Infrastructure, Long-Run Growth, and Recessions

ThinkProgress:

Matthew Slaughter was on the George W Bush Council of Economic Advisors so he’s probably only saying this because he’s a socialist:

Over much of the 20th century, America’s strong infrastructure investment was a major factor attracting global corporations headquartered in other countries to invest and create jobs here. Rising U.S. standards of living were fueled by a strong infrastructure system that facilitated the growth of companies in America, both global and domestic alike: transportation systems to move people and products, electrical systems to power plants and offices, communications backbones to drive computers and creativity. By 2008, the U.S. subsidiaries of foreign companies employed over 5.6 million Americans — nearly 2 million in manufacturing — and exported $232.4 billion in goods. That’s 18.1% of America’s total.

Today is very different. America’s decaying infrastructure costs the typical American worker hundreds of hours in lost productivity. It also costs companies time and efficiency in moving their products around — and also out of — the country. This decay is particularly stark for global companies, whose executives are witness to the dynamism of emerging economies like China and India that present them with ever-widening choices for where to grow jobs and investments around the world.

Aging Public Infrastructure | ThinkProgress: 

I frequently see letter grades from the American Society of Civil Engineers cited as evidence that we need to invest more in infrastructure, which always seems a bit unpersuasive to me. Civil engineers want more infrastructure spending, admirals want more aircraft carriers, prison guards want more jails, etc. This chart Kevin Drum offered on Friday seems like the more persuasive way to make the point.

Once upon a time, the public sector refreshed its capital stock at a rate similar to that used by private businesses. Over time, our level of investment hasn’t kept pace with the growth of the economy and the age of public sector capital has steadily increased. That’s not a knock-down argument. You could make the case that we had this wrong in the 1960s and it makes sense to maintain public infrastructure that’s distinctly shabbier than private capital goods. That doesn’t seem plausible to me, but you can make the case if you like. Either way, what we have here is a pretty precise take on the existence and scope of the change over time. I’d say it’s been change for the worse.

A big burst of spending on this stuff is genuinely not my first-choice for a “jobs” program since well-designed infrastructure projects don’t necessarily target the segments of the labor market that are most in need of help (not a lot of women, for example, work in these fields) but it’s needed one way or the other.

Yglesias on Frum’s Infrastructure Bank:

David Frum’s proposed State of the Union speech contains both a lot to like and some to dislike, along with this wonky proposal:
I propose that all revenues from gasoline taxes, aviation fees, and other similar sources be placed in a fund directed by an independent infrastructure bank. The bank would be permitted to issue bonds up to a certain level, too. Instead of Congress writing a highway bill every five years, the bank would develop a list of priorities — no politics allowed. I’d suggest we have seven directors of the bank. Three would be nominated by the president and confirmed by the Senate. Two would be nominated by a conference of the Republican state governors, two more by a conference of the Democratic state governors. The directors would serve fixed and overlapping terms. When we’re balancing the budget, we can move slowly through the list of bank infrastructure priorities. In a year like 2011, when it’s cheap to borrow and workers need jobs, we can bring projects forward faster. Congress would always have the last word, in an up-or-down vote. And Congress would decide whether to increase or reduce the flow of future tax revenues into the infrastructure bank.
Every American will have the reassurance that these new infrastructure projects are not pork barrel. They were not chosen to reach some political deal. The money you pay at the pump or at the airport or in future taxes on carbon dioxide and other pollutants will be reinvested toward faster travel, more advanced telecommunications, and cleaner water.

I like the spirit of this suggestion, but worry about the details. Slightly more than fifty percent of the American people live in California, Texas, New York, Florida, Illinois, Pennsylvania, Ohio,  Michigan, and Georgia and slightly less than 50 percent of the population lives in the other 41 states. Wouldn’t the practical impact of board dominated by gubernatorial appointments be to even further exaggerate the American political system’s over-weighting of the interests of low-population states? Crowded airports in New York, Dallas, Los Angeles, Chicago, Houston, Miami, and Atlanta would be taxed to finance upgrades in Cheyenne and Albuquerque. Instead of a rail tunnel under the Hudson, we’d get a bridge to nowhere . . . exactly the problem this proposal was supposed to solve. 

Private infrastructure is also aging.  The privately-owned car fleet is older than ever and residential housing has been underbuilt since at least 2007.