Original Source Date: June 1, 2016
Impact Highlights
| Annual ROI | Time Horizon | Confidence |
|---|---|---|
| 10.0% | 10.0 years | 4 - Weak |
| Activities | Outcomes | Indicators |
|---|---|---|
| Public Works | Infrastructure | GDP, Transportation Spend |
| Geography | Demographics |
|---|---|
| United States | All |
Article Details
When it comes to driving long-term economic growth, few strategies are more effective than investing in infrastructure. Roads, bridges, water systems, broadband networks, and energy grids are not just physical assets—they are the foundation of a thriving economy. According to research from the Center for American Progress, public infrastructure investments yield significantly higher returns than previously thought, making them one of the smartest economic strategies for state governments.
Infrastructure as an Economic Multiplier
Infrastructure investments create a powerful economic ripple effect. When a state invests in new transportation or water systems, it creates jobs, boosts productivity, and supports private sector growth. Every dollar spent doesn’t just benefit construction workers—it boosts industries from logistics to manufacturing, and even education and healthcare.
Recent studies show that infrastructure investments can generate returns of 17% in the short term and 10% in the long term. This dramatically outpaces traditional private investments, such as stock market portfolios or real estate, which typically offer annual returns between 5% and 7%.
Closing the Investment Gap
Despite the high returns, the U.S. currently underinvests in infrastructure. The American Society of Civil Engineers estimates a $2.6 trillion investment gap by 2029. State governments are uniquely positioned to help close this gap—and benefit economically in the process.
The article highlights that well-targeted infrastructure investments can significantly increase a state’s gross domestic product (GDP), support small business growth, and even raise wages. Moreover, infrastructure projects improve community resilience by reducing costs tied to traffic delays, flooding, and system outages.
Infrastructure and Equity
Beyond the financial gains, infrastructure also promotes social equity. Investments in broadband can close digital divides. Upgraded transit systems can provide low-income workers better access to jobs. And green infrastructure can reduce environmental hazards in underserved communities.
By incorporating equity-focused planning, states can ensure that the benefits of infrastructure investments are widely shared, helping both underserved communities and the broader economy.
Annual ROI of Infrastructure Investments
Based on this article, infrastructure investments yield a short-term return of 17% and a long-term return of 10%. Let’s translate that into real numbers.
Example Calculation:
Initial Investment: $1 billion
Short-Term ROI (1 year): 17%
Return Amount (1 year): $1 billion × 17% = $170 million
Total Value After 1 Year: $1 billion + $170 million = $1.17 billion
Long-Term ROI (Assuming Year-Over-Year for 10 Years at 10%):
Using compound interest:
Future Value = $1B × (1 + 0.10)^10 = $1B × 2.5937 = $2.59 billion
That’s a 159% total return over 10 years.
Final Takeaway:
States that prioritize infrastructure investments don’t just improve roads and bridges—they unlock long-term economic growth, create jobs, reduce inequality, and increase prosperity. With annual returns as high as 17%, infrastructure isn’t just a cost—it’s one of the best investments a state can make.
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