I always find it frustrating when highly intelligent people with fantastic resumes reveal the limitations of their expertise when they venture outside their areas of expertise. I yield to no one in my respect for Mohamed El-Erian in matters of finance. Sadly, in his op-ed at Bloomberg View he reveals that his knowledge does not extend to politics or policy. Consider:
On the supply side, better infrastructure — addressing decaying parts such as roads, bridges, airports and ports, as well as expanding in new areas associated with the wider use of technological innovations, including artificial intelligence and mobility — enhances both private- and public-sector productivity. By also reducing the historically-unusual gap that has emerged over the last few years between the U.S. and some of its international competitors, particularly in Asia, this spending helps lift both the country’s actual and potential growth capabilities.
When the federal government builds a new highway, the federal government shoulders most of the expense. Once built the highway becomes the property of the state and the state is primarily responsible for its upkeep and maintenance. That’s why when you cross the border from Illinois into Iowa, Wisconsin, or Indiana the roads are so much obviously better maintained. Those states give higher priority to maintenance than does Illinois.
Additionally, how federal, state, and local governments spend money is rarely based on need but on political considerations. The squeaky wheel, etc. That’s why no matter how much we spend our roads and bridges never seem to get any better and never result in improved “private- and public-sector productivity”. It would be a remarkable coincidence if it did because that’s not the basis on which the money is spent.
Additionally, infrastructure spending programs are inevitably backwards-looking—devoted more to past needs than future ones. Unless nothing ever changes that means that such programs accomplish a lot less than they might.
I think that Mr. El-Erian is imagining a form of government that’s different from the one we actually have and that does not and never will exist. The question he needs to ask is why a mile of subway costs so much more in New York than it does in Paris or Tokyo. It isn’t because of how they’re designed. It’s because of how they’re executed.