I think Greg Mankiw might want to think harder about this: “First, since most infrastructure is used locally, the proper level of spending is best determined by state and local governments rather than by the federal government.”
The country has always had a lot of infrastructure spending take place at purely the state and local level. After all, a lot of infrastructure is a purely state and local issue. Here in DC, a lot of our small city parks are actually under the control of the National Parks Service and it’s a big problem. There’s a small park between my neighborhood and Chinatown that the community wants to redo on a kind of “Chinatown” theme and there are all kinds of hold-ups because it seems doing this will actually require an act of congress. Consider yourself lucky that if you don’t live in DC your local park infrastructure decisions are made on a local level. That’s how it’s always been, and I don’t see anyone proposing that we do otherwise.
But at the same time, we’ve always done some infrastructure spending and planning on a national level. The authority to build roads is one of the congress’ enumerated powers, and if you think back to your US History days you’ll dimly recall something about Henry Clay’s “American System” which involved building canals and such. The issue back then and carrying forward to the present day is that a lot of infrastructure crosses state lines. People who live in New York use Newark Airport in New Jersey and they need ways to get there. And people in New Jersey use Philadelphia Airport in Pennsylvania. People live in Maryland and take MARC trains to work in DC. And of course people in every state consume goods made abroad, but few states contain a major container port. It would be crazy for the federal government to take sole responsibility for infrastructure in such a giant and diverse country, but at the same time there’s no way you can just leave this up to the state and local governments and hope they remember that the highways need to meet at the border.