It's not just the federal government that's misguided in its belief in extensive infrastructure spending. Macroeconomists also tend to misunderstand the impact of infrastructure spending on local communities. Spending on infrastructure is seen as the consequence-free way to boost the economy, but in city after city that we visit across the country, that’s not the case. For local governments, infrastructure is a liability that weighs on a city’s budget with the promise of expensive maintenance costs down the road, even though it’s usually counted as an asset on municipal balance sheets.

Growth—building new infrastructure, new homes, new businesses—is not sufficient to improve a local economy or indeed, the United States economy as a whole. We need productive growth in order to achieve true prosperity. Our investments must pay for themselves and add to our communal wealth. We’re talking real concrete return on investment, not just social benefit or “time savings” (which is so often used to justify road construction and expansion projects). There’s nothing wrong with counting social benefits, but those don’t pay the bills. An infrastructure project that has no long-term plan to cover its costs is doomed to fail.

But perhaps the biggest macroeconomics mistake that is costing our cities dearly is the fact that infrastructure investments are not something we can walk away from. While the federal government can sponsor a project, hold a ribbon cutting, then move on to the next project, cities can’t do that. Our cities are stuck with the consequences of these decisions for decades. That dangerously wide road funded through federal dollars will make life unsafe, even fatal, for the people in the surrounding neighborhood. That big box store with frontage roads and turn lanes that were created through federal money will leave a vacant hole that contributes nothing to its town in a decade or two, with acres of public infrastructure suddenly serving no purpose.

It's Time to Invest in Something Different

Rather than spending billions of dollars on large infrastructure projects, we should be focusing our investments in the most high-returning areas of our town: the poorest neighborhoods.

It might be counter-intuitive but take a look at this map of tax value per acre, created in partnership with Urban3. Green equals profit and red equals loss. The higher the block goes, the larger the amount of profit/loss.