Modern America’s Infrastructure Dilemma

Although it’s popular to dislike anything President Trump proposes, its possible that his American infrastructure plan is the best such proposal since Eisenhower. Even Obama’s impressive infrastructure stimulus package may end up being on a smaller scale than what Trump proposes.

Those who question Trump’s proposal range from many of his fellow Republicans, to a wide array of Democrats. Ironically, given the state of political paralysis America now faces in Congress, its possible that if Trump’s infrastructure plan is scrapped due to his impeachment, America may languish with sub-standard infrastructure for years. This is because Republicans rarely approve infrastructure upgrades, and Democrats are careful about advancing large agendas when they’re in power.

Part of the reason for the political paralysis in Congress is the radical disagreement about economics and the role of government in the economy. On a political and economic level, the left and right of America are caught in a Keynesian Economics time warp. This is shown by how many on the left ignore the perils of the debt Keynes advocated, while many on the right have shown an allergy to debt. Both sides seem reluctant to realize much has changed since Keynesian ideas were adopted in the 1930s. 

Although Keynes never advocated for the type of debt we see today, the influence of his economic ideas has been incredible. His idea that debt is something to embrace has invaded almost every pore of the developed world. As a result, debt has exploded in governments, businesses, and individual households too. This has led some analysts to say that Keynes’ ideas have led to an economic shift on a micro and macro level. As many remember, debt on all levels, from households to nation-states, used to be something to not only be monitored closely, but also in many cases shunned.

Regarding the Trump infrastructure proposal, many on the left dislike it since it doesn’t go as far as FDR’s New Deal of the 1930s. In addition, many on the right question it since they feel infrastructure concerns are over-stated, and too costly.

Agreeing with even one aspect of President Trump’s ideas is a hard sell to those who prefer smooth politicians. Obviously, his demeanor and communication style is highly unconventional. As a result, there are those who now tune Trump out at every turn regardless of what he proposes. Although political operatives now urge supporters to resist the opposition at all costs, it’s unfortunate there can’t be more bipartisan support on a basic idea like infrastructure. After all, this type of proposal, since it avoids the emotions common with social issues, is a natural fit for bipartisan support.

While Trump’s plan could be vastly improved by increasing the amount of federal dollars from $200 Billion, his goal of raising a total of $1.5 Trillion by creating public-private partnerships with business is not without merit. After all, many countries through the world and some Democrats now tout such ideas. This is because implementing strictly government-funded programs that add to debt without tax increases is unstable. Therefore, since tax increases are unpopular with all but the Progressives of the left wing, many politicians have embraced the cozy language of public-private partnerships.

In the long run, since America’s infrastructure is falling behind, there needs to be ways of getting both parties to compromise and move beyond the harsh political dogma in today’s society. Obviously, the Democrats have a point about increasing the amount of federal dollars allocated far beyond the $200 Billion level. However, since America’s debt is so high, it’s fair to think there could be a strong role for private business to play. Therefore, Trump’s business-friendly concept may work if tweaked through negotiation, and given a non-politicized chance. After all, even though certain politicians demonize business, the fact remains that for much of the developed world, private business provides not only goods and services, but also much of the creative color that enriches our lives.

The sad reality is that much of America’s infrastructure such as roads, trains, bridges, and airports is in need of repair. On this issue, it’d behoove us to acknowledge that Trump is addressing this serious matter. Now we should challenge the dealmaker that he is to work with both sides of the political aisle to get the job done.

 

 

 

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21 thoughts on “Modern America’s Infrastructure Dilemma

  1. Understanding that our infrastructure is truly decaying but knowing that Trump is being thwarted from both the Left and the Right due to his America First pledge (which should propel infrastructure projects to the forefront, but that policy is also tied to a retreat as world’s policeman, and that is where the conflict with everyone else in Washington arises), sadly nothing of any substance will occur. Should have been a no brainer everyone on board initiative, however partisan politics will kill it.

    1. Hey PJ…great to hear from ya!

      Yeah, these political times are truly the most polarizing that I’ve ever seen. As a result, we’re definitely losing the commonweal that holds us together as a country. You’re so correct to note that a topic like infrastructure could at least have revealed + built on a philosophical bond to attend to basic needs that exists between both sides of the political aisle. Yet…so far it hasn’t.

