This week President Obama outlined his plan for recovery going forward which includes a plan to spend $50 billion on infrastructure investment. This is the right theme but the wrong quantum. Bailing out badly managed financial institutions and propping up non-productive asset prices (stocks, commodities, credit and real estate) that should be allowed to follow an inevitable course lower are futile efforts that have wasted trillions of tax dollars around the world the past couple of years. Tax payers have received no valuable, lasting benefit for our “investment” in dead assets. Jobs are in desperate demand and governments can lend worthy support there by investing tax dollars into infrastructure (not Wall Street structure) that will endure and serve the next couple of generations. Pat Choate, the Director of the Manufacturing Policy Project explains the issues in this clip:
Worthy areas include clean water, recycling, sewer management, schools, parks, bridges, domestic energy. The American Society of Civil Engineers has outlined the projects needed and the cost involved and estimates that an investment of 2 trillion dollars over the next 5 years would be enough to overhaul and modernize badly neglected US infrastructure. Their web site here (excellent video) grades current systems as a “D” but explains in detail what can be done to remedy deficiencies . Since the government is mandated to promote employment, these areas are the perfect candidates for targeted spending programs that will benefit the entire nation for many years to come.
Like the “war bonds” of the 40’s, governments can issue “infrastructure bonds” to fund capital shortfalls. But for the bulk of the spending needed, we can redirect non-productive subsidies currently being wasted on elements of the old status quo like Banksters and oil cos. The era of worshipping “financial engineers” must end. It is real engineers who build and invent that have practical solutions for a stronger future.
The annual investment needed to completely update US infrastructure is about 400 billion over the next 5 years. Once we deduct the annual maintenance costs needed to service the old systems, the net cost of the upgrades will be less than that. When we factor in the increased efficiencies and savings that will flow from the upgrades the net cost is lower still. And governments are spending on “stimulus” anyway; better here than other places. Also the Bush tax cuts need to expire. For the past 10 years, America has lost an estimated 2 trillion in revenue from tax cuts to the wealthiest families, while the nation's infrastructure has been allowed to waste on the vine. It is a travesty to democracy. No wonder the economy has diminished. The time is here to invest in real nation building again.