From Kelton in April 2021: "The key to responsibly spending vast sums of money lies in carefully managing the economy’s real productive limitations. Just as my son’s Lego projects are limited by the amount of bricks we have bought for him, we can’t squeeze more goods and services out of our economy once we’ve made use of all available resources. ... Depending on how big Congress ultimately decides to go on infrastructure, and how quickly, it may need to unleash a whole suite of inflation-dampening policies along the way — all of it unrelated to deficit neutrality." (Emphasis added.)
> This is far from the case. Case in point: nearly 3 trillion and counting in public stimulus over the last couple of years. In fact, even the Republicans are mostly on board with many items from Biden's infrastructure bill, which is in the 2-3 trillion range.
Lets think about how this would play out.
Money will come down from on-high at the Federal level. States will analyze their road systems, and decide "This traffic light should be converted into an overpass, causing 20% reduction in traffic in this area" (or something similar).
And what will happen with the local population? They'll go nuts. Some rightfully so (any such large infrastructure project would cause some houses to be displaced, to make room for the overpass). Others will care about gentrification and rising home prices. Still others will worry about debts and budgets.
That's what I mean. You'll have to force the infrastructure down people's throats if you actually want it to get done.
US infrastructure spending is heavily cost-constrained though. Your argument would hold up if we were building loads of new infrastructure at enormous cost, but instead we are not building enough because the costs are too high.
> We can't build any public infrastructure in the US anymore.
I know it feels that way, but it's not strictly true. Here in Seattle in the last decade we've built a new floating bridge, multiple miles of underground light rail track, and nearly two miles of deep bore road tunnel.
I think there is a real problem that our new infrastructure is way too expensive and takes way too long to build, but we've demonstrated that we can definitely build new stuff.
Infrastructure spending in the US is backlogged for decades. Hard to argue we're overspending on that when we see a major bridge collapse disaster every 5 years.
Bring that schedule forward through issuing more debt at record-low interest rates, and bang, you've solved several problems at once. People have jobs, they spend money, that helps the economy, and we get the infrastructure out of it as well.
You'll even get some of that inflation that's been missing during the QE period, while all the fed economists looked at their macro textbooks in utter confusion.
I would be very surprised if that 1T infrastructure spending bill ever sees the light of day.
Firstly, the US has a massive budget deficit and with upcoming corporate tax cuts the question will be where the money is going to come from. Secondly, the US is approaching full employment at ~5%. Now sure there is significant underemployment but you have to wonder if (a) there is enough people to build out all this infrastructure and (b) if the states even have enough shovel ready projects. Because they sure didn't during the GFC when Obama was looking for an infrastructure stimulus.
Plus doesn't infrastructure spending normally result in higher returns than it costs?
> A recent Business Roundtable study found that $737 billion in public investment over 10 years would set us on the path toward reviving our national infrastructure. While those numbers seem daunting, the report also showed that every additional dollar invested in infrastructure delivers roughly $3.70 in additional economic growth over a period of 20 years.
> However, infrastructure projects tend to have high multipliers - think the interstate highway system and the internet.
In theory. In reality that can be the case but is very hard to forecast. Those projects rely on 30+ year estimates of travel habits. Much of the fibre infrastructure put in the ground during the dotcom bubble would still not really be profitable. On the other hand, road demand is far above expectations because of ecommerce and more complex supply chain.
Doesn't mean we should do these projects but financing them purely out of debt because of higher anticipated growth is dangerous.
The US has profited immensely from "building stuff to build stuff" back from the new deal programs in the 30's, wartime factory infrastructure investments in the 40's, as well as massive infrastructure buildout of the highway systems, water and sewers, etc. in the 50-60's. I think coasting on a lot of that build out is what allowed lower than typical infrastructure expenditures for many decades, but also gave us (and our political/business leadership that grew up in those years), a warped low view of how much infrastructure investment is reasonable.
> We know to a high degree of confidence that investments in infrastructure give a good return on investment.
No, we know that some investments in infrastructure give a good return on investment. Some don't (bridge to nowhere, for example). The problem is that Congress can take useless make-work pork-barrel trash, and label it "investment in infrastructure". Don't automatically believe the labels that Congress applies to bills; they often are political smoke screens.
Note well: There is real infrastructure investment that is needed, and will give a good return. All the more reason to reject the waste - we need the money for real things; don't waste it on pork.
The next big growth engine could and should, if the Congress were to choose to emprace it, be a large infrastructure and public works budget (especially given the current low interest rate environment, and the large number of people unemployed and underemployed). Our bridges and highways and air traffic control system could really use it. Of course, keeping the waste, fraud, and abuse in that budget down to a minimum would be difficult, given current Congresspeople and their priorities and agendas.
We have an extremely tight labor market, surging commodities prices and other inflationary pressures/symptoms, which large scale infrastructure investment would usually exacerbate.
I'm usually a Keynesian, but in this case, i think we should jack up interest rates and deliberately tank housing and asset prices, then use large scale infra investments to stop the unemployment rate rising too high.
And that, ladies and gentlemen, goes pretty far in explaining why American infrastructure costs are so high (although I suspect the paperwork burden, NIMBYism, and “citizen voice” are just as important).
I strongly support the Biden Administration infrastructure program. BUT selling it as a “Jobs” program (at a time of near record low unemployment) makes me very wary.
> says building bridges and moving dirt around causes inequity
Infrastructure is one of the most expensive things people interact with on a regular basis. Choices in how we build infrastructure redirects society's resources on a massive scale. So yes, I do think it's plausible that huge investments in water-resistant infrastructure and wasteful attempts to build Dubai-style island suburbs will redirect resources away from more important issues, like the pressing need in the US to fix existing bridges and roads, build 1.5 million more houses, earthquake-proof the infrastructure in the pacific northwest, and figure out how to get 4800 GW more on the electrical grid cleanly.
> This tragedy shows the importance of inspection and cost of maintenance of infrastructure.
Your table is scary - and it leads me to one question: why is the future maintenance not budgeted in with any public infrastructure project? For example, a city wants a shiny new bridge... but without provable funding for the maintenance in the future (e.g. tax projections), it is not allowed to be built.
Of course stuff like economic shifts (leading to a loss of tax base) can't be prevented but it's a small risk compared to some politician deciding "I need something monumental where I can cut the opening ribbons" and loading the future generations with maintenance debt.
https://www.nytimes.com/2021/04/07/opinion/biden-infrastruct...
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