infrastructure

A New Economy from Old Roots?

Dave Johnson — Wed, 30 Sep 2009 16:11:44 -0700

How do we build a new economy out of the collapse of the old economy? How do we start fresh to begin creating jobs again, while building in economic and environmental sustainability, as well as workplaces that respect human needs and rights? How do we change things so that we all get to share the benefits of the economy rather than just contributing to the increasing wealth of a few vastly wealthy people?

While we look for a vision for a new economy, we should examine what has worked in the past. America had periods in which regular people enjoyed sustained increases in their standard of living. For a long time it was a conventional wisdom that each American generation would do better than the previous generation, more people would receive good educations, medical care would get better, the middle class would grow, leisure time would increase, poverty rates would decrease, retirement would be easier, etc.

But this pattern stopped. Beginning in the late 1970s and especially in the 1980s incomes began to stagnate, wealth increasingly concentrated at the top, working hours and workplace pressures steadily increased, availability of good health care started to decrease, etc. The standard of living of most Americans began to and continues to decline. At the same time corporations became more predatory as consumer protections vanished. Meanwhile outsourcing, deunionization and other anti-worker policies led to increasingly unpleasant, stressful and unrewarding worklives for more and more people.

Many of today's problems are traceable directly to the policy results of anti-government propaganda that was blasted out from well-funded conservative think tanks starting in the 1970s. The anti-government campaign led to defunding of many national, state and local government programs that improved education, helped the poor or enriched people's lives. We suffered deregulation in many areas where the government had protected consumers, workers, investors and the environment. Huge reductions in taxes for the wealthy were either offset by tax increases for the rest of us or government borrowing. And that borrowing has led to increasing problems of paying the interest and threats to funding even basic programs like Social Security and education.

So what worked, before the conservatives trashed the place?

Regulation

One thing we know for sure now, learned the hardest way thanks to the financial crisis: regulation worked. Regulation was necessary, it worked, it kept firms from taking risks that could bring down the economy. And we can also see now how regulations protected consumers from predatory corporate activities, workers from wage theft or unsafe working conditions, and the environment from exploitation and destruction.

Taxes

Before Reagan the tax rates at the top were very high. After you reached - and took home - a certain very high income you paid a high percentage of the rest in taxes. This had many beneficial results – even for the people who paid higher taxes. Government could afford to keep the physical, education and legal infrastructure in good condition without borrowing. Government could afford to invest in programs that improved our standard of living, health, knowledge and technology, which helped businesses grow. Businesses thrived in such well-watered soil.

The high tax rates also kept the bad side of human nature in check. When it took years to build up a fortune businesspeople had to rely on the health of the greater community to nurture their own wealth-building enterprises and keep them thriving over a long period. They had to think and act long-term. The roads needed to be kept in repair, the schools needed to provide excellent education to potential employees, the courts needed to be functional to enforce contracts, and they wanted the communities they were going to have to stay in to be pleasant places to live.

But once taxes were lowered vast windfalls could be realized from a single event and it made more sense to try to fleece the community with quick-buck schemes than to rely on it. We began to see corporate raiders break up solid, ongoing companies, steal pension funds, etc., while encouraging communities to cut spending on schools, roads, etc. It became more profitable sell off or outsource our manufacturing capacity. And then, as things fell apart, the few who benefited could just fly away in their private jets or sail away in their huge yachts. The greater community was no longer any use to them except as crops to be harvested. Vulnerable consumers are the only crop that is coming up in this economy.

Big Government

Government is We, the People making the decisions. "Big government" is simply another way of saying that more of the important decisions are made by the people. Shrinking government means handing the decisions over to big corporations. In the real world this is the choice. And in the real world big corporations make decisions that benefit them, and only them. Before you badmouth government think carefully about what the alternative is.

Old-Fashioned Government Planning

As I said in a post here a few months ago,

The phrase “industrial policy” sounds so Walter Mondale, 1970s, smokestacks and brick factory old-fashioned. I suspect the subject turns people off, eyes glaze over, hands reach under the table for iPhones and Blackberries…

But here we are without an industrial policy. How’s that working out for us? Every other country has one. China seriously has one. We instead have huge trade deficits. We don't make things here so we have to borrow money to buy things made elsewhere.

