cannot meet future freight tonnage load. Schools require a staggering $127 billion to bring facilities to decent operating condition. Billions of gallons of untreated sewage continue to be discharged into U.S.’s surface waters each year. Economic growth One of the most classic macroeconomic inquiries is the effect of public capital investment on economic growth. While many analysts debate the magnitude, evidence has shown a statistically significant positive relationship between infrastructure investment and economic performance. U.S. Federal Reserve economist David Alan Aschauer asserted an increase of the public capital stock by 1% would result in an increase of the total factor productivity by 0.4%. Aschauer argues that the golden age of the 1950s and 1960s were partly due to the post-World War II substantial investment in core infrastructure (highways, mass transit, airports, water systems, electric/gas facilities). Conversely, the drop of U.S. productivity growth in the 1970s and 1980s was in response to the decrease of continual public capital investment and not the decline of technological innovation. Likewise, the European Union nations have declined public capital investment through the same years, also witnessing declining productivity growth rates. A similar situation emerges in developing nations. Analyzing OECD and non-OECD countries’ real-GDP growth rates from 1960 to 2000 with public capital as an explanatory variable (not using public investment rates), Arslanalp, Borhorst, Gupta, and Sze (2010) show that increases in the public capital stock does correlate with increases in growth. However, this relationship depends on initial levels of public capital and income levels for the country. Thus, OECD countries witness a stronger positive link in the short term while non-OECD countries experience a stronger positive link in the long term. Hence, developing countries can benefit from non-concessional foreign borrowing to finance high-prospect public capital investments. Given this relationship of public capital and productivity, public capital becomes a third input in the standard, neoclassical production function: where: Yt represents real aggregate output of goods and services of the private sector At represents productivity factor or Hicks-Neutral technical change Nt represents aggregate employment of labor services Kt represents aggregate stock of nonresidential capital Gt represents flow of public capital stock (assuming services of public capital are proportional to public capital) In this form, public capital has a direct influence on productivity as a third variable. Additionally, public capital has an indirect influence on multifactor productivity as it affects the other two inputs of labor and private