      Interestingly, since Trump, a former Democrat, has expressed interest to Congressional Democrats in increasing the amount of federal spending in his infrastructure proposal, there’s a chance that if the midterms tilt Congress Democratic, that a pretty good compromise bill may still come out. Then again, if the zeal to impeach Trump continues + is actually successful, there’s a chance that a comprehensive infrastructure package may not come to be for a while. After all, without Trump to spearhead some Republican votes, a Democratically-led infrastructure proposal could become dead in the water.

      Between the evolution of the post-Fairness Doctrine media, the rise of social media, + heightened political activism, we have, as we’ve talked of, a fragile body politic.

  2. First of all, I am not a hater, just a debater. Don’t shoot the messenger, I’m only an observer. A long standing paradigm is –Don’t fix it if it’s not broken. Business hates capital investment as much as it hates it’s employees, because they cut into profits. From the basics of tort to representative democracy, one has to have standing to participate. A steak holder is someone with a vested, primarily economic but not limited to monetary, interest in the outcome. Having debt, kept companies and countries in the game because they are now vested.
    In the same way, Nixon ending to the Brenton/Woods system of gold exchange for U.S. currency, in essence, made all the world U.S. Bond holders. Hence, present day, where Republicans ironically say debt is good and the only thing that matters is trade deficits. G.W. Bush infamously borrowed money from China to buy nuclear submarines and aircraft carriers. Good luck recalling that loan.
    Weaving the web of interdependence and laying the foundation of too big to fail is the sole principle of our modern reliance on debt and this comes with a considerable moral quandary. Who eventually pays? Right now the global economy is more productive than ever, however increases in productivity, which for decades has leapfrogged exponentially, has slowed to single digits and many feel we may be reaching the peek of human/robotic capacity.
    There is obviously still room to grow, and that is where investment in infrastructure makes a ton of sense. But what will this human/robotic capacity look like? How do we invest? Presidents before have all taken the tried and true cronyism, shovel ready, Keynesian path, in the hopes that the ruling parities buddies will share in their publically funded wealth.
    No one has responsibly endorsed the trickle-down theory. The rich are not known for their generosity. Let’s be honest, history is rife with the failings of all too insular greed epitomized by Mark Antony going down with a ship full of gold busts of himself.
    Keynes theories of stimulating demand are based on the trickling up of monetary gain. To solve these age old problems we need strong fact based solutions. Should we be taking the advice of a six time bankruptcy debt king? As I joked before the election; who better to settle Americas debts than a man who has gone through bankruptcy half a dozen times?

    1. Hey Tom…thx for the in-depth comment! I just love your mention of the steak-holders 🙂

      And yes, by talking about the stakeholder situation we’re in economically now, you aptly point out how the modern concept of economics is fraught with so much moral quandary. After all, by examining the interdependence now built into modern economic theory, we can easily see how the whole concept of interdependence promotes the “too big to fail” mindset. And yes, this has diluted the concept of paying debt down. To many…debt has become a bit of an abstraction + a numbers game. And yes, this is why the Republicans, who often play the role of being fiscally responsible, are now somewhat comfortable with Trump. As you say, Trump is someone who’s leveraged debt + bankruptcy for personal gain.

      If we look back, it was Cheney’s famous comment about not worrying about deficits that marked a verbal change in Republican ideas about debt. But yet, many Republicans to this day still claim to be deficit hawks.

      Along with the “too big to fail” concept comes the charge, understandably so, that many of the wealthy who benefit from such policies are now recipients of a form of welfare for the rich. After all, if the cutoff points for failure have been altered by the concept that we’re all economically in this together, failure really isn’t the option that it used to be.

      I echoed your stakeholder comments in this earlier blog piece I wrote:

      https://economicpolicythoughts.com/2014/04/

      And yes, as you mentioned, after Nixon took us off the Gold Standard in 1971, America did well insofar as American debt, since the American dollar was the default currency, became something of value to hold in the form of bonds. However, the days of the American dollar being the reserve currency may be ending. At that point, things will get much more complicated for America.

      Tom, you’re correct to note that the tried + true Keynesian way, with shovel ready, has been altered. As you hint at…we’re entering new economic times. 🙂

  3. Thanks for this thoughtful post. As far as I can gather from this side of the pond in the UK, there is plenty of US infrastructure that needs upgrading and Trump, at least in his campaign rhetoric and his inauