StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

The Time for Infrastructure Investment Is ASAP

03 Oct 2010
Posted by Andrew Samwick

Writing in The Washington Post, Ezra Klein correctly notes that the case for infrastructure spending during an economic downturn is compelling and that the most recent proposals for infrastructure spending are too small.  He writes:

People say that the government should be run more like a business. So imagine you are CEO of the government. Your bridges are crumbling. Your schools are falling apart. Your air traffic control system doesn't even use GPS. The Society of Civil Engineers gave your infrastructure a D grade and estimated that you need to make more than $2 trillion in repairs and upgrades.

Sorry, chief. No one said being CEO was easy.

But there's good news, too. Because of the recession, construction materials are cheap. So, too, is the labor. And your borrowing costs? They've never been lower. That means a dollar of investment today will go much further than it would have five years ago -- or is likely to go five years from now. So what do you do?

If you're thinking like a CEO, the answer is easy: You invest. You get it done. Happily, that's what the administration is proposing to do. But its plan is too modest. The $50 billion bump in infrastructure spending it has proposed is only for surface transportation. The infrastructure bank envisioned in the proposal is also likely to be limited to transportation. And as for our water systems, our schools, our levees? This is not a time for half-measures. It's a rare opportunity to do what we need to do and to save money doing it.

What Ezra does not say explicitly is that the most opportune time to launch this program of infrastructure investment was when the downturn was first upon us.  And at that time, the key task for writers in The Washington Post (and other places)was to argue that a serious infrastructure investment program was a better way to deal with downturns than the other proposals in vogue at the time; namely, something "timely, targeted, and temporary." 

But late is better than never.  As the proverb goes, "The best time to plant a tree is 20 years ago.  The second best time is today."  What is rare about this opportunity is that, unfortunately, it still exists 32 months after we should have started taking advantage of it.

Wrong Infrastructure

Mr. Klein emphasizes the wrong infrastructure. Educational infrastructure? It is to laugh. We spend more overall and per capita on education than any other OECD country already. Rebuild the schools by reducing the bloated staffs of big city school systems.

I also point out the $700 million high school recently built in the LA district. You can refurbish a lot of schools for $700 billion. Sounds like "educational infrastructure" is just another way of saying graft to me.

To me the issue on transportation infrastructure is not the state current infrastructure (which was what the civil engineers evaluated) but rather the transportation needs over the life expectancy of the changes being proposed. Do we really believe that we'll need as many roads, bridges, and airports in 20 or 50 years as we do now? More? How will the additional vehicles be powered?

Energy infrastructure is the one sort that is in urgent need of doing, continues to get short shrift, and will point the way to the future. I can only speculate why this remains so.

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