Infrastructure

Trump's Infrastructure Illusions

Yet another federal spending spree isn't going to fix what ails us.

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highway
Foter.com / CC0

"We've got shovel-ready projects all across the country. And governors and mayors are pleading to fund it. The minute we can get those investments to the state level, jobs are going to be created." — President-elect Barack Obama, December 2008

"There's no such thing as shovel-ready projects." — President Obama, September 2010

Boosting federal investment in infrastructure has never had so many enthusiasts. During the presidential campaign, it was the rare chorus that Donald Trump, Hillary Clinton and Bernie Sanders could all join in singing.

House Democratic leader Nancy Pelosi says she's eager to work with Trump on it. Her GOP counterpart, Kevin McCarthy, expects Republicans to cooperate with their president.

Both the AFL-CIO and the U.S. Chamber of Commerce are in favor. And why not? Not only will we get more modern facilities, we are told, but the gusher of money will invigorate the economy and create lots of blue-collar jobs.

But such investments don't always work out the way they're supposed to. Pouring funds into highways, bridges, airports, dams and other projects is easy. Spending money wisely is hard. What beckons on the horizon, as Obama discovered after getting his $840 billion stimulus in 2009, often turns out to be a mirage.

There are several reasons for deep skepticism about this whole proposed endeavor. One is that the federal government has a lousy record of investing for the maximum payoff. Harvard economist Edward Glaeser has noted that the transportation funding in Obama's package "was twice as generous, on a per-capita basis, to the ten least dense states than it was to the ten densest states, even though higher-density areas need more expensive infrastructure."

Remember that "bridge to nowhere" that Alaska Gov. Sarah Palin bragged about stopping? It was part of a federal highway bill. When Washington lavishes money on transportation, it typically puts politics above economic merit.

There are doubtless many infrastructure fixes that could be done with more spending. But why should the federal government assume responsibility for them? The majority serve mostly local needs and can be financed by the beneficiaries. Mayors and governors are less accountable when such projects are financed by taxpayers who live elsewhere.

People in Los Angeles, Houston and Pittsburgh know better than anyone else what the local priorities are. If taxpayers in those places aren't willing to shore up the bridges or resurface the roads they use every day, it's a signal the money shouldn't be spent. In the 1960s, notes economist Lee Ohanian of the Hoover Institution, capital outlays made up 20 percent of California's state budget. Today they're 3 percent.

Nor will infrastructure spending yield a harvest of new jobs. A study by the Congressional Budget Office calculated that the 2009 stimulus, of which infrastructure was only a part, created no more than 200,000 jobs by 2014—out of the 9 million the economy added during that period.

Andrew Garin, a Ph.D. candidate in economics at Harvard, studied the results of the 2009 package and detected "little to no county-level impact of highway spending on local employment outcomes reported by employers. There appears to be no effect on local highway-construction, employment, overall construction employment, or total private-sector employment."

The prospect of a blue-collar boom is a feat of imagination. Out-of-work coal miners and autoworkers don't necessarily have the skills contractors need to expand airports or replace bridges. The unemployment rate for construction workers is just 5.7 percent, which means a lot of those hired for public projects would be taken away from private ones.

What about the claim that a massive infrastructure program will be a 5-Year Energy shot for the economy? Standard economic theory says that such an effort to boost total national demand can be helpful during a recession. But in the eighth year of a recovery, it will just crowd out private spending, nullifying any macroeconomic benefit.

One likely consequence of this type of program, whether financed with direct spending or tax credits, is to add to the federal debt, to the detriment of future taxpayers. The CBO concluded that Obama's stimulus had modest short-term benefits for the economy but negative long-term effects, because "increased debt tends to reduce the stock of productive private capital."

Trump and others in Washington see an infrastructure push as a superhighway to prosperity. Most likely, it's a grander, shinier bridge to nowhere.

© Copyright 2016 by Creators Syndicate Inc.

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  1. Why don’t we put a superhighway on top of the wall? Think about how much faster it will be to get from San Diego to El Paso.

    1. *looks for clean dirt locations and quarries along route to buy

    2. Better idea: get Elon Musk to put a hyperloop from Sand Diego to El Paso (because, you know, there’s a shit-ton of people itching to be able to travel between those two cities in a couple of hours) on top of the wall.

      Elon gets another crony deal and the government gets to crow about infrastructure and stimulus. Win-win. The only people who lose are the future tax payers who will have to pay for it, plus interest. But fuck them, they don’t vote in the here and now. Shit, most of them haven’t even been born yet..

