State of U.S. Infrastructure.” Council on Foreign Relations,
September 20, 2023. https://www.cfr.org/backgrounder/state-us-infrastructure.
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