I Do Know Some Dirty Words

I agree with Alan Blinder that “stimulus” is not a dirty word. But “waste” and “rent-seeking” are. Here are his prescriptions:

Unlike private investment, inadequate public investment is part of the problem. America’s infrastructure needs are so huge, and so painfully obvious, that it’s mind-boggling we’re not investing more. The U.S. government can now borrow for five years at about 0.75% and for 10 years at about 1.7%. Both rates are far below expected inflation, making real interest rates sharply negative. Yet legions of skilled construction workers remain unemployed while we drive our cars over pothole-laden roads and creaky bridges. Does this make sense?

[…]

Everyone knows that the returns to education, while large, are long delayed. That means we have no time to waste. We should be doing a much better job of building a better educated, more productive work force for the future. A Council on Foreign Relations task force co-chaired by former Secretary of State Condoleezza Rice and former New York City Schools Chancellor Joel Klein recently argued that better K-12 education is critical to American leadership in the world and therefore to our national security.

Dr. Blinder continues to live in a dream world in which the skills of homebuilders and roadbuilders are completely interchangeable and infrastructure projects are executed by cobbling together gangs of unemployed workers rather than being let to large, politically-connected construction companies that will drag them out as long as possible. He also apparently missed the tremendous run-up in real education spending without an appreciable effect on things like on-time graduation rates, test scores, or other measures of achievement.

Will an interstate that runs directly between Quincy and Peoria really increase U. S. productivity? Can that decision be made reasonably in Washington, DC? The unemployment and underemployment rates for recent college grads tops 50%. Will increasing that make us better or worse off?

We don’t really know how to cram more education into the skulls of the 50% of young people in Chicago, New York, and Los Angeles who don’t graduate from high school on time. Pointing to the benefits of doing so is an exercise in nihilism. We do know that simply spending more money isn’t enough.

The problem we face today is that the actual solutions to the problems we face run afoul of the preconceived notions and shibboleths of our elected officials on both sides of the aisle. Throwing more slogans at me doesn’t change that but it does bolster the case for waste and rent-seeking.

15 comments… add one
  • Oh, another “wonk” selling selling the “pothole” and “infrastructure” and “education” narrative to a brighter tomorrow?

  • Icepick

    I agree with Alan Blinder that “stimulus” is not a dirty word.

    It is if you’re doing it right.

  • Good one.

  • Icepick

    He also apparently missed ….

    Dude’s name IS Blinder.

  • Icepick

    On a slightly more serious note (because I was only joking a little before), I swear I’ve been hearing and reading stories about America’s decaying infrastructure since the 1980s. Apparently nothing has been done about this since then, as we’ve never stopped talking about it. Shouldn’t the whole country have fallen down by now?

  • I think that one of the possible explanations is that our opinion-makers are too heavily concentrated in New York, Los Angeles, and Washington, DC. Potholes in Manhattan, a deteriorating JFK, and the I95 bridge is in serious need of repair are generalized to “America’s decaying infrastructure” while, if you just get ten miles away, there are hundreds of miles of pristine interstate and dozens of sound bridges.

    My take: the problem would be much reduced if New Yorkers weren’t paying for commuter highways in Casper, Wyoming. New York and Casper should pay for their own darned infrastructure.

  • steve

    We now cover a small hospital in coal country. I am not so sanguine about the state of our infrastructure. Rather than cite anecdotal evidence, what disinterested evidence do we have? I assume you would see the civil engineers as an interest group, so where do we go for accurate data? If we decide we do have infrastructure issues, as a matter of public policy should we address them now when they would be cheaper to finance?

    http://www.asce.org/uploadedFiles/Publications/CE_Magazine/2010_Issues/04_April/410CE-A.pdf

    Steve

  • The Civil Engineers’ report is widely misunderstood. It doesn’t suggest which bridges should be fixed. It only points out the structural state of the bridges that exist. Is it your position that all bridges should be fixed whether it makes sense to do so or not?