      1. Better idea yet: take a Southwest flight. 229 bucks, 3 hours, and you get to stretch your legs in Phoenix for a bit.

        1. That is expensive. I can fly across the USA nonstop for $150 or less.

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    4. You forgot about McAllen, Texas.
      You might as well put a superhighway all the way down to the Lone Star State, and make sure it has four lanes going both ways on the wall.

  2. Why don’t we just build walls around the sanctuary cities? Like *Escape from NY City*

    1. *Escape from NY City*

      The harrowing tale of the Old El Paso salsa cowboys search for decent salsa.

      1. It’s Pace. Where’s my rope?

    2. We’ll need a new wall around California when they secede.

      1. And we may as well wall off Chicago and Detroit, just in case.

        1. “And we may as well wall off Chicago and Detroit, just in case for the lulz.”

          Fixed.

  3. Pontificate Chapman, you haven’t been right for the last year and a half but don’t let that stop you.

  4. For once, Chapman is right. (I know, broken clock and all that.) The big boost in infrastructure spending stuff always struck me as a sort of homage to FDR’s WPA program in the New Deal. Well, like it or not, in 1932 there were probably many unemployed folks that knew how to do manual labor – and building a road probably involved more actual shovels and fewer specialized earth moving machines you need training to operate.

    And can you imagine today’s unemployed office assistants donning safety vests and hard hats and putting in some shifts doing physical work OUTDOOTS? “I’ve hurt my back!” “The sun gave me skin cancer!” “My hands are calloused!” And that would all be on the first day.

    1. Don’t worry, it takes more paper pushers to build a road than laborers.

    2. For once, Chapman is right.

      Yeah, but he criticized MUH TRUMP! /Derp

    3. And can you imagine today’s unemployed office assistants donning safety vests and hard hats and putting in some shifts doing physical work OUTDOOTS? “I’ve hurt my back!” “The sun gave me skin cancer!” “My hands are calloused!” And that would all be on the first day.

      Judging by the work I’ve seen being done over the past 12 months on a highway project that’s about 8 miles long and still only about 60% finished, I’d say they’ll fit right in.

  5. Because they don’t actually build and repair roads and bridges. Some of the money does go to that.

    We also get, police with fancy license plate scanners, DOT raises, fancy roads signs that 99% of the time have drive safely on it, carpool lanes turned into HOT lanes and other nonsense misuse of federal money.

  6. Massive federal spending on infrastructure is massive federal spending.
    Massive federal spending is usually inefficient.
    Better to spend the money building a wall around California and expel them from the union, and then we will have somewhere cheap to deport illegals.
    To really build up the economy, include Oregon & Washington (state)
    Charge them for all the federal lands there, and reduce the debt.
    A win for all illegals and liberals; they will have a safe place to call their own.
    A win for the rest of us; the illegals and liberals will be gone.
    There is a minor issue with the use of force, but what the heck. As the liberals would say, it is for the greater good.

  7. Something all politicians can agree on: Using tax dollars to buy their next election.

  8. Boosting federal investment in infrastructure

    There’s the tell right there. It’s not investment, that’s a euphemism. It’s SPENDING and PORK, mulcted from the citizens at the point of a gun. Chapman is stupid enough to buy the narrative, and by framing it that way, he makes it seem OK if the pork is carved by a different waiter. Call it what it is. It’s PORK, it’s government power.

    1. No, it is investment. It will result in assets on the balance sheet. (The assets will be overvalued because in most cases there’s no easily estimable market price for them.) But it’s investment in ways that would get directors of a public corporation either ousted by shareholders or thrown in jail.

      1. They have no money to invest though. They have to borrow more (or increase taxes).

  9. George Bush spending ‘government money’ on war is what ballooned the debt and caused the Great Recession, but spending ‘government money’ on infrastructure totally pays for itself. That’s what I’m told.

  10. Trump’s plan is especially worrisome. The $130-something billion will be in the form of tax credits, meaning the majority of it will go towards projects that private companies were probably going to do anyways (now they’re just get a tax credit for it). For a private company to get involved in infrastructure, it needs to be a profitable investment, meaning there’s some sort of return in the form of fees, toll, etc. A tax credit doesn’t change whether an investment is profitable over the longer term.

    Where our infrastructure really needs help is in poorer areas, like Flint. There ain’t no tax credit that’s gonna make a private company take that on.

    1. On the plus side, if there’s a potential profit, it means the project is probably of actual use to people who are willing to pay for it.

      1. Yes, but that’s missing the point. The most dire projects that’ll have the most impact on people’s lives will probably not get addressed at all in such a scheme. Only fixing things that lend themselves to profit-making eliminates many useful things as possibilities for improvement.

