Is Obama Wrong About Infrastructure Creating Growth?

You didn't build that. |||Last week I rounded up a partial timeline of President Barack Obama claiming that infrastructure spending will magically create jobs, an act he's been taking on the road during Congress's summer break. Writing in the Wall Street Journal, history professors Larry Schweikart, Jr., and Burton W. Folsom, Jr., argue that, to the contrary,  

building infrastructure was never the engine of growth, but rather a lagging indicator of growth that had already occurred in the private sector. And when the infrastructure was built, it was often best done privately, at least until the market grew so large as to demand a wider public role, as with the need for an interstate-highway system in the mid 1950s.

Sample:

Railroads are another example of the infrastructure-follows-entrepreneurship rule. Before the 1860s, almost all railroads were privately financed and built. One exception was in Michigan, where the state tried to build two railroads but lost money doing so, and thus happily sold both to private owners in 1846. When the federal government decided to do infrastructure in the 1860s, and build the transcontinental railroads (or "intercontinental railroad," as Mr. Obama called it in 2011), the laying of track followed the huge and successful private investments in railroads.

In fact, when the government built the transcontinentals, they were politically corrupt and often—especially in the case of the Union Pacific and the Northern Pacific—went broke. One cause of the failure: Track was laid ahead of settlements. Mr. Obama wants to do something similar with high-speed rail. The Great Northern Railroad, privately built by Canadian immigrant James J. Hill, was the only transcontinental to be consistently profitable. It was also the only transcontinental to receive no federal aid. In railroads, then, infrastructure not only followed the major capital investment, it was done better privately than by government.

Whole thing here. Thanks to Manny Klausner for the tip. 

The president is often at his rhetorical and economic worst when talking about infrastructure. How many times, after all, can the man claim federal-government responsibility for building the Golden Gate Bridge?

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  • Fist of Etiquette||

    What experience does the president and his brain trust have creating wealth? In producing anything? In employing anyone? If it doesn't involve government, he doesn't know about it. Roads are all understand.

  • sarcasmic||

    To the Tonys of the world, there is no distinction between money and wealth. Therefore printing money creates wealth. So the president as created tons of wealth through stimulus programs that rely on freshly minted currency.

  • ||

    ^ This.

    I have had countless conversations with lefties who would assert that money is wealth. When I would explain the difference in simple terms, often in more than one way, I get blank stares in response.

  • sarcasmic||

    If I was to sell everything I own except a suitcase and the clothes on my back, then put all that money into the suitcase, I'd be rich! Sure I'd be homeless and without a car or computer or anything else, but I'd be rich! I'd have all that money in the suitcase! Woo hoo! With a home and a car and a computer and everything else I own I'm poor, but if I had only the clothes on my back and a suitcase full of money I'd be rich!

    /derp

  • MJGreen||

    With that kind of cash in your briefcase, you'd be one of the most powerful, privileged oppressors in US history.

  • Finrod||

    Back in 2009 there was a fact going around about how Obama's cabinet had the lowest percentage of people that had actually been businessmen of any President in many decades, down around 10 percent or some such, when the average was about 50 percent. I haven't seen an update on that number but I can't imagine it's changed much.

  • DJF||

    Yes it can, but it can also cost jobs by diverting resources to unneeded and/or overly expensive infrastructure.

    My city built a light rail line which mostly parallels a already existing freeway. While building the light rail they neglected the freeway maintenance which became one big pothole even though the freeway carries many more people then the light rail line.

  • Brian D||

    Feature, not bug.

  • Raston Bot||

    Then, in the aggregate, no. No additional jerbs will be created.

  • SugarFree||

    If Obama said it, odds are overwhelmingly good that it's untrue, half-true or an opinion stated as fact to be believed only by the brain-dead who have replaced their blood with pure Kool-Aid.

  • sarcasmic||

    Is it blue Kool-Aid like in the previews for 'The World's End'?

  • SugarFree||

    Grape or cherry, I think. You know that The World's End is just a movie, right? I'm talking about reality here.

  • umh||

    Needed infrastructure additions and repair will boost the economy once when the work is being done and then everytime the infrastructure is used. Useless infrastructure only boost the economy while they are being built and then may become a drain on the economy.

  • Raston Bot||

    And who decides what infrastructure is needed? To maximize production and prosperity, it would be all the decisions made by everyone in their everyday lives that determine what infrastructure is needed. That's not what our parasite-in-chief is proposing.

  • umh||

    Did you read the second sentence?

  • Rob||

    Needed infrastructure additions and repair will boost the economy once when the work is being done and then everytime the infrastructure is used.

    How?

    Let's use Interstate 75 in Michigan as an example (becuase it is always being worked on). How is the work being done on I-75 today have a long term positive impact economically? What new economic opportunities will this open up?

    I will grant you that not maintaining the interstate will have negative consequences. However, that is not the same generating new economic activity.

  • creech||

    The fact is that many early railroad lines were built, in part, by public funds provided by towns that wanted the railroad to go through their town. Also, use of eminent domain for railroads was allowed in many states. Both policies did, of course, lead to many uneconomical lines being built which soon collapsed and wiped out the public investment.

  • KDN||

    I posted this in the PM links and am therefore honor bound to demand my hat tip. Who the hell is this hat tip thieving Manny Klausner anyway?

  • Fatty Bolger||

    Then there’s the argument, well, this is full of pet projects. When was the last time that we saw a bill of this magnitude move out with no earmarks in it? Not one. And when you start asking, well, what is it exactly that is such a problem that you’re seeing, where’s all this waste and spending? Well, you know, you want to replace the federal fleet with hybrid cars. Well, why wouldn’t we want to do that? That creates jobs for people who make those cars. It saves the federal government energy. It saves the taxpayers energy.

