Potholes
My colleague, Matt Slaughter, holds forth today on the link between infrastructure and jobs. He is a former member of the CEA and an expert in interanational economics:
There is a crucial connection between potholes and unemployment. America's crumbling infrastructure is eroding America's competitiveness in the global economy by eroding America's ability to attract and retain global corporations and their high-productivity, high-wage jobs.
This was not always so. Over much of the 20th century, America's strong infrastructure investment was a major factor attracting global corporations headquartered in other countries to invest and create jobs here. Rising U.S. standards of living were fueled by a strong infrastructure system that facilitated the growth of companies in America, both global and domestic alike: transportation systems to move people and products, electrical systems to power plants and offices, communications backbones to drive computers and creativity. By 2008, the U.S. subsidiaries of foreign companies employed over 5.6 million Americans -- nearly 2 million in manufacturing -- and exported $232.4 billion in goods. That's 18.1% of America's total.
Today is very different. America's decaying infrastructure costs the typical American worker hundreds of hours in lost productivity. It also costs companies time and efficiency in moving their products around -- and also out of -- the country. This decay is particularly stark for global companies, whose executives are witness to the dynamism of emerging economies like China and India that present them with ever-widening choices for where to grow jobs and investments around the world.
China/India
While I certainly wouldn't argue that infrastructure has some stimulatory effect especially to some of the other dumb ideas congress/presidents have come up with in the past I don't think China and India are good comparisons.
China/India were essentially borderline 3rd world countries with 3rd world infrastructure and they needed to ramp out actual new construction and build entirely new facilities/new highways ( heck China has been building out entirely new airports. In the case of china their has been tremendous populous migration which has caused the need for this construction.
Not to mention the fact that the cost of labor is much cheaper over there.
Not that it's the exact same but to use an example here in the U.S ( tax cuts now have much less of a stimulative effect because you are already working from lower rates than say the 70's ) by the same token infrastructure spending will have a much more stimulative effect in china/india because the middle class there has been earning next to nothing so any increase in earnings will have a much bigger effect and even then the wages are still low compared to here.
It's just the same comparison to spending the money here.
Also and this is being simplistic but I'm not a fan of federal dollars being spent on some of these state projects. Let the states pay for most of their own roads. In the case of this texas project which I'm not familiar with but just using it as an example let texas pay for it themselves and pay for it and projects like it with an extra fuel tax or institute their own income tax.
system is broken
when you have 14 million unemployed and think you lack the capacity for whatever reason to clean up & repair storm damage your system is broken...
No idea...
A substantial portion of the public has no idea of what the public sector brings to the table here. Interestingly enough, this is also an area where the reverse of our perceptions are true: it’s the average businessman who doesn’t know how this element of our economy works. That’s ironic considering it’s usually the opposite.
For years, the American Society of Civil Engineers (ASCE) has begged for more infrastructure spending. Their 2009 Report Card on America’s Infrastructure (1) painted a bleak picture with the average ranking for the country being a “D.”
The more we delay, the higher our costs to rehabilitate everything become too. It’s like skipping out on fixing your roof. You pay now or you pay later.
Using figures (2) from the American Association of State Highway and Transportation Officials (AASHTO), $1 spent on preservation eliminates or delays $6 to $14 in spending on rehabilitation or construction. Right now this is huge!
Cash is short, we need to be more efficient, and the purchasing power of the federal gas tax has dropped to 70% of what it was in 1993 (the last time it was raised)!
The economic benefits are substantial too. The Chamber of Commerce (3) produced a study last year that found, "For each single point of improvement in [their] transportation index, GDP would increase by 0.3%. In other words, allowing the nation’s overall transportation performance to lag behind the average index of the top five states leaves about $1 trillion of potential GDP on the table."
Meanwhile, the Federal Aviation Administration and Surface Transportation reauthorization bills have been granted short term extensions repeatedly. So much for certainty in the construction industry. Especially with housing in the toilet.