        1. Only fixing things that lend themselves to profit-making eliminates many useful things as possibilities for improvement.

          I know we free market types are odd birds, but we tend to believe that the set of things that are useful coincides with the set of things people are willing to pay for freely, and hence with the set of things that lend themselves to profit making. Hence, what you decry is, in fact, intentional.

    2. The $130-something billion will be in the form of tax credits, meaning the majority of it will go towards projects that private companies were probably going to do anyways (now they’re just get a tax credit for it).

      That’s true for all price changes: lowering the price of an item by a few percent will cause only a few percent of people to buy more of that product, but everybody enjoys the lower prices. Welcome to Economics 101; it can’t work any differently.

      If you’re going to play favorites in the economy at all, tax cuts are still a far better choice than subsidies.

  11. “Standard economic theory says that such an effort to boost total national demand can be helpful during a recession.”

    Goddamn it. I guess we’re all Keynesians now.

    Chapman may have simply been pointing out that Keynesians never even follow their own theory, but he could have at least included an aside that this “standard” is total bullshit.

    1. Unfortunately, Keynes is “standard” now. Shouldn’t be, but it is.

      1. Keynes is only standard in poor economic times. During good economic times, the anti-Keynesians take over. Increase spending during bad times to stimulate the economy, increase spending during good times because we can afford it.

  12. Nothing like a good boondoggle to get the Trump administration started right!

    1. I’m pretty sure the boondoggle started about 18 months ago.

  13. I see Paul Ryan has managed to postpone voting on the issue of bringing back “targeted spending” – AKA earmarks or pork barrel spending – until the start of the new session and possibly made it contingent on a public floor vote rather than a closed-door committee vote. But he did suggest it’s the appearance of the thing – it looks bad when you’ve just elected a “drain the swamp” candidate as President and then turn right around and vote for a swamp-building measure – rather than the principle of the thing so I don’t have much hope that the GOP is not going to ratchet up the spending a notch or three. To the victors belong the spoils and all that. What the hell’s the point of getting elected if you can’t loot and pillage, engage in graft and corruption, reward your friends and punish your enemies, use all that government power to do something even it’s just cutting donuts in the neighbor’s front yard? As long as you put on the solemn “public servant doing the will of the people” act, it’s all good.

    1. All federal spending should be earmarked by Congress, per the Constitution.

  14. Steve Chapman can’t explain anything. Explaining something requires knowledge, understanding, and rational thought, all of which he lacks.

  15. I wish writers at Reason would stop discussing how many jobs might, or might not, be created. The purpose of infrastructure spending, or any government spending, should be about creating value. As the old economic adage goes, if the point is to create jobs then take away their shovels and give them spoons.

  16. RE: Trump’s Infrastructure Illusions
    Yet another federal spending spree isn’t going to fix what ails us.

    “We’ve got shovel-ready projects all across the country. And governors and mayors are pleading to fund it. The
    minute we can get those investments to the state level, jobs are going to be created.” ? President-elect Barack Obama, December 2008

    “There’s no such thing as shovel-ready projects.” ? President Obama, September 2010

    1. Please do not cite Dear Leaders lies. It makes him look dishonest.
    2. Making interstate and intrastate road tool roads would be a better idea than taking tax dollars away from everyone.
    3. Where did all that money the Department of Transportation got go to, for what, when and what company got those funds? Transparency for the masses’ money might give us an idea where our money went.

  17. the best part of new infrastructure is that you still have the old not updated infrastructure and no one prepared for the long term maintainence of either so its always there for the next politician to harp on just like SS and welfare and ACA

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  19. The new freeways, bridges and schools will be beautiful. Believe me.

  20. RE: Trump’s Infrastructure Illusions
    Yet another federal spending spree isn’t going to fix what ails us.

    Also, infrastructure provides the ruling establishment turds an excellent opportunity to get rich through cronyism.
    But be rest assured, Trump wouldn’t engage in cronyism and waste our tax dollars any more than Hillary would.

  21. “Yet another federal spending spree isn’t going to fix what ails us”

    Not with that attitude it won’t.

  22. “Obama’s package “was twice as generous, on a per-capita basis, to the ten least dense states than it was to the ten densest states, even though higher-density areas need more expensive infrastructure.”

    Is that true?

    I’m thinking of Montana, which has relatively few people, but lots of highways. I’m betting the cost per capita for cost of highways is greater in Montana than, say, Massachusetts.

    1. Well, it’s true in the sense that the “least dense states” probably got fucked by Obama’s “big package”: federal spending in those states tends to be for crap people don’t usually want in their own backyard.

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