	Introduction

Policymakers at all levels of government are debating a wide range of options for addressing the nation's faltering economic conditions. This report presents policy issues associated with using infrastructure as a mechanism for economic stimulus. The Context: Current Economic Conditions

Interest in government spending to stimulate economic recovery has intensified recently in response to economic indicators showing significant and continuing deterioration of the national economy. Defining Infrastructure in Today's Context

Most people probably think about roads, airports, or water supply when they refer to infrastructure, having in mind the types of systems or facilities that are publicly provided and are important to the productive capacity of the nation's economy. Today, policymakers and stakeholder groups appear inclined to define the term broadly to include facilities and categories that vary considerably in the degree of historic federal investment in building or rebuilding physical structures (e.g., highways compared with public schools) and systems that have a long history of combined public and private ownership (water resource projects as well as electric transmission systems, some of which are federally owned, for example). A relatively new dimension in today's context is the notion of coupling public works with investments in environmentally friendly systems that incorporate renewable technologies or energy efficiency—called "green infrastructure" (see discussion below). Infrastructure and the Economy

Academics, economists, and policymakers debate two key issues concerning the contribution of infrastructure investment to the economy. One is the general issue of the effects of infrastructure spending and investment on productivity and growth. The second related issue is the role of infrastructure spending, including short-term job creation, as a countercyclical tool in stimulating a faltering economy. Infrastructure investment, it is argued, will be an important source of stimulating labor demand, which is lacking in the current labor market, and enhancing U.S. productivity through long-neglected investments in roads, bridges, water systems, etc. While there is growing momentum for more infrastructure investment, some analysts are cautious about the effectiveness of this type of fiscal stimulus because of one key issue: timing. By definition, the goal of stimulus spending is to get money into the economy swiftly. But that objective conflicts with the reality of building infrastructure projects that typically are multiyear efforts with slow initial spendout. First, they point out that because economists now expect the current recession to be of long duration (longer than 12 months), projects with extended timeframes can still contribute to the economy's recovery, which is likely to be a two-year undertaking. Thus, the overriding question in debating infrastructure spending as part of economic stimulus is, what will the stimulus buy? Two important considerations regarding any fiscal stimulus proposal are, will the proposal produce stimulus quickly, and will it produce a significant amount of stimulus, relative to its budgetary cost. A second issue, related to the first, concerns the tension between funding activities that will create jobs quickly and the desire to invest in projects that will have sustained value. The overriding governance issue, for all levels of government, is ensuring accountability for funds that will be spent through a stimulus program. The amounts of federal dollars committed to such a program are likely to be enormous (some advocates are proposing $850 billion or more in total stimulus, to include as much as $350 billion for infrastructure) and other direct spending, making it particularly important for the public to be assured that decisions involving public dollars are made quickly yet with transparency, that investments are made in quality projects, and that projects have adequate oversight.
Interest in using federal government spending to stimulate U.S. economic recovery has intensified recently in response to indicators showing significant deterioration of the economy. Policymakers at all levels of government are debating a range of options to address these problems. Some favor using traditional monetary and fiscal policies. Others, however, favor making accelerated investments in the nation's public infrastructure in order to create jobs while also meeting infrastructure needs. This report is an overview of policy issues associated with the approach of using infrastructure as a mechanism for economic stimulus.
When most people think about infrastructure, they probably have in mind systems that are publicly provided and are important to the productive capacity of the nation's economy. Today, policymakers define the term more broadly to include both publicly and privately owned systems and facilities and categories that vary considerably in the degree of historic federal investment in building or rebuilding physical structures. A relatively new dimension in today's context is the notion of coupling public works with investments in environmentally friendly systems that incorporate renewable technologies or energy efficiency—called "green infrastructure."
Academics, economists, and policymakers debate two issues concerning the contribution of infrastructure investment to the economy. One is the effects of infrastructure investment on productivity and growth, including job creation. The second related issue is the role of infrastructure spending, which is typically a long-term activity, as a short-term mechanism to stimulate a faltering economy. Research conducted over time has resulted in a general consensus that there can be positive returns on productivity of investing in infrastructure. Many experts now argue that infrastructure spending could be an important source of stimulating labor demand and enhancing U.S. productivity through investments in roads, bridges, water systems, etc. Still, some analysts are cautious about the effectiveness of this type of fiscal stimulus because of one key issue: timing. By definition, the goal of stimulus spending is to get money into the economy swiftly. But that objective can conflict with the reality of building infrastructure projects that typically are multiyear efforts with slow initial spendout. Spending advocates counter that because the current recession is expected to be of long duration, projects with extended timeframes can still contribute to the economy's recovery, and that investments that improve long-term productivity are preferable to options that focus on consumption as a stimulus tool.
The overriding question in debating infrastructure spending as part of economic stimulus is, what will the stimulus buy? Two important considerations are, will the proposal produce stimulus quickly, and will it produce a significant amount of stimulus, relative to its budgetary cost. Because of the urgency of responding to the recession, stakeholder groups have been preparing lists of projects that are "ready to go," but the criteria for developing these lists are largely unknown. There is tension between the goal of funding activities that will create jobs quickly and the desire to invest in projects that will have sustained value that contributes to U.S. productivity.
A critical issue for all levels of government is ensuring accountability for funds that will be spent through a stimulus program, to assure the public that decisions involving public dollars are made quickly yet with transparency, efficiency, and sufficient accountability.
This report will not track legislative developments; other CRS reports referenced here will do so.