A study by the American Alliance for Manufacturing also claims that, "Roughly 18,000 new jobs would be created for every $1 billion in new infrastructure spending on the nation’s transportation, energy, water systems and public schools."
Finally, the point that this should be the responsibility of the states is a "red herring." Most already are! Federal spending, instead, is used to encourage a uniform national policy to facilitate inter-state commerce. The Feds may dole out spending, but ultimately it is up to the states to determine the projects that they follow-up on.
Prior to the 1950’s, our infrastructure system was a patchwork ill-suited to a global marketplace. The last thing we need is to go back to it.
Sources:
1. http://www.infrastructurereportcard.org/report-cards
2. http://roughroads.transportation.org/RoughRoads_FullReport.pdf
3. http://www.uschamber.com/lra/transportation-index
4. http://www.americanmanufacturing.org/files/peri_aam_finaljan16_new.pdf
Fuel Taxes and Lobbyists
Sounds like you are a lobbyist. Nevertheless, you may have a point about the "purchasing power" of the federal excise tax on fuel. The point here is that the excise tax is 18.4 percent per gallon (just a quibble, it was raised to 18.4 percent in 1997, was dropped again to 18.3 percent for a few years, and then raised back up). Since it is an excise tax levied on each gallon sold, the tax does not rise with price or with inflation---revenues increase with sales, which roughly corresponds, I guess, to highway usage. But, you seem to be referring to the federal excise tax only. Most states have excise taxes on fuel, and sales taxes, too. Those sales taxes do increase as the price of gas goes up. The federal excise tax goes into the Highway Trust Fund most of which is used for federal highways. My guess would be that the state highway system is larger, more costly to maintain and *is* to some degree subject to increase as prices go up. The total average state tax tax on fuel is about 30 cents, so this makes sense (and cents) in the larger scheme.
Samwick's "pothole" example is a good one for study with respect to infrastructure. Highway projects are easiest to get off the ground--in general, they are "shovel ready". The downside, though, is that they are notoriously susceptible to earmarking and pork barrel spending. Also, I've read a number of informed comments recently at Meg McCardle's blog on The Atlantic, that highway spending is one of the least effective in generating jobs. That's because, per dollar spent, it is not very labor intensive. You've tried to lump highway spending with building schools, water and energy systems to justify spending on highways.
All that said, I'm in favor of increasing the fuel tax from a Pigovian perspective. I'm a global warming skeptic (not denier) which means that it makes sense to do things that have a dual (or better) purpose. Raising federal fuel tax should reduce consumption and carbon emissions, but there are many other benefits that result that have nothing to do with global warming.
As to the funds that might arise from increased taxes, yes, preventive maintenance is a good idea. I'm also very concerned that those funds would be misused by politicians through earmarks and wasteful spending. There need to *first* be better safeguards in place to ensure the funds are better spent. And, maybe we should use some of those funds to reduce the deficit.
Me, a lobbyist? I'm not sure
Me, a lobbyist? I'm not sure how to take that. I'm a Research Librarian with a State DOT, so I guess that means I'm an interested party. But, I also make much, much less than a lobbyist, so you don't have to worry about my vested interests. They just aren't there.
I assure you, any talking points I have spewed are mine alone. Inaccuracies and all. :)
That also explains why I focused on the transportation aspect of infrastructure. That's what I know. My apologies if I came across as connecting it with areas that don't apply.
That said, there are a lot of other issues going that complicate the stimulus question. Nobody likes to admit it, but the growth in the Chinese, Indian and emerging auto markets means our "highway transportation model" is facing some serious long-term challenges.
Sure, we can make cars more efficient, but that assumes: 1) new technology will arrive in time and 2) a comparable revenue stream to supplement or replace the fuel tax will become available.
How do we know that building more highways makes the most sense? Say, as opposed to high-speed rail? We don't.
On the earmarking and efficiency issue, this is something that's received a lot of attention. I already know that the reporting requirements from ARRA are supposed to become (somewhat) permanent. Every draft re-authorization bill I've seen over the past few years includes some sort of performance reporting requirements too.
