Monday, September 6, 2010

Internal Improvements

Last week I was reflecting on the plight of American infrastructure.  Crumbling bridges, cracking roadways, and inadequate railways all hold business investment back.  Ports are filling with sediment, wetlands are too damaged to prevent flooding, and the electrical grid is woefully inefficient.  Civil engineering in American cities is stuck in the 1950's, and public transportation is underwhelming from most urban areas, and is absent in suburbia.

So I'm heartened that the Obama administration is announcing a 6 year plan to increase the safety and utility of our road, rail, and waterways.  The plan appears very different from the stimulus focus on "shovel ready" projects because the Administration appears to actually have put together a plan.  Instead of money in search of projects, the Administration compiled a series of projects that are necessary.  Furthermore, they will create jobs in the short run and ensure private sector investment in the future.

“Over the next six years,” Mr. Obama promised “we are going to rebuild 150,000 miles of our roads — that’s enough to circle the world six times; that’s a lot of road. We’re going to lay and maintain 4,000 miles of our railways — enough to stretch coast-to-coast. We’re going to restore 150 miles of runways and advance a next-generation air-traffic control system to reduce travel time and delays for American travelers — I think everybody can agree on that.” (NY Times)
One of the bugs of the American Congress is its inability to produce a coherent infrastructure plan. This is what the Congressional leaders of the 19th century excelled at. Henry Clay's emphasis on 'internal improvements' provided a national transportation network which propelled America to industrial prominence.  At least the administration seems to have a portfolio of projects in mind. While I would prefer a return to a functioning Congress, I'd take a functioning administration in a pinch.

"Shovel-ready" projects send more money to capital acquisition (e.g. paving machines) than labor, which is why they're less effective at stimulating the economy than road building.  This observation underlies a critique of Keynsian responses to recessions that it somehow is no longer effective.  But as long as the infrastructure spending is targeted towards labor-intensive projects, the basic economics are the same.  The railroad investments in this bill should be more labor intensive than road resurfacing.

The stated goal of this infrastructure project isn't stimulus though; it's long-term investment. And by the way, the administration is pledging that the spending will be paid for- by taking away oil and gas subsidies.  Let's just hope the Congress is still democratic enough to maintain that popular initiative.

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