Here's a problem: we have been over-consuming and under-investing. And here's part of the solution: a major, smart, strategic program to revitalize the nation's infrastructure.
I know, "infrastructure" sounds really unexciting, not nearly as cool as a Mars probe or as obviously essential as health care reform. But investing in roads, bridges, water systems, schools and other public goods is a critical need, one that won't be met by the private sector. What's more, it's got some real political currency right now.
Conservatives love to turn everything over the market, but even these types recognize that markets under-invest in public goods and for a very simple reason: private firms can't claim enough of a return on such investments, so they fail to invest enough in them.
Take schools, for example. Private schools exist, of course, but they are a niche market, either providing a "luxury good" for those who can afford it or a specialized good for those who want their kids' education to occur in a more religious context. Few disagree that in the absence of a public system, we'd under-invest in educating our citizenry.
So one reason to make public investments is that if we fail to do so, we'll all be worse off. If our highway system is falling apart -- the U.S. Department of Transportation has identified more than 6,000 high-priority, structurally deficient bridges that need to be replaced -- if our schools are physically inadequate to the task at hand -- in New York City alone, officials have identified $1.7 billion of deferred maintenance projects on 800 city school buildings -- we will fail to realize our economic potential, no matter what happens in corporate America.
That case has been well made by progressives for awhile, most recently at EPI, where we've articulated a robust infrastructure agenda. But there is another reason why this idea may have particular urgency now: to replace the demand lost to the coming downturn in consumer spending.
One of the more remarkable trends in recent years has been the steady climb in consumer spending as a share of the economy. For years, we learned that consumption is two-thirds of GDP. But over the last decade it climbed to 71%, the highest share on record, and a shift equivalent to $575 billion today. (In Europe, btw, the average consumption share is about 55%.)
We've borrowed and spent our way through the 2000s, even while incomes were flat for most families. Much of this was brought to you by your local housing bubble, and now that home prices are once again experiencing the pull of gravity, that window is closed.
Where there once was a bubble, we now have deleveraging households struggling through a tough job market, with key commodity prices through the roof. I know, betting against the American consumer has been a losing proposition for decades, but this time, it's very likely that 71% consumption share is coming down. And that's a loss of a lot of economic demand, and less demand means fewer jobs.
In the short run, infrastructure investment could offset the cyclical downturn we're in right now. But over the longer term, if consumption really begins to grow more slowly, we'll want to kick up public investment to pick up the slack.
The threat of climate change should also be pushing us toward new infrastructure. Here we can combine basic infrastructure needs with new, green technologies, like the extremely cool green rebuild of TC Williams High School in my own hometown.
I mentioned politics above. Last week, Obama delivered an important economic speech that cast infrastructure investment as a key part of his economic plan. To fund the work, he wants to create a National Infrastructure Reinvestment Bank. It's a financing mechanism that's been around for awhile -- Hillary Clinton touted this too -- that would create an independent bank, like the Fed or FDIC, to evaluate and fund these projects.
To capitalize the bank, Obama proposed $60 billion over ten years. Where would he get that kind of money? From ending the war; it's a classic "swords into ploughshares" move.
Progressives have talked about the need for making these investments for years, but conservative ideology coupled with government failure has blocked us. The stage may finally be set for overcoming these barriers. The needs are deeply pressing, both in terms of repairing and greening the nation's infrastructure and stimulating economic demand and job creation. And, if we play of cards, or our ballots, right, we might just have the personnel in place to get this done.
We have smart missiles that can blast an Iraqi resistance fighter into paradise, while cattle graze peacefully nearby.
We got SHOCK, we got AWE, we got kids who graduate from high school and couldn't make change if the register at McDonald's didn't provide a hint.
COULDN'T FIND IRAQ IF IT WERE CIRCLED ON A MAP AND LABELED WITH BIG BLOCK LETTERS.
But, damn, we can kill some Taliban.
And, all the most progressive economists in the Democratic Party can come up with is some minor infrastructure repair to produce a little ECONOMIC pump-priming.
This is their hair-raising, wild-eyed, left-wing radical response to the Republican agenda?
This, is what frightens conservative mouthpieces?
That the Democratic Party would continue to sail aircraft carriers around the Persian Gulf AND repair a bridge or two?
is THIS the change we are supposed to believe in?
http://pogoprinciple.wordpress.com/
That's why!
The word "infrastructure" is alien to USA vocabulary.
Replace it with BRIDGE COLLAPSE!
1) Due to underinvestment in maintenance, decaying infrastructure now will cost more to replace or remedially repair than it would have to maintain in good repair all along.
