Biden's "Infrastructure" Plan: A Bridge too Far

 

Last week President Biden offered up his $2.3 trillion “infrastructure” plan, but only $115 billion goes to highways and bridges and only $111 billion goes for improving the nation’s water systems. There is also $85 billion for public transit, $80 billion for rail, mostly AMTRAK; $100 billion for building out broadband, and $100 billion for extending and hardening the electrical grid. All to the good, except maybe AMTRAK. In terms of intangible capital, Biden’s program calls for a $180 billion increase in R&D spending. Indeed, with real interest rates below zero, now is the time to finance much needed infrastructure.

 

What is questionable is the $174 billion allocated for electric charging stations. It seems to me that the administration is making a huge bet on electric vehicles. That bet may pay off, but with fast moving fuel cell technology, the future may not all be in electrification. What is even more questionable is the $213 billion allocated to affordable housing and the $400 billion allocated to home care. Although arguably necessary affordable housing and home care are a stretch to being called infrastructure. Further if such programs are enacted they would likely be continued beyond the plan’s eight-year budget window making it far more costly than advertised.

 

Make matters worse is that the plan does not waive environmental permitting and the prevailing wage requirements of the notorious Davis-Bacon Act. By avoiding the waivers, the plan all but guarantees exorbitant costs and delays. Indeed, by failing to waive environmental reviews we can look forward to years of delays in siting power lines from wind and solar farms to our urban centers. In fact, the Biden Plan requires project labor agreements that would put the Davis-Bacon Act on steroids.

 

We also learned that the Biden Administration is not really serious about climate change. If it were, it would have offered to pay for at least part of the plan with a carbon tax, a tax that Treasury Secretary Janet Yellen spoke highly of as a private citizen. A carbon tax would be a far more efficient way of financing infrastructure than an increase in the corporate income tax. Moreover, there is no mention of investments in carbon capture/sequestration technology which most experts believe to be essential in reaching our climate goals. Thus, there is much to like in Biden’s program, but quite a bit to dislike as well.

My Amazon Review of Raghuram Rajan's "The Third Pillar: How Markets and the State Leave the Community Behind"

Inclusive Localism

Raghuram Rajan, a University of Chicago finance professor, former Governor of the Reserve Bank of India, former Chief Economist at the IMF and the one who blew the whistle on the dangers embedded in the derivatives markets at a 2005 Federal Reserve conference has written an important book on the political crisis of our time. Unfortunately it is too long and too dry. That said he is spot on in noting how the state and the market has taken over the historical role of community in our society. No wonder folks are alienated.

He focuses in on the communities that have been left out of the global economy over the past fifty years from rural towns, isolated factory communities and the inner city. All of this being exacerbated by a flood of immigrants who put downward pressure on low end wages and upward pressure on rents and the geographic sorting of the global elites in very expensive neighborhoods and metropolitan areas making upward mobility difficult. Because the major urban centers have become so expensive Rajan focuses on place-based strategies as opposed to people-based strategies to uplift the left behind. He focuses on what he calls “inclusive localism.” By that he means that wealthy communities have to affirmatively loosen up their planning controls and society as a whole has to invest in infrastructure in poorer communities.

However this is all too easy to say and very difficult to implement. Wealthy communities are not opening their doors and for poorer communities to uplift themselves there has to be a requisite amount of indigenous leadership ready and willing to take charge.

My own view is that inclusive localism would be far easier to implement if we returned to the 100 year old ideology of the melting pot. I know this is not politically correct, but it largely worked for white America and probably can work for all of America today. If we are to have inclusive communities there is going to have to a lot give from all corners. It sort of comes down to that old saying of “think globally and act locally.” Further it would help if we had a program of national service where young people of different backgrounds are forced to work together on common goals and it would also help if the elite universities radically increased their class size to accommodate more students.

Rajan closes the book with his global solution to today’s economic problems. To me that is a bridge too far and ought to be the subject of a different book.

For the full amazon URL see: https://www.amazon.com/review/R1XE3YT1K4PGS9/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv

My latest USNEWS Blog on Obama's Corporate Tax/Infrastructure Grand Bargain

See the attached URL below:
http://www.usnews.com/opinion/blogs/economic-intelligence/2013/07/31/obamas-new-corporate-tax-grand-bargain-has-potential-for-republicans

Zakaria Supports Shulmaven on Infrastructure Projects

Washington Post columnist Fareed Zakaria endorsed the Shulmaven proposal to fast-track environmental approvals and Davis-Bacon Act waivers for new infrastructure projects.He like Shulmaven understands we face a jobs emergency. This list grows.

full URL : http://www.washingtonpost.com/opinions/where-obamas-jobs-bill-falls-short/2011/09/28/gIQA5jne5K_story.html?hpid=z3

Bloomberg Endorses Shulmaven View for Infrastructure Projects

Bloomberg News has joined Mort Zuckerman of US News and Noam Sheiber of The New Republic in endorsing the Shulmaven view of fast-tracking environmental approvals and waiving the prevailing wage requirements of the Davis-Bacon Act for new infrastructure projects. Their editorial calls for a $100 billion program. Hopefully President Obama will see the light.


Full url: http://www.bloomberg.com/news/2011-08-23/a-public-works-spending-deal-even-the-republican-party-can-embrace-view.html

The New Republic Picks up Infrastructure Idea (from July 4 Post)

See "Desperate Measures" by Noam Sheiber, October 29, 2010

Shoot the hostage (i.e., kneecap your allies to finagle more government spending). It’s no secret that Democrats are keen to pass a major infrastructure package, which would have the dual benefit of supporting the economy in the short-term while making us more productive over the long-term. Pretty much everyone who studies these things agrees that our infrastructure is either badly outdated, in a state of disrepair, or both. (The American Society of Civil Engineers estimates that the country could use about $2.2 trillion worth of upgrades and repairs over the next five years.) But, of course, Democrats had zero luck passing a major infrastructure package after the initial stimulus in early 2009. It’s hard to believe they’re going to fare much better with a House Republican majority that’s constantly looking over its shoulder at pitchfork-wielding Tea Party activists. Particularly since several of these activists are on the verge of coming to Congress themselves.

Still, a deal on infrastructure spending may not be entirely out of reach, at least if the White House is ruthless enough. One idea along these lines comes care of David Shulman, a senior economist at UCLA’s Anderson Forecast center. Shulman proposes a several-hundred-billion dollar infrastructure package in which the administration agrees to suspend Davis-Bacon, the law requiring contractors for government-funded construction projects to pay locally prevailing wages, as deemed by the Labor Department. Conservatives complain that the law artificially inflates costs and is a sop to labor. (I have somewhat mixed feelings toward the law but am more sympathetic.)

Shulman would also have the administration fast-track environmental approval of construction projects—under current law, it can take months to assemble the various environmental-impact statements and reports, and there can be costly litigation along the way. Shulman recommends that the White House oversee an accelerated environmental review process and set up some provision for expediting judicial review. (The American Prospect’s Harold Meyerson hinted at some similar ideas back in May.)

Unions and environmentalists would howl, of course—in many cases for good reason. But that’s partly the point. (In fact, the louder the better.) If a spending package has the right opponents, then the conservative media-industrial complex may come around, bringing the GOP leadership along with it.

Full URL - http://www.tnr.com/article/economy/78762/desperate-obama-economy-republican-congress