  • PD Shaw

    steve, some of what’s in that link is water and wastewater infrastructure, which I do think would be good federal investment. The EPA has been suing local governments to get them to update their systems, leading to layoffs and municipal bankruptcy.

  • However, my point remains: the stimulus effect of pursuing even worthwhile infrastructure projects will be disappointing. We just aren’t that society any more.

    Even discounting my point about connected companies trafficking projects through their systems the stimulus effect will be disappointing. So we rebuild a bridge. The steel and concrete, made in automated plants, doesn’t amount to much. The guys who built it go out and buy a new TV. The TV was made in China from components made in Taiwan, Japan, and the Philippines. Money goes to top management at the U. S. big box retailer who sold the TV, managers in China, Taiwan, Japan, and the Philippines, and some workers in China, Taiwan, Japan, and the Philippines. Income disparity grows in the U. S. and Asia gets more prosperous.

  • PD Shaw

    I think infrastructure is probably a poor argument for stimulus, it implies a one-time, unique event that will not encourage businesses to buy much equipment or train new employees. It won’t encourage new businesses to enter the field. State governments will react similarly to a short-term plan. The result is a lot of time-shifting.

    If you think infrastructure is a painfully obvious problem and you want to maximize job creation in dealing with it, I think you need a long-term plan with dedicated funding. That’s essentially what is being debated in Congress now, but I agree with Dave’s other point, the rhetoric is about crumbling bridges and roads while the sponsors are promising their constituents about new interstates and bypasses.

  • TastyBits

    @Dave Schuler

    However, my point remains: the stimulus effect of pursuing even worthwhile infrastructure projects will be disappointing. We just aren’t that society any more.

    This is a salient point that very few understand, and unless undocumented/illegal workers were used, the labor costs for a WPA type project would be prohibitive. The US workforce is “knowledge” based.

    A stimulus package built to increase technical jobs would be an investment in the future. Instead of cutting NASA budget, it should be increased – substantially. Restart the Mars mission, and open source the Intellectual Property. This is one example, but there are numerous projects the government could undertake to invest using stimulus.

    This is not an endorsement of any stimulus package, but if the money is going to be spent (pissed away?), this is where the focus should be.

    “Then the bowsprit got mixed with the rudder sometimes.”

  • A stimulus package built to increase technical jobs would be an investment in the future. Instead of cutting NASA budget, it should be increased – substantially.

    That’s why I’ve been emphasizing the importance of investments in the power grid. Cheaper, more reliable electrical power with more agile distribution would be an investment in the future that would potentially attract manufacturing jobs to the United States. It wouldn’t employ thousands of semi-skilled navvies but, then, neither would building roads we don’t need and won’t want in 20 or 30 years.

  • steve

    ” Is it your position that all bridges should be fixed whether it makes sense to do so or not?”

    Nope. Just that if it needs to be done, why not do it while it is cheapest. As I have said before, I dont think there is as much of a role for deficit spending now as there was during the Depression. Starting out with record levels of private debt and high levels of public debt is different.

    “So we rebuild a bridge. The steel and concrete, made in automated plants, doesn’t amount to much. The guys who built it go out and buy a new TV. The TV was made in China from components made in Taiwan, Japan, and the Philippines. Money goes to top management at the U. S. big box retailer who sold the TV, managers in China, Taiwan, Japan, and the Philippines, and some workers in China, Taiwan, Japan, and the Philippines. Income disparity grows in the U. S. and Asia gets more prosperous.”

    Pretty much the same thing happening for the last 10 years with supply side economics.

    Steve

  • Nope. Just that if it needs to be done, why not do it while it is cheapest.

    The problem with this “cheap” argument is that the debt is not going to get paid off in five or ten years so the borrowing will be rolled over to a higher interest rate. If you can’t pay off the borrowing while interest rates remain low, then it isn’t “cheap” anymore. Plus, there isn’t much of a market for 10 year + bonds anyway, most of the money is in short-term vehicles.

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