Still, even though I get the impression improvements are being made, with RayLahood and Obama being from Illinois, I'm not surprised IDOT got as much ARRA rail money as they did.
Chinese/Indian Emerging Auto Markets
I'm curious because maybe i'm missing something but what correlation does their auto markets have anything to do with our highway transportation model ?
If we are talking about cars being built theirs are cheaper because of the cost of labor. There is nothing we can do about that. Technology could make costs somewhat lower but it won't put us anywhere near parity with them.
They get paid next to nothing right now which is why when you call your credit card company or some other over the phone service there is a good chance you are calling Bangalore India. But as labor eventually rises companies look at the cost benefit and look for a more efficient place.
Example-I have clients who import textiles and distribute here. They were primarily importing from China. But now the cost of labor has starting going higher over there ( the beginning of the rise of the middle class and working class ) and now because that industry is very prices sensitive they've started looking elsewhere and have started importing from Vietnam and are looking at a couple of other countries.
But if you are talking about highway infrastructure I don't see how they are comparable either. China/India ( specifically china ) are building new cities and are basically building entirely new roads where their weren't any or where they could barely be considered passable.
It's not like we are building factories in the middle of nowhere or new cities where their weren't any. Could we use some new roads ? Repair roads and infrastructure ? Absolutely. But for someone living here in NY there isn't room for any anyway
And while it needs to be done it's just not comparable to India/China and it won't even remotely make the cost of our goods cheaper to be near theirs because the biggest factor that goes into the products other than maybe the cost of the underlying materials is the cost of labor in production of that product and the transportation cost of getting it to the port to ship overseas isn't that cost
Couple of things...
A couple of things. First, my auto market comment had less to do with the economics of manufacturing than it did with an increased (and global) demand for oil. High fuel costs are here to stay. I can go into detail if you would like.
Anyways, my point was that the United States is very much a single mode transportation nation. We don't have many alternatives to cars; especially outside of urban areas.
This may have made sense in the post-war era, but it assumes: 1) cheap fuel or 2) a technological breakthrough that will replace oil with something else and 3) that consumers have the purchasing power to buy them. I'm not saying "cars are bad," but our dependence on the automobile makes the United States dangerously inflexible (and susceptible to fluctuating oil prices).
There's a reason that the auto industry didn't complain about the Obama administration's new fuel economy regulations.
To boot, assuming we maintain a highway transportation model (i.e. shipping the majority of goods and conducting most personal travel travel on roads) the current system is outdated. It's reaching the extent of it's original 1960's and 1970's design life and overcrowding is making it inefficient. Just try driving in LA or New York.
Clogged freeways mean extra fuel burnt, time wasted, unnecessary roadway fatalities, and increased costs for both business and the consumer.
I agree that trying to emulate China and India and China would be dumb. But, we need to recognize that adhering the the status quo puts us in a bad spot long term and also adds another competitive disadvantage risk to our list.
Ok
Ok so now e have ruled out the Automobile comparison. No need to get into file because I'm net long energy as of this week for the long term.So now basically what you are saying is the way in which we transport products and ourselves via mass transit.
But here is the problem. Our highway system isn't outdated compared to overseas. At worst you can say it doesn't meet the need of a larger population ( L.I.E ) for example. But it still can't be compared to China because where they are building highways right now most likely in 10 years won't be sufficient because of population migration and more people getting cars.
But lets talk about lets say high speed trains. Show me where they aren't subsidized ( Heck show me how Amtrack isn't subsidized ) but as someone who has traveled extensively the last several years I can say I don't believe for one second any of them come even close to breaking even.
But also more to the point Europe is more closely populated and trains can work better there ( even if not profitable ) compared to here ( but Europe is a mess right now financially so I don't want to get started there )
But also lets get to the highway system here. While our highways need to be refurbished or redone ( some ) it has very little bearing on the cost of our goods being produced here. It just doesn't . We have highways and in the case of LA or NY there is very little you can do in regards to highways and I can't speak for LA definitely I can speak for NY and there is no room for new highways and new construction projects take 5-10 years it seems and still dotn do much ( see widening of the LIE )
The cost of wasting gas in traffic for a truck or 16 wheeler or whatever is minimal to the cost of building new roads/highways etc.
