Many people in Washington are talking about infrastructure spending. Infrastructure is a bi-partisan issue, because every elected official is happy to spend other people’s money on projects that will get their names in the paper and contributions to their re-election campaigns.
George Will throws a dose of cold water on the party when he points out that it’s hard to spend money on infrastructure when we’ve thrown up so many roadblocks in the form of environmental reviews. But that’s not the real problem with infrastructure spending. The real problem is that we really don’t need any new infrastructure.
Most writers assume that government spending on infrastructure has a multiplier effect: that every dollar spent will generate more than a dollar of gross domestic product. That worked for early highway spending, which generated a huge amount of new travel and shipping that didn’t exist before. It won’t work for most infrastructure spending today.
In particular, building new rail transit or high-speed rail projects whose goal is not to generate new travel but simply to substitute for existing forms of travel is going to have a negative multiplier: every dollar spent leads to a reduction in the GDP.
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Supposedly the push for infrastructure comes from the claim that our existing infrastructure is crumbling. But even if that were true, federal infrastructure programs are most likely to go for new infrastructure, not repairs or maintenance of existing infrastructure.
Anyone who thinks that all infrastructure spending has the same effect on the economy needs to look at Japan, which has been using infrastructure spending as an economic stimulus for a quarter century, with no visible results yet. If the federal government spends any money on infrastructure, how do we make sure it goes for projects that are really necessary and that really will boost our economy?
The Antiplanner recently argued that Trump’s tax-credit plan has no advantages over tax-free municipal bonds. Infrastructure investor Joel Moser disagrees, saying that private infrastructure spending can be more efficient than spending by the government. However, that still leaves the fundamental problem, which is that neither method of finance offers any guidance as to which projects are worth funding.
The Antiplanner’s answer to that question remains the same as ever: if a project can’t be funded out of user fees, it isn’t worth doing. There may be some exceptions, such as pollution abatement, but all transportation, water, and other projects that produce consumable goods or services can and should be funded out of user fees.
Infrastructure is a bipartisan issue, and we should be thankful that bipartisanship isn’t cooperative when these issues spring up. Just remember a deadlocked Congress is a good Congress, when both sides of the aisle agree on things……..watch your wallet.
As a result of negative feed back infrastructure spending Japan now has one of the higher national debts in the world and is still in deflation. Let us try to prevent the US going down the same path.
Japan serves as a lesson for what grandiose infrastructure spending can ravage the economy and set you down the path of sweeping debt. Japan’s rural areas have been paved over and filled in with roads, dams and other big infrastructure projects, the legacy of trillions of dollars spent to lift the economy from a severe downturn caused by the bursting of a real estate bubble in the late 1980s. During those nearly two decades, Japan accumulated the largest public debt in the developed world; a whopping 180% of their GDP. In total, Japan spent $6.3 trillion on construction-related public investment between 1991-2009. However the having neglected its roads, bridges, water treatment plants and more over the years, the United States is bound to generate a greater payback for such spending than say Japan. Reinvesting in crumbling infrastructure rather than building new stuff seems like a wise use of dollars.
Trump can solve this easily.
Executive Order; no federal funds for any new infrastructure projects until all repairs and renovations are completed on the DC Metro and it is completely back in full operation.
Since the DC Metro problems will never be solved, we will save billions and billions…
Our infrastructure was mainly planned in the 1950-1970 period for a population 1/3 smaller than today.
And if user fees are the sine qua non of funding, when do I get property tax relief for paying for my local roads I rarely drive on and which my gas tax doesn’t pay for?
A few thoughts:
(1) Remember that (at least at the federal level) the tax on motor fuels was supposed to be a user fee (and I concede that diversion to other things has made it less so).
(2) As for projects funded out of user fees, there are several large ones being funded mostly or entirely that way, including a significant widening of the New Jersey Turnpike; the replacement of the Tappan Zee Bridge (part of the New York State Thruway); the replacement of the Goethals Bridge between Staten Island, N.Y. and New Jersey; and the MD-200 toll road project. Yes, there was tax money in some or most of these, but the majority of the dollars came from bonds to be paid-back by the users of these projects.
(3) Where I live, there is absolutely need for more highway capacity, and the bond markets have been willing to buy the bonds to fund the construction of the added capacity, but objections from persons and groups opposed to any and all highway projects come out of the woodwork when such network additions and improvements are proposed. Often they opponents want the dollars spent on passenger rail projects instead (never mind that rail projects in the United States appear to generally not collect enough in fare revenue to be capable of paying back bondholders).
“And if user fees are the sine qua non of funding, when do I get property tax relief for paying for my local roads I rarely drive on and which my gas tax doesn’t pay for?”
What percent and amount of your property taxes go for local roads?
At my last residence in Seattle, 29% of the property tax went to the city. Of that, no money went to my 75-year-old neighborhood street since the city refused to do any significant maintenance to anything other than arterials. It’s hard to say how much of that 29% went to any roads. I’m guessing a small percentage. And I’m also guessing most money that went to arterials went to road diets and bike lanes rather than resurfacing.
To add on, when can I get a refund for the 50% of my property taxes that went to government schools since I don’t have any children?
Socialism. It sucks.
Oh, and great post by the AP today. I fully agree with it. It’s telling that both parties want to waste money on infra.
Yeah, 75% of my local transportation miles are covered on a bicycle. But FedEx and UPS and USPS use the local roads to deliver my packages. And garbage trucks use local roads to pick up my garbage. And local ambulance services would use local roads to pick me up after a heart attack or whatever.
Frank; To add on, when can I get a refund for the 50% of my property taxes that went to government schools since I don’t have any children?
Socialism. It sucks.
THWM; I don’t want to ever call the fire department, but I don’t want it shut down either.
Also even you teahadi’s don’t expect roads to be profitable to survive. :$
To add on, I thought retards from Canada agreed not to post here any more. Andrew. Because you can keep strawmanning like the retard you are. Or you can STFU.
I piss off people on both the political right and left. So I’ll take that as a compliment Frank. 😉