Infrastructure investment is a state responsibility
By Keith Yost
Last week, President Obama unveiled a $447 billion spending plan. Notice I say “spending plan,” rather than “stimulus plan” or “jobs plan,” because there is a difference. None of the plan’s components, which consist of roughly $250 billion in payroll tax cuts, $60 billion in unemployment insurance, and $140 billion to fund infrastructure (most of it going to a national infrastructure investment bank), can be considered significantly stimulative, and without stimulus, we’re unlikely to see many new jobs.
The plan’s unemployment benefits and tax cuts are largely extensions of existing measures — our economic situation would be much worse if the cuts and benefits were allowed to expire, but these half-measures are not going to push us out of our current, miserable trajectory. And the infrastructure bank promises very little spending in the short term; it’s not an institution tasked with finding shovel-ready, stimulative projects, even if such things existed. This is quite plainly a spending plan in which Obama has tied a pet project that he thinks deserves money (the infrastructure bank) to something that Republicans find fairly unobjectionable.
As a political matter, the future of the plan seems pretty straightforward: Republicans will strip out the infrastructure bits and pass the rest, judging (correctly) that the American public isn’t going to assign blame for the whole economy to the GOP just because they blocked one of Obama’s minor economic proposals. The president probably even prefers it this way because an actual infrastructure bank wouldn’t do much in the short term to help Obama keep his job, but the idea of an infrastructure bank could prove useful on the campaign trail.
That leaves just one question: who is right here? Is an infrastructure bank an idea whose time has come, or is it a dud?
At first glance, a national campaign to invest in infrastructure isn’t a bad proposition. The returns to investment on infrastructure aren’t very impressive, but with the government able to borrow money at two percent interest, and with labor and materials costs at extreme lows, it doesn’t take a very high return to justify infrastructure spending.
On deeper inspection however, a national infrastructure bank is a fatally flawed idea, for one simple reason: forcing the citizens of Texas to pay for a high speed rail line from San Diego to Sacramento is bad government. It invites corruption, pork barrel politics, and misallocation of our society’s resources.
The citizens of, say, Ohio are and will always be in a better position to decide whether it is worth the money to repair a bridge or school in their state. Offering to let them pay for their projects with someone else’s money is not going to lead to better decision-making— instead, it will lead states to cut their own infrastructure spending and turn their beggars cup to the federal government. It will incentive states to represent their infrastructure as worse than it actually is, and pretend that solutions are cheaper than they actually are. And because it isn’t their money at stake, states will have even less inclination than usual to make sure that the projects are managed correctly. The real key to a state’s economic success won’t be the wise decision-making of its leaders, it will be its ability to lobby the federal government for special treatment and trade favors with the party in power.
Perhaps in a few instances, investment in infrastructure at the national level makes sense. Air traffic control, or an interstate network make sense as matters for the national government to manage. But bridges, schools, high speed rail lines, and the vast majority of the projects Obama touts as within the purview of his national infrastructure campaign are best managed at the state or local level. It’s a conclusion so obvious that the idea of national control raises immediate suspicion. Does Obama plan to use the bank to bestow patronage on his supporters (particularly labor unions)? Or did he really manage to forget that state governments already have the power to levy taxes and make repairs?
Democratic activists are thrilled with Obama’s supposedly new “toughness.” But getting tough is only a good strategy if you’ve got an idea that’s actually worth fighting for. Two weeks from now, every leading Republican is going to have worked out the obvious counter-argument to a national infrastructure bank, and two weeks after that they’re going to have integrated the bank into their stump speeches as yet another example of intellectually bankrupt federal overreach.
- Is Obama’s National Infrastructure Bank the Answer on Jobs? (usnews.com)
- No national infrastructure investment bank (tech.mit.edu)
By JOSHUA SEGALL
The question looming in everyone’s mind is, “Where are the jobs?” The answer to this question appears to be China. Last week, President Barack Obama’s jobs czar, CEO and Chairman of General Electric, Jeffrey Immelt, announced that he was launching a joint venture between GE and China. This partnership will send medical and aviation manufacturing jobs to China, rather than keep them here in the United States. This further adds to the poor choices Obama and his administration have made when “attempting” to reduce the unemployment rate.
When Obama took office in 2008, he ran on the idea of change. With an economy in the slums and a global recession on the brink, Obama was voted in to transform the way the United States operates. Shortly after he was elected, he went on the record to state that “we need to act with the urgency this moment demands to save or create at least 2.5 million jobs so that the nearly 2 million Americans who’ve lost them know that they have a future.” At the time the unemployment rate was at 5.8 percent.
Now we are well into 2011, and the unemployment rate is 9.1 percent. The economy is still failing and jobs haven’t been created. Many people immediately turn the blame over to President George W. Bush. The truth is that the unemployment rate only rose from 4.7 percent in 2001 to 5.8 percent in 2008. That’s a total of only 1.1 percent. Obama is not even a full three quarters of the way into his first term, yet the unemployment rate has gone up 3.3 percent.
The unemployment rate only accounts for people who have actively sought work within a prior four-week period. People who are unemployed but do not actively seek employment are known as discouraged workers. This group of people, believed to be more than one million, do not factor into the unemployment rate.
To further add to our problems, Obama does not have a solution. In 2009, as part of his American Reinvestment and Recovery Act, he announced his new energy team and boasted about “shovel-ready projects all across the country.” He repeatedly made mention of the term “shovel-ready” and claimed to have met with governors that all had projects that were ready to break ground. In 2011, when asked about these “shovel-ready” jobs, Obama laughed and said “shovel-ready was not as shovel-ready as we expected.”
One of the biggest issues with job creation today is the regulations imposed on employers. Since the Obama administration has taken office, employers now have to be compliant with a number of different regulations that include the new healthcare laws and newer Environmental Protection Agency restrictions. Everyone from the family farmer to the small business to the large corporation is being hindered by these regulations. As a result, companies are fearful of hiring because of the uncertain future and the impact on their businesses.
The best thing that Obama and his administration could do today is listen to the companies that do the hiring. There are a number of plans that have been introduced by members of Congress, such as Sen. Ron Johnson (R-Wisc.) who presented a bill declaring a moratorium on major regulations until unemployment drops below 7.7 percent.
The only way to get the job market growing again is to encourage businesses to hire. Offering incentives to businesses is key to promoting job growth. While the president might think he offered hiring incentives, American companies are proving him wrong. It is time for Obama to honor the promises he made and get more Americans back to work.
— Joshua Segall is a management information systems senior. He can be reached at email@example.com.