To add insult to injury, recently Deutsche Bank released a research note advising investors that the U.S. was not a good investment because of our lack of a government industrial policy. See Deutsche Bank: Absence of US Clean Energy Policy Will Send Global Capital Elsewhere.

While we envision a new direction for our economy, maybe we should also be looking at returning to a few old-fashioned ways of doing things, too.

A Bank For Our Public Needs

Isaiah J. Poole — Thu, 21 May 2009 08:09:49 -0700

A year ago, I called attention to efforts by some progressives in Congress to establish a national infrastructure bank that would finance critical investments in our transportation network, our waterways and other public assets. This week, that push is happening again—but this time with the help of the White House.

Rep. Rosa DeLauro, D-Conn., on Wednesday introduced the National Infrastructure Development Bank Act of 2009 (HR 2521), which would provide financing for projects that have regional or national impact, such as high-speed rail, interstate highways or major water projects.

The bank would be financed with a relatively meager $5 billion a year annual appropriation over the next five years (plus access to another $250 billion in total capital from the U.S. Treasury). But the real breakthrough of this legislation is that finally the federal government will be paying for its capital investments the same way the private sector usually does—through a separate capital budget with its own funding.

President Obama has embraced the idea of an infrastructure bank, and there is a provision allowing for the bank's launch in the budget resolution Congress approved in April.

America's Future co-director Robert Borosage explains why this infrastructure bank is significant:

This legislation will make an important contribution to addressing America’s investment deficit. We have always been a nation that has looked to the future by investing in our land and in our people. Historically, we directed roughly 8 percent of our gross domestic product to long-term investments, and that investment paid off. Public investment built the interstate highway system and transcontinental railroad, universal primary education and public universities, and much more.

But since then, we have adopted a short-term “pay-as-you-go” mentality that stops long range investment before it begins. Nowadays, public investment as a percentage of GDP has dropped below 4 percent. Our post-World War II infrastructure is decaying and we aren’t replacing it. Levees are overflowing, water mains are bursting and our roads are potholed. Instead of building for the future, we sit in traffic and worry about budget deficits a decade from now.

The National Infrastructure Investment Act would help address these problems by creating an instrument that can help finance long-range investments with public and private capital. . Infrastructure investments can create jobs in the short term and economic growth in the long term, addressing both our current investment deficit and next decade’s budget deficit at the same time. This bill supports long-term growth that will keep America competitive globally and improve our way of life.

The infrastructure bank bill has broad support, with endorsements from the U.S. Chamber of Commerce, key unions, Wall Street investors such as Felix Rohatyn and groups such as PolicyLink, a research organization that promotes progressive social policy solutions. Previous infrastructure bank proposals have been embraced by Republicans as well as Democrats.

That coalition of support is not new, but what is new is that for the first time the infrastructure bank could become a reality this year. If it does, its existence will come at a particularly crucial time. One of the major agenda items facing this session of Congress is a reauthorization of federal highway and public transportation funding. The last time Congress addressed the issue, in 2004 and 2005, it was constrained by a White House that refused to consider a modest increase in gasoline taxes—five cents a gallon—that would have helped finance enough construction to help the country's transportation network keep pace with growth, including the rush to public transportation that accompanied last year's oil price spike.

This time, the financing options are harder and the task bigger. We need the infrastructure bank to help the nation build and pay for the assets that are fundamental to our economic growth and well-being.

Good deficit, bad deficit.

Eric Lotke — Fri, 08 May 2009 11:16:17 -0700

Obama has introduced his budget, and people are hyperventilating about the deficit. Piling “debt on the backs of our kids and our grandkids,” declares House minority leader John Boehner (R-Ohio). "Bloated," exclaims Democrat Evan Bayh of Nebraska.

With all the hyperventilating, we are forgetting what’s most important. Deficits aren’t necessarily bad. Sometimes deficits can be good.

• Credit card debt for a plasma TV? Bad.
• Low interest loans for a college diploma? Good.

• Buying a second car you don’t need? Bad.
• Borrowing for a house when the kids are born? Good.

Deficits have taken almost mythical hold of our imagination. The word “deficit” has become a stand-in for words like waste and irresponsibility – so running a deficit is nearly synonymous with irresponsibility. But deficits are not necessarily irresponsible. Economists consider deficits simply one economic variable to be taken into consideration among many others.

• Every successful business starts with a loan. Entrepreneurs earn their ulcers looking at their loan schedules, not expecting a profit until the third year. But still they borrow. It's necessary to succeed.