    So then you get the argument, well, this is not a stimulus bill, this is a spending bill. What do you think a stimulus is? That’s the whole point. No, seriously. That’s the point. - Barack Obama, 2009

    Obama thinks that any spending will create jobs and help the economy. This focus on infrastructure is just an attempt to get another bite of the apple, after he and Congress pissed away all the stimulus money. If he really thought infrastructure spending was so much better, he would have been more focused on it back in 2009.

    And really, it's a shame he wasn't. Of course government infrastructure spending will never be as efficient as the private sector, but at least it's better than just wasting the money. At least you've created something of value with it.

  • Inigo M.||

    "Obama thinks that any spending will create jobs and help the economy."

    ALL Keynsians think this, despite all evidence to the contrary. Look, for example, at Pelosi's remark about unemployment compensation being a wonderful boost to the economy because those who collect it will put 100% of it back into circulation by paying bills and buying things like household appliances!

    As much as I dislike her, I was still surprised by the level of simplistic stupidity about economics packed into that single statement.

  • ||

    My state is four laning all of the state highways between our major cities. It is nice to drive on. I can drive to Monroe in less than half of the time it used to take, but I go miles without seeing another car. 165 north of Alexandria goes miles and miles with only pine trees for scenery, unless you count the handful of ghost towns.

    Infrastructure my ass. All they did was transfer huge amounts of tax money to out of state contractors.

    We also have some seriously inane and business unfriendly laws on the books. This place could really boom if the legislators would pull their heads out of their asses. I am not holding my breath waiting for that to happen.

  • ||

    I only lived in Shreveport in 2010 and part of 2011, but that State is one that really should have its act together.

    Ridiculous tourism draws in New Orleans and Baton Rouge, close proximity to many other major cities in other states. We spent most weekend on getaways to Dallas, Memphis, Hot Springs, and Houston. Natural gas deposits, a coast, and a top 3 college football draw to boot.

    How does Louisiana possibly suck as much as it does?

  • Killazontherun||

  • Calvin Coolidge||

    Private railroad construction in the early 19th century was a mess, mostly due to the limited communications and primitive financial institutions of the time.

    You formed a company and borrowed as much money as you could using 90-day commercial paper. Then, you contacted an agent for old-money investors in the UK or Europe. As the agent sailed over to meet you, you built as much track as you could afford, straight out into nowhere.

    The agent would land, and you would walk the track with him, showing that you could, indeed, build a track. The track went nowhere, but "building ahead of demand" was accepted business practice at the time.

    If the agent liked what he saw, you could get long term financing just in time to pay off the 90 day paper. If he didn't, you went broke and the track was abandoned.

    Still, the process worked better than having the government decide to finance a track to go where it wanted the track to go, paid for by someone else's credit.

  • Rufus J. Firefly||

    Please allow me to remind everyone of one Lyle Lanley.

    http://en.wikipedia.org/wiki/M.....e_Monorail

  • Robert||

    Or he could hark back to the xport'n canals, which were mostly public-private partnerships.

  • Jon Lester||

    Well, good roads are better for growth than bad ones, of course, but people need jobs to drive to, once the renovations are complete.

  • ||

    What creates growth? FREEDOM, you fucktards.

    People want to build things and produce things to improve their lives. So LET THEM. Stop making them jump through hoops before starting a business and stop burdening them with regulations and taxes that keep them from growing.

  • sarcasmic||

    But, but, but who will be in control if people are allowed to produce things without first asking permission from government? Who will make sure things are well ordered if no one in government is telling people what to do? You're talking about anarchy and chaos! Casino capitalism! Unchecked profits! Rich getting richer and the poor getting poorer! The world would be a barren wasteland with naked serfs toiling for the corporations! You're a fucking monster!

  • ||

    Private-public projects are the Ali-Baba stores of government. They get the benefit of being a lazy, inefficient POS who gets fat off of Baba's effort but gets to heap blame on Baba when the SHTF.

  • Gilbert Martin||

    Of course government infrastructure spending doesn't create jobs.

    Government doesn't create anything.

    Goverment has no wealth to give to anyone or spend on anything except that which it has taken away from someoen else who had previously created it himself (or herself).

    Everything government does is essentially nothing more than forced transfer payments.

    And transfers can never net to any value greater than zero.

    The "infrastruture spending creates jobs" crowd are merely peddling Keyneseanism and pointing their fingers at one side of the transfer equation while trying to pretend that the other side doesn't exist.

  • Alan Vanneman||

    "And when the infrastructure was built, it was often best done privately, at least until the market grew so large as to demand a wider public role, as with the need for an interstate-highway system in the mid 1950s."

    In other words, public investment isn't necessary, except when it is. In fact (of course) both industrialization and infrastructure were heavily subsidized as far back as the 1830s, thanks to both tariffs (remember the "tariff of abominations" that pissed off the South during Andrew Jackson's administration?) and Henry Clay's "American Plan." The railroads were heavily subsidized through gifts of free land. Everyone who knows anything about American history knows this, except for the "geniuses" who write for the Wall Street Journal.

    But Obama's beloved "high speed rail" not to mention his "green economy," are a total waste of time, so these guys' history may be faulty, but their policy recommendations aren't bad.

  • ChrisO||

    Creating the Department of Digging and Filling Holes would also "create lots of new jobs." Just sayin'...

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