A recurring theme of these pages is the miserable state of both the economy and our political system, however defined. There are problems out there that demand urgent attention, but the folks who can make this happen are engaged in a hissy fit, spewing vitriol and untruths rather than taking a moment to reflect on why they’re even in office. First clue, it’s not to simply reward those who bought your ticket to the congressional dance. You really have a duty to “the people.”
Let’s take our nation’s infrastructure, for example. I think it’s a good one, because (a) it’s been so long neglected and (b) were our putative representatives to start paying attention the economy might actually recover. Quickly on the latter point.
This is a demand-constrained recession, which means that too many people lack sufficient income to spend on goods and services. They need jobs that pay “family wages.” If the government were to spend money fixing the things that are broken and building things that we’ll continue to need, people would be working once again. And when they work, they make money, which they use to feed, house, clothe their families, and pay taxes—just what the Economy Doctor ordered.
Each year for the last five the Urban Land Institute and the firm Ernst & Young produce a report detailing infrastructure needs. They’ve just issued their fifth. Here’s an excerpt:
In contrast with its global competition, the United states is lurching along a problematic course—potentially losing additional ground. After more than 30 years of conspicuously underfunding infrastructure and faced with large budget deficits, increasing numbers of national and local leaders have come to recognize and discuss how to deal with evident problems. But a politically fractured government has mustered little appetite to confront the daunting challenges, which include finding an estimated $2 trillion just to rebuild deteriorating networks. operating beyond their planned life cycles, these systems include roads, bridges, water lines, sewage treatment plants, and dams serving the nation’s primary economic centers.
Although President Obama ranks infrastructure as one of his administration’s top three “win the future” initiatives (together with education and innovation), the chances for setting and executing national priorities appear to be foundering in partisan debate over tax burdens and how to cut exploding government debt. Plans for transformational networks—regional high-speed passenger rail, a new electric grid tied to energy-saving technologies, and state-of-the-art satellite air traffic control systems to replace obsolete radar stations—will probably get delayed, pared back, or shelved.
Despite the nation’s unemployment woes, the vast job-creation potential of infrastructure projects is being sidetracked by concerns about government spending appetites and potential cost overruns. related benefits from reducing carbon footprints—energy efficiencies and greater independence from problematic foreign energy sources—are also failing to gain much traction. The overriding stumbling block to generating support for rebuilding the country’s infrastructure remains simple public resistance to paying more for these systems—either through higher taxes or user fees. Although informed voters have passed bond issues and even some sales tax increases for new projects, Congress perennially refuses to raise the federal gasoline tax or allow states to put new tolls on interstate highways, which could help ramp up funding for mass transit alternatives and repair existing highways and bridges. [added emphasis]
Oh, and this is a very good time for governments to be borrowing, since interest rates are so low. Thus saith The Economist. However, the magazine continues, there is a lingering belief that would-be bondholders fear that the government won’t pass along the costs of borrowing. The Economist says this is nonsense:
America is the world’s largest economy. Its citizens are among the richest and least-taxed in the developed world. American citizens will not move to other countries en masse if taxes go up (the equivalent of “losing market share”), and citizens can’t simply refuse to pay their taxes (the equivalent of “elastic demand”). Setting politics aside, there should be no question that the American government can “pass on its costs to consumers” if necessary. This ought to mean that debtholders will continue to trust the credit of the government, which should mean interest rates on its debt will stay low until growth picks up, which should mean that no extra tax increase to pay off debt will be necessary. [my emphasis]
That this magazine would offer these suggestions strikes me as almost amazing. After all, The Economist is proudly conservative. But what passes for conservative in the U.S. is closer to a weird hybrid of fascism and libertarianism, both inchoately practiced by amateurs residing under the loony umbrella of the new GOP.
It’s no wonder we’re in such a mess.