2) Increased risk of calamity-level failures.
3) Huge financial impacts to our economy in travel delays.
4) Potential benefits to our economy at large, and construction sectors in particular, to government investment (not expense but investment) in public works.
-- Civil engineer, and financial manager of large public works projects
*****Quote******
"7 March 1998
China to Boost Infrastructure Spending
There's been a warning from the Chinese President, Jiang Zemin, that the effects of the Asian financial crisis will hit the country later this year.
China has remained largely unscathed by the crisis, but President Jiang -- speaking to parliamentary deputies -- said its looming impact on the national economy could not be underestimated.
China is committed to radical economic reform in the state sector, which will lead to millions of job losses, and President Jiang again warned that redundant workers must be cared for.
Meanwhile, the Central Bank governor Dai Xianglong has said China plans to spend one trillion dollars over the next three years on infrastructure projects to stimulate the economy.
The money is to be invested in building roads and ports, bridges and power plants."
http://news.bbc.co.uk/2/hi/asia-pacific/62954.stm
****End Quote****
China's economy has grown enormously since 1998. Not without creating new problems like pollution, mind you, but the growing economy puts the Chinese in a position to address them. China spends only about one-tenth of what the U.S. spends on military purposes.
We need some of those same priorities over here.
In my view, this is one reason why the neo-cons like to demonize China so much -- Americans might catch on to how successful public spending on your own people's needs can be.
We should be reordering our priorities, and spending money more effectively on job-creating infrastructure that enhances productivity and our quality of life.
Our national security is vital, but it is not the end-all and be-all. How many families would spend over a third of their annual income on a home security system every year, while neglecting plumbing, transportation, health, education and food needs?
We need to hold our politicians' feet to the fire on this: people need to understand that right now, our worst enemies are ourselves and our collective failure as a nation over the past decade to pay attention to our own problems, and in particular our aging and crumbling infrastructure.
I would love to see the proposed bank fund a high speed rail between Denver and Grand junction to move freight and people. Get rid of cars and employ trains. It's not like you can enjoy the drive anyways.
We have such a problem now they we may have to resort to a works program just to get the Infustructure back to 1/2 the shape it was in before Regan started this crap of robbing the public's investments.
Mr. Bernstein, thank you for bringing this subject to the forefront; of course it helps that in the background levees continue to break. Has river traffic re-opened for barges, etc., traveling the Mississippi? Nothing boring about infrastructure ... ask the farmers and families who've lost so much these past few weeks in Iowa, Missouri and Illinois.
And speaking of FDR, I encourage you all to visit Hyde Park and apologize to him and Eleanor at their grave sites for the sad state of American political will.
this is so painfully obvious, that i wonder if people think there must be a "catch." The catch is gonna be when Big Energy uses our money and our wilderness to hijack us again in a Renewable Power era, even though most structures have the capacity to generate and conserve energy. some will generate huge excesses (small homes in desert regions), some will break even (McMansions in most cities) and some will require an importing of power (skyscrapers, etc.) but a very very significant portion of our power needs could be met through simple, clean and affordable solar and wind on our own properties.
the other flavor of koolaid being gulped is the "expense" issue, which is purely policy, not feasibility or economics. Germany can install 1.1 GW on rooftops in 2007 and nearly 2 GW in 2008, while paying ratepayers 60 cents/watt for power these systems generate, so it's possible with the right policy.
The "infrastructure" and "energy independence" we all need is OUR OWN. The tech is ready, we just need the laws.
Solar maybe. Fission yes, Fusion probably,
http://www.withouthotair.com
Very good study on the possibilities of alternative energy.
Obama can talk and talk and talk, but he's not fooling anyone. He tells us that McCain wants to "spend money" on a tax cut. And then Obama tells us that he wants to "save money" by taking the deficit spending we're doing in Iraq and institutionalizing it here in a huge new socialist program.
The problem ultra-liberals like Obama have always had and will always have is that at some point the voters stop and do a reality check on the rhetoric. They say, 'well, a tax cut isn't actually SPENDING money it's the opposite, and spending billions of Chinese dollars on a national Big Dig isn't actually SAVING money it's the opposite." And then the politician hawking that sort of rhetoric either looks like a scheming propagandist who can't be honest with the voters, or like a fool, or both.
I for one will be glad when this war is over and we can STOP spending that money. Obama wants us to continue spending like we're at war long after the war has ended. That's not a refutation of Bush's policies. That's not taking this country in a new direction. That's not leadership. And people are sick and tired of the profligate spending in Washington.
IF this project is so necessary, then FUND IT!!!!