If yo want to talk about upgrading the electrical system or becoming more green etc etc I'll listen but while the highways need to be maintained etc the cost of building new ones won't do much for our economy in the long run
I never said we *only* need
I never said we *only* need to build more highways. In fact, I never said we *only* need to invest in alternative forms of transportation either. If you read between the lines my point was much more subtle.
The longer maintenance is delayed on highways the more expensive it gets. Moreover, if maintenance is deferred too long then it means everything has to be completely rebuilt. All roads and bridges have a fixed design-life and the majority of the Interstate system is reaching that limit.
Why? It was built, and planned, during the 1950's and 1960's.
You'll hear no disagreement from me that we have to fix the system that we have first. But, the fact of the matter is that fixing it - from an engineering perspective - very often means replacing it.
Moreover, changing traffic patterns, technology and land use means that there is always at least *some* efficiency to be gained by planning and implementing new projects.
My comparison between the United States and other countries wasn't intended to say that things are necessarily bad. In fact, I'm wasn't even saying that spending more on transportation will dramatically reduce the cost of shipping.
All I was saying is that in some locales there is a need for new projects. And, across the country if we do nothing then our sub-par maintenance efforts won't preserve what we have, much less preempt our forthcoming needs. Land use changes. Technology changes too. Population grows.
If both long-term planning and short term maintenance are routinely deferred (as is happening now), or if we assume that today's system will always suit us tomorrow, then we run the risk of losing our competitive advantage. Or even backsliding. That is my point. That is the point.
There is a substantial amount of planning and investment required for any form of transportation infrastructure. That includes both short-term and long term costs. It was required of the Interstate System to begin with and it'll be required for whatever we have tomorrow.
So to reiterate my point, if we don't maintain our system and if we don't upgrade it to keep pace with population growth, wear and tear, and so on then we will very much have an outdated system compared to other countries. If technology changes, then we'll be stuck with gas-driven cars too.
Is that a little more clear? It's quite different from saying "just slap more roads down and it'll make everything better."
Quite clear
I thought this latest post of yours was quite clear and different from the impression your 1t post left and it was quite reasonable. Thanks
Oops. Caught some errors. I
Oops. Caught some errors. I meant the purchasing power of the gas tax has declined 70%. So, that's 30% of it's original value.
Work Transportation
Work in transportation. I just want to note, the more we wait to do basic things, like clean out culverts, repair spalling concrete, repave roads and highways, the more expensive things become. I'm not going to go into contracting issues, but much of this work can be done cheaper than at the height of the bubble. Why we wouldn't be funding massive efforts to upgrade and repair existing roadway infrastructure is beyond me. Everyday we're forced to make the stupidest decisions about what to fund and not to fund from a limited budget--it's a total joke. And all I hear about is waste, waste, waste, from people who know little about how tight our budgets actually are. It's crazy.
Don't consider myself a liberal at all. Not close. But there are issues where I we need to decide as a society whether or not we're going to go the way of Mexico, or go the way of first world countries.
There has always been enough
There has always been enough money for infrastructure improvement. However, local governments have always been more willing to add people to the payroll instead of spend money on infrastruture.
maybe local and state government should demonstrate interest in infrastructure by ending minority set aside contracts, diversity program, make-work welfare programs, and other forms of wasteful spending. As long as government have useless employees and useless programs, there is no reason to pay attention when they demand more tax dollars for infrastructure spending.
If you think there's always
If you think there's always been enough money for transportation, you should compare the purchasing power of the Federal Gas Tax in 1993 vs. today. I assure you that worrying about DBE's, MBE's and mandated "useless programs" won't make up the 70% difference.
Moreover, most of those requirements tend to be mandated by the Feds. Go figure. At least if they were local rules there would be a snowballs chance in hell that they could be changed.