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Investing in Water Infrastructure: Exponential Potential and the Cost of Inaction

Katie Henderson- Value of Water Campaign | August 26, 2020

A hidden network of pipes and pumps ensure water flows through homes and businesses, but people often take these critical systems for granted. This month, our organizations, the American Society of Civil Engineers (ASCE) and the Value of Water Campaign (VOW), partnered on a new economic report that quantifies water infrastructure investment and what happens when the nation fails to invest. With the research firm EBP, we sought to understand two contrasting futures: a future where we meet our water infrastructure needs and a future where we allow water infrastructure investment to fall further and further behind.

Our report “The Economic Benefits of Investing in Water Infrastructure: How a Failure to Act Would Affect the US Economy Recovery” shows that closing the water investment gap brings enormous economic benefits and improves public health protection. As federal lawmakers consider how best to alleviate economic hardships caused by the COVID-19 pandemic and protect public health, it is critical they understand the role water plays in keeping communities safe and healthy and our economy flowing.

Before modeling future scenarios, we first had to assess where the US stands on water infrastructure spending and needs. We found that in 2019, total capital spending on water infrastructure was $81 billion short of the need. If the nation continues underinvestment, a funding gap will remain. The annual gap will grow to $136 billion by 2039. As capital needs continue to grow, the share of investment borne by the federal government has plummeted. In 2017, the federal government provided just four percent of capital investment in water and wastewater infrastructure, down from 31 percent in 1977. State governments and individual water utilities must bear the remaining share of rising capital investment needs.

Future Scenario 1: Failure to Act

When we modeled what the next two decades would look like if we continued current underinvestment trends, we found that no industry is immune to water disruptions. The most water-reliant businesses will spend $250 billion in 2039 in costs related to water service disruptions. Less reliable water service would make industries less efficient and profitable, and the consequences would ripple across the entire economy, leading to more than $4.5 trillion in lost business sales, a $2.9 trillion decline in the gross domestic product (GDP) and 636,000 fewer jobs.

Individual households and communities would also endure the consequences of underinvestment as more frequent and extreme weather inflict shutdowns, and street flooding deteriorating and rupturing water infrastructure. Without proper infrastructure investment, there will be greater costs to US households. At the current rate, costs will be seven times higher in 20 years than they are today, totaling $14 billion in 2039.

Future Scenario 2: Closing the Gap

In the second scenario, we modeled the impacts on households and the economy if the nation meets the capital water infrastructure needs. New infrastructure projects would mean new jobs, especially in construction. Completing those water projects creates a more reliable water service, meaning better productivity and efficiency in other sectors. Over 20 years, closing the water infrastructure gap would create 800,000 new jobs and generate higher wages—the disposable income would rise by more than $2,000 per household. The entire economy would benefit: the US GDP would grow by $4.5 trillion in 20 years.

As legislators continue to debate stimulus packages to offset the economic costs of the Covid-19 pandemic, this research suggests that failing to include capital water infrastructure investment is a lost opportunity to jumpstart the economy when the nation needs it most. The 20th century used infrastructure investment as a driver for economic growth and public health protection, and future investment should build on 20th-century lessons and emphasize water and wastewater infrastructure resiliency, efficiency, and reliability. Investing in water will create healthier communities that can thrive and a path to economic recovery for the nation.