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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