StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



President Obama Joins the Build While It's Cheap Chorus

11 Oct 2010
Posted by Andrew Samwick

Ah, my work here is done.  From the White House today:

The President on Infrastructure Investment: "This is Work That Needs to Be Done. There Are Workers Who Are Ready to Do It."

I was glad to hear that the definition of infrastructure was broad enough to include more than just transportation networks.  Read the transcript or watch the video at the link above.  Read the Treasury/CEA analysis of infrastructure investment here.  From its executive summary:

Our analysis found four key reasons why now is an optimal time to increase our investment in transportation infrastructure:

  • Well designed infrastructure investments have long term economic benefits;
  • The middle class will benefit disproportionately from this investment;
  • There is currently a high level of underutilized resources that can be used to improve and expand our infrastructure; and
  • There is strong demand by the public and businesses for additional transportation infrastructure investments.

Of these reasons, the first two have nothing to do with the assertion that this is "an optimal time" to increase investment.  They will be true regardless of when the investment is undertaken.  The fourth might be relevant to timing, but I don't think so.  We have had chronic underinvestment and unmet demand for transportation infrastructure.  Each of these statements was also true when the economy was expanding toward the last business cycle peak. 

The legitimate reason for why now is an optimal time is the third -- there are unused factors of production that can be employed on the cheap.  The Treasury/CEA report goes on to cite evidence of this.  I am glad that the President chose to focus on that one (and the White House blog chose to put it in the title).  I only hope that the proposal gets due consideration in the Congress.

Please let there be enough

Please let there be enough sensible people in the House & Senate to get this thru.


Should be easy

Identify what the federal government is currently doing that is less important, cut that and replace it with increased infrastructure spending. Alternatively, identify revenue increases that are less damaging than the benefits from increased infrastructure spending, and pass them together.

However, if the plan is to add the infrastructure spending with no spending cuts or revenue increases to offset it, no thank you.


Ranking programs

This blog has had a few columns on "ranking" the importance of federal programs. It has never worked and it will never work. There is no realistic metric to prioritize spending.


govt role?

This looks like a very well done report. But there is a hidden assumption: the private sector cannot provide infrastructure. This may be true (still true) for a lot of pieces of infrastructure. But technology has reduced transactions costs significantly for roads. Drive up and down the east coast with EZ pass. You can get GPS to follow your teen's driving. London's photo based driving tax. Photo speed cameras. There has been some serious huffing and puffing about a national "miles driven" tax (based on a GPS-type reporter - I think).

But the point is we have the technology (or almost have it) to privatize roads and have a per-use charge rather than public roads funded by taxes. So if the rate of return to infrastructure investment is as high as suggested in this study, why can't we figure out ways to unleash the private sector on the problem?

(I'm not trying to be annoying here. I teach a economics class on policy in which I still hold out roads as an obvious example of a public good. But I'm having an increasingly hard job figuring out if this is still -- with current technology -- a reasonable example. So I'm really asking for help here in preparing lectures.)




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