The Obama budget shows deficits in the trillions. Maybe that’s okay. The US had a budget deficit for most of our stunning boom after World War II.

Our deficit might appear less frightening if we think not in terms of dollars, but as percent of GDP. The U.S. is a gigantic economy, so national numbers become frighteningly large.

Our deficit this year is $1.7 trillion. That’s big. But our economy is $14.2 trillion. That’s even bigger. Put them together and our deficit is 12% of our GDP. It is high, but not extraordinary by historical or international standards. It is like a person who earns $30,000 with a $3,500 deficit at the end of the year. It’s a lot. But it can be managed. Indeed, if the deficit bought some education or a new set of tools, it might not be irresponsible at all; it might even be worth it.

Source: OMB history, 1930-2008; CBO projections, 2008-10

Even if we look at the accumulated debt, not the annual deficit, the U.S. level of debt is lower than most advanced industrial countries’ – and during the current crisis, many other countries are, like the U.S., deliberately raising their deficits. In 2008, France’s public debt was 64 percent of its GDP; Germany’s was 63 percent. Japan sets the scale at 170 percent.

Source: CIA

Obama seems to understand this. He’s at his best when he talks about cutting waste, but “what we will not cut are investments that will lead to real growth and prosperity over the long term." Energy, health care and education are usually at the top of the list.

He’s at his worst when he promises to cut the budget deficit in half by the end of his first term. First, it creates an impossible expectation. Second, it accepts deficit reduction as more fundamental than it needs to be.

The conclusion: Don’t panic. Our deficit is high and it deserves attention. But at this time of crisis, deficit spending to make sensible investments and put people to work is both necessary and affordable. It can turn our troubles around, and build the resources that we need for the future – clean energy, an educated workforce and a 21st century infrastructure. Build, and build big.

The Dubious Priorities of the President's Fiscal Budget

Susan Ozawa — Fri, 27 Mar 2009 12:08:04 -0700

Investing in People

Susan Ozawa — Fri, 27 Mar 2009 11:27:41 -0700

Testimony of John S. Irons, Ph.D. Before the U.S. House of Representatives Committee on Transportation and Infrastructure Hearing on: “Infrastructure Investment and Economic Recovery”

Susan Ozawa — Mon, 16 Mar 2009 10:55:57 -0700

The Investment Deficit in America: Yesterday’s Achievements, Today’s Problems, Tomorrow’s Solutions

Susan Ozawa — Mon, 23 Feb 2009 09:39:36 -0800

RELATED RESOURCES

Research Director Eric Lotke discusses the "Investment Deficit" report and the "Real Investment in America" conference.

Conference: "Real Investment in America" | Conference liveblog
Robert Borosage: "Free Fall"
"Invest in America" website

Read full report >>

America is falling apart. Falling apart, and falling behind.

Previous generations of Americans built interstate highways and transcontinental railroads. Now we sit in traffic.

Americans from an earlier era pioneered universal primary education and chartered great universities on public land. They enacted the G.I. bill to give the greatest generation the access to college that helped build our modern middle class. Nowadays American students toil in overcrowded classrooms with leaky roofs, while the cost of college soars out of reach.

America grew up investing in its land and its people. Historically, we directed roughly 8 percent of our gross domestic product to long-range investments, and the investment paid off. Now we are down below 4 percent. Our post World War II infrastructure is starting to decay, and we aren’t replacing it. We are lamenting the loss of jobs rather than hiring people to renew and rebuild.

Other countries are racing past. China spends 9 percent of its GDP on infrastructure investment and opens a new subway system every year.

From physical infrastructure like roads and bridges to human capital from kindergarten to college, this report comprehensively examines our investment deficit. It documents yesterday’s achievements, today’s problems and tomorrow’s solutions.

As this report is released, America’s economy is in a deep downturn, which is now spreading across the
globe. A major recovery program is essential to lift this economy from what is likely to be the worst
recession since the Great Depression. Direct public investment—in new energy and conservation, in modernizing our infrastructure, in education and training, and research and development—should be the centerpiece of any recovery plan. That is not only necessary to lift the economy in the short run; it is a vital down payment on the sustained public investment that we need to sustain a competitive and decent society in a global
economy.

The needs listed in this report provide a guidepost for both recovery and for long-term, sustainable growth.

Time To Rebuild

OurFuture.org Staff — Thu, 11 Dec 2008 07:59:57 -0800

Free Fall

Robert Borosage — Wed, 19 Nov 2008 09:41:02 -0800

Free fall. The U.S. has lost private sector jobs for 10 straight months. One quarter of all businesses in the U.S. plan to cut payroll over the next year. Retail sales fell in October by the largest monthly drop on record. Auto sales have collapsed, driving the auto companies towards the precipice. Unemployment is up to 6.1 percent, with most analysts predicting it will soar past 8 percent over the next year. (That translates into unemployment among young minority men at rates of 50 percent or more). States are now facing $100 billion in deficits in operating budgets for the next fiscal year. Twelve million homes are "under water," worth less than their mortgages. The U.S. has joined Germany and Japan in what is becoming a global recession.

"The era of big government is over" is over. In the crisis, we are, as Richard Nixon once said, "all Keynesians now." Former Clinton Treasury Secretaries Robert Rubin and Lawrence Summers, until recently notable deficit hawks, now call for substantial fiscal stimulus—deficit-funded federal spending—to get the economy going.

Summers whose alliterative guidelines for this year's earlier $150 billion stimulus—"timely, temporary and targeted"—helped to fix its mistaken focus on tax rebates, has changed his consonants. Now he says the stimulus should be "speedy, substantial and sustained," noting that some estimates on Wall Street have gone as high as "$500 to $700 billion." Rubin agreed, saying "we need a very substantial stimulus," while mumbling about needing to reduce the budget deficit over the longer run.

A major recovery program—featuring substantial public investment—will be inevitably the first initiative of the Obama administration. It should feature more spending than tax cuts—investing in renewable energy and conservation, in rebuilding everything from schools to bridges to a smart electric gird, in helping cities and states avoid crippling cuts of services, in keeping college affordable, providing health care to children, and aiding those most in need.

INVEST IN AMERICA

Research Director Eric Lotke discusses the "Investment Deficit" report and the "Real Investment in America" conference.

Conference: "Real Investment in America" Conference liveblog
Report: "The Investment Deficit in America"
"Invest in America" website

Our public investment needs can easily use the money. A stunning report by Eric Lotke at the Campaign for America's Future details the staggering investment deficits that have accumulated over the last 30 years. For decades, we've chosen to cut taxes on the wealthy while starving vital public investments. The result is an America that is literally falling apart, while much of the private wealth was squandered in the speculative frenzy that now has leveled our economy. Rather than adding to that folly, we should be focusing on strategic public investments that will put people to work in the short term while contributing to a more competitive economy, a better-educated citizenry and a cleaner environment.

The Last Obstruction

The time to get started has already passed, as the downturn is accelerating. Right now, as Senate Majority leader Harry Reid suggests, Congress should pass a $100 billion down payment on recovery, while instructing the Treasury Secretary to use some of the $700 billion rescue fund to help keep the auto industry from going belly up, with devastating effects throughout the Midwest.

But, as this is written, it looks like that won't happen. Republicans didn't get the message from the election, and apparently don't read the financial section of the papers. The Republican minority in the Senate seems intent on adding one last obstruction to its ignominious record. Secretary Paulson has indicated that while he's happy to throw $250 billion at Wall Street banks with no conditions, he isn't ready to save the Midwest with a $25 billion bridge loan for the automakers under strict conditions.

In the face of the threatened Republican filibuster, this Congress is likely to adjourn for the final time without acting on the deepening economic downturn. When the new administration and the new Congress convene next January, the crisis here—and across the globe—will surely be far worse. Make no small plans, President Obama; you are about to inherit the full catastrophe.

The Investment Deficit in America

Isaiah J. Poole — Wed, 19 Nov 2008 07:18:42 -0800

RELATED RESOURCES

Research Director Eric Lotke discusses the "Investment Deficit" report and the "Real Investment in America" conference.

Conference: "Real Investment in America" | Conference liveblog
Robert Borosage: "Free Fall"
"Invest in America" website

Read full report >>

America is falling apart. Falling apart, and falling behind.

Previous generations of Americans built interstate highways and transcontinental railroads. Now we sit in traffic.

Other countries are racing past. China spends 9 percent of its GDP on infrastructure investment and opens a new subway system every year.

The needs listed in this report provide a guidepost for both recovery and for long-term, sustainable growth.