Inflation Strangles Infrastructure

KEY TAKEAWAYS

• Last year, Republicans worked with Democrats to pass comprehensive legislation to improve America’s aging infrastructure, with significant increases in funding for transportation projects.
• The law is being undermined by surging inflation, with prices for essential materials soaring.
• 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 surging inflation, which was set off when Democrats jammed through a partisan $2 trillion stimulus last year.

Democrats in Congress and the Biden administration now want to spend even more, in ways that will push inflation higher and make it more difficult for states to build the infrastructure they need.

Reckless Spending Blunts infrastructure

Inflation has soared since Democrats dumped $2 trillion into the economy as part of their partisan “COVID relief” law in March 2021. In June, consumer prices were up 9.1% compared to a year earlier. But it’s not only consumers being walloped by high prices – nearly all sectors of our economy are being harmed by inflation. This spring, as construction season ramped up across the country, states and businesses were paying high prices for the supplies they need to build infrastructure projects, and prices remain high this summer. As of June, prices for asphalt were up 77.5% compared to a year ago; concrete products were up 13.5%; sand, gravel, and crushed stone had jumped 9.3%; and cement had increased 6.8%. Beyond the raw materials for construction, the cost of machinery and equipment was up 11.5%; tires were up 15.2%; and diesel fuel has increased a staggering 111.1%.

Construction Costs Are Climbing

The infrastructure law provided a five-year reauthorization for federal surface transportation programs. It authorized $303.5 billion for roads and bridges through fiscal year 2026, an increase of approximately 35% from the previous authorization. It provided additional direct appropriations for several initiatives, such as $27.5 billion for the improvement of bridges. But the out-of-control inflation in construction materials and equipment is causing project costs to balloon, undercutting the increased funding. Things could get worse. According to an analysis by the Eno Center for Transportation, if inflation for highway costs exceeds 7% per year through fiscal year 2027, the increased funding IIJA provided will be largely eroded.

Businesses involved in building these infrastructure projects have been sounding the alarm about construction inflation. Last month, a group of them urged the Biden administration to extend flexibilities that are currently exempting their projects from “Buy America” requirements, so they can buy lower-priced construction materials. 

As states are being forced to consider project delays as a result of inflated prices, Democrats are recommitting to their reckless tax and spending spree. The Biden administration is also pursuing onerous regulations that could further limit the ability of states to build. To address the “climate challenge,” the Department of Transportation recently announced a notice of proposed rulemaking to force a greenhouse gas emissions performance measure on state departments of transportation and metropolitan planning organizations. Last fall, under a previous version of their reckless tax and spending spree, Democrats proposed funding to carry out a similar initiative, which was met with concerns from several states and industry groups. This overreach could jeopardize the ability of states to complete construction projects unless they meet undescribed conditions left to the Biden administration’s discretion.

Republicans and Democrats came together last year to pass long-term, comprehensive legislation that provided significant resources to improve America’s infrastructure. Democrats’ inflation and their push for prices to go even higher could block the states from ever breaking ground on some projects.