Also, some investments have stronger effects on productivity than others do. Some investments in infrastructure start improving productivity soon after they are made, whereas other investments, like many in R&D, take much longer. How Would Increasing Federal Investment Affect the Economy?ĬBO has found that federal investment affects the economy mainly by changing overall demand in the short term and gradually boosting private-sector productivity in the longer term. All told, investment has recently represented about 15 percent of federal spending. The federal government also spent $180 billion on defense investment, chiefly in physical capital and R&D. In 2015, the federal government spent $293 billion on nondefense investment. Those purchases, called investment, fall into three categories: physical capital (which includes infrastructure), research and development (R&D), and education and training. The federal government pays for a wide range of goods and services that are expected to be useful some years in the future. What Else Does the Federal Government Invest In? State and local governments spent money on those things as well, but a much larger proportion of their spending paid for the operation and maintenance of infrastructure.įurthermore, state and local governments pay for most of the facilities that schools require. Of the federal spending, roughly two-thirds paid for new, improved, or rehabilitated structures and equipment. The largest amount of public infrastructure spending in 2014 went to highways ($165 billion), followed by water utilities and mass transit and rail.Ībout a quarter of the $416 billion (roughly $100 billion) came from the federal government, and three-quarters (a little over $300 billion) came from state and local governments. That amount equaled about 2.4 percent of gross domestic product, a percentage that has been fairly stable for roughly 30 years. Federal, state, and local governments spent $416 billion on it in 2014. What Kinds of Infrastructure Do Federal, State, and Local Governments Invest In?Īlmost all spending on transportation, drinking water, and wastewater infrastructure is done by the public sector. If Policymakers Wanted to Encourage Private Investment in Infrastructure, How Could They Do That?.How Is Funding for Highway Infrastructure Provided, and What Are Some Alternatives?.How Could the Federal Government Encourage More Efficient Use and Financing of Infrastructure?.How Would Increasing Federal Investment Affect the Economy?.What Else Does the Federal Government Invest In?.What Kinds of Infrastructure Do Federal, State, and Local Governments Invest In?.Because answers during Congressional hearings need to be brief, this blog post provides additional information about those issues and highlights some of CBO’s related work. During testimony that CBO’s Director gave at the beginning of February on the outlook for the federal budget and the economy, some Members of Congress asked about issues related to infrastructure and investment. The federal government spends hundreds of billions of dollars every year on infrastructure and other investments, either directly or through grants to state and local governments.
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