Lack of State, Local Infrastructure Investments Slowing the U.S. Economy

"A sharp pullback in spending by cities and states on infrastructure—from highways to sewage systems to police stations—is weighing on U.S. economic growth," according to an article by Eric Morath and Ben Leubsdorf.

"Such government austerity is unusual in the eighth year of an economic expansion, and it is acting as a headwind just as the worst effects of the energy-industry bust, a strong dollar and inventory drawdown are fading," add Morath and Leubsdorf.

The article cites analysis from S&P Global Ratings and the Pew Charitable Trusts in addition to new data from the Commerce Department to build its case. In total, "[s]tate and local governments spent an annualized $248.47 billion on construction in August—the least since March 2014 and down nearly 11% from its recent peak in mid-2015."

The article identifies declining state tax revenues as the cause of the reduced spending. Declining revenues restrain the ability of state and local governments to borrow money for capital projects, according to the article. The article also examines the political landscape regarding infrastructure, which was once an area of government that found bipartisan support. 

[The article might be behind a paywall for some readers.]