Inflation strangles infrastructure

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KEY POINTS TO REMEMBER

  • Last year, Republicans worked with Democrats to pass comprehensive legislation aimed at improving America’s aging infrastructure, with significant increases in funding for transportation projects.
  • The law is undermined by soaring inflation, with soaring commodity prices.
  • Now the left is pushing for reckless spending that will only make it harder for states to capitalize on investments made under the bipartisan Infrastructure Investment and Jobs Act.

Last year, Republicans worked with Democrats to pass the bipartisan Infrastructure Investment and Jobs Act. The law provides significant increases in funding to update America’s aging infrastructure systems. Those investments are now being undermined by soaring inflation, which was triggered when Democrats blocked a $2 trillion partisan stimulus last year.

Democrats in Congress and the Biden administration now want to spend even more, so as to drive up inflation and make it harder for states to build the infrastructure they need.

Inflation has soared since Democrats dumped $2 trillion into the economy as part of their partisan ‘COVID relief’ right in March 2021. In June, consumption prices increased by 9.1% over the previous year. But it’s not just consumers who are affected by high prices – almost every sector of our economy is affected by inflation. This spring, as construction season intensified across the country, states and businesses were paying high prices for the supplies they needed to build infrastructure projects, and prices remain high this summer. From June, prices for asphalt increased by 77.5% compared to a year ago; concrete products are up 13.5%; sand, gravel and crushed stone jumped 9.3%; and cement was up 6.8%. Beyond raw materials for construction, the cost of machinery and equipment increased by 11.5%; tires are up 15.2%; and diesel fuel increased by 111.1%.

Construction costs are rising

The Infrastructure Act provided a new five-year authorization for federal surface transportation programs. It authorized $303.5 billion for roads and bridges through fiscal year 2026, an increase of about 35% from the previous authorization. It provided additional direct funding for several initiatives, such as $27.5 billion for bridge improvements. But rampant inflation of building materials and equipment is driving down project costs. ball, undermine increased funding. Things could get worse. According to a analysis per the Eno Center for Transportation, if highway cost inflation exceeds 7% per year through FY2027, the increased funding provided by the IIJA will be largely eroded.

Companies involved in building these infrastructure projects have sounded the alarm over construction inflation. Last month a group of them urged the Biden administration to expand flexibilities that currently exempt their projects from “Buy America” requirements, so they can purchase building materials at low prices.

While states are forced to consider project delays due to inflated prices, Democrats are re-engage to their reckless tax and spending spree. The Biden administration is also pursuing onerous regulations that could further limit states’ ability to build. To meet the “climate challenge”, the Ministry of Transport recently announcement a notice of proposed regulations to impose performance measurement of greenhouse gas emissions on state departments of transportation and metropolitan planning organizations. Last fall, under an earlier version of their reckless fiscal and spending spree, Democrats offers funding to carry out a similar initiative, which has raised concerns among many States and industry groups. This overreach could jeopardize states’ ability to carry out construction projects unless they meet undescribed conditions left to the discretion of the Biden administration.

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Republicans and Democrats came together last year to pass comprehensive, long-term legislation that provided significant resources to improve America’s infrastructure. Inflation from Democrats and their pressure for prices to rise further could prevent states from ever innovating on certain projects.

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