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Not Borrowing Big To Improve This Country’s Infrastructure? Absolutely Crazy!
My friend Kay suffers from two afflictions that cause her great difficulties in this political season — common decency and common sense. It was the latter that brought on a very strong reaction the other day while we were driving in Philadelphia, and she noticed a bridge that had just undergone repairs with federal funds. “How can the government not be spending big on infrastructure improvements these days,” she wondered aloud? “It’s crazy!”
Crazy indeed.
Unlike the human body, which often heals itself after injury or illness, transportation, communication and educational infrastructure doesn’t. You don’t fix it, upgrade it or replace it with something better, it deteriorates. This not only makes a society less convenient and pleasant to live in, but less competitive with other economies as well.
Kay’s own comments about the craziness of not spending big now on old and deteriorating infrastructure were first of all about costs. You don’t do the fixing, upgrading or replacing now, it will cost more later in total dollar terms. Then she noted the present costs of borrowing to do all this fixing, upgrading or replacing, and the craziness really kicked in.
These days our federal government has to borrow about 40 percent of its budget. In anything like normal times, such shortfalls would mean it would have to borrow at very high interest rates. Except it doesn’t. The reason is because of some very curious and short-lived circumstances, namely, that most other big borrowers look even less credit worthy.
What this means is that there’s this wonderful window of opportunity today during which we can borrow for virtually nothing to upgrade and improve the infrastructure that is absolutely necessary to keep us competitive in world markets. And here’s where the uber-craziness really kicks in: The prime lender who would be helping to keep us competitive in world markets would be China, our emerging prime competitor in world markets!
So that was Kay’s take on the craziness of not borrowing these days to keep our infrastructure truly world class. It’s a subject that gets her upset in common sense terms. Don’t even get her started on the common decency foibles and failures of our government’s present policies.
P.S. Some leading Republican contenders for the White House claim to have business experience. In regard to the above, they might be asked whether it is better to borrow a million dollars today for equipment a company needs at 1 percent, or have to borrow two million dollars to buy this same equipment in three to five years at four or five percent? The basic question posed by this post.
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13 Responses to “Not Borrowing Big To Improve This Country’s Infrastructure? Absolutely Crazy!”
Unfortunately ‘common sense’ and ‘common decency’ take a back seat to the Republicans only goal for 2011 / 2012… Getting President Obama out of the White house.
Their inability to see the long and short term damage they’re doing to The United States of America and how 75+% of the America People (and 90% of the world) sees them and their single minded incompetence simply boggles the mind.
Well, part of the problem is previous experience with the recovery act. Infrastructure was suppose to be a big part of it. The idea that we spend now on things we need to pay for eventually anyway and help the economy, which I thought was a reasonable idea. The problem was once special interests got done with it, it did do that much of either. So it is hard to trust that things will be any different this time.
Where can I find a good source of info on what all that last round of infrastructure money was spent on? I think one thing we can all agree on is spending like that while necessary and beneficial, is likely to disappear down the throats of special interests with only a fraction of it going to where it was supposed to.
A good place to start is with the Federal Government at: Recovery.gov – Tracking the Money
For some strange reason the Republicans don’t like this site.
As I recall, recovery.gov was supposed to be the source for tracking how the Recovery Act money has been used. Not sure how up-to-date it is.
After spending a while browsing “recover.gov”, and seeing some of the projects that have already finished, the first thing I thought of was the ‘righties’ screaming: “The government is spent millions of dollars for every job that they create” and realize that a cursory look at “recover.gov” shows what a BS argument that is. AND, the right trying to get us to believe.
Why a straw-man argument? Because they forget to mention the 65 miles of four lane highway removal, repair, and repaving that was included in the cost of the “millions of dollars” jobs.
For the current batch of Republican Politicians lying seems to be the only tool they have when facing their constituents… Though not holding ‘townhall’ meetings is getting more and more
popularnecessary.One thing in this post keeps nagging at me; “keep us competitive in world markets”.
In my opinion the world is benefiting from our markets more than we are benefiting from the world’s. Unless we can start exporting far more tonnage in American made goods, I’m not sure we are greatly benefiting in terms of infrastructure investment. However in terms of jobs, infrastructure maintenance and upgrade investment seems very logical.
The reason I am leery of another big “infrastructure” program can be seen on recovery.gov. Look at how much was spent on “infrastructure”, $54-$61 billion dollars out of $722 billion. For all the talk of “infrastructure” it was mostly a bunch of spending and tax cuts with little bit of infrastructure thrown in.
I can’t help but think any new move for “infrastructure” spending is going to face the same people as before wanting to add their bits in, just like before.
Infrastructure is a terrific thing for the government to spend money on. The right investments can pay themselves back many times over, for generations. There is a strong case to borrow more aggressively to fund infrastructure projects, though as David points out, the government has a small credibility problem in that area.
But I don’t understand the headline. If the government is already borrowing 40% of the money it spends, in what sense are we not already borrowing to improve the country’s infrastructure? Surely the government isn’t spending all that money on infrastructure-free projects.
And what are humble voters like me to make of San Francisco’s proposition B, which asks us to issue a quarter billion dollars of bonds to fix potholes? On the one hand, it’s a great time to spend on infrastructure. On the other hand, road maintenance isn’t a big capital project, so this smacks of mortgaging the house to buy groceries. If we can’t find the cash to fill the potholes, where will we find the cash to pay off the bonds?
The stew gets thicker with a rumor I heard that much of this bond money is earmarked for improvements related to the Americas Cup, which we will host in 2013. That at least makes a bond more rational, but voters would frown on going into debt to prepare for a yacht race, even one Larry Ellison had nothing to do with. So we’re being bamboozled with a story, not unlike the stimulus story we heard from Washington in 2009.
We are addicted to bonds in CA. They keep getting sold as a way to spend more without raising taxes. I know that I look at them and, if I can’t figure out why it couldn’t have been paid for out of general revenues, I vote against it.
Some leading Republican contenders for the White House claim to have business experience. In regard to the above, they might be asked whether it is better to borrow a million dollars today for equipment a company needs at 1 percent, or have to borrow two million dollars to buy this same equipment in three to five years at four or five percent?
This is an interesting point. I am a (very) small business owner and if I had already accumulated a huge debt I would not be looking to accumulate more even if interest rates were good. It might make more sense for me to pay down existing debt before assuming more. It would depend how onerous the payments are.
But Mr Silverstein makes a good point – the repairs have to be done eventually anyway. And a government is not a business, they can print money and are under no pressure to turn a profit. It may well make sense to make repairs now.
The problem is illustrated above in the comments. Even if we can all agree that the time to work on infrastructure is now, there is no clean infrastructure bill out there. Judging by the above numbers, less than 10% of the original stimulus was infrastructure. Since infrastructure spend is generally couched in a much larger bill, the bill has to be judged in its totality and not merely on the basis of support or opposition to infrastructure.
“Infrastructure is a terrific thing for the government to spend money on.” – Dr J
Absolutely! If I break my arm I’m going to find a way to fix it, not ignore it!
The earlier stimulus was a flop. Why seek more of it, especially by the same people that made it a flop (if not worse) the “first” time?
As for infrastructure, that was supposed to be the big thing with the earlier “stimulus,” and it’s ridiculous to see people discover the “need” for more infrastructure now. (not limited to Rachel Maddow’s stupid 1930s megalomanic infatuation with Hoover Dam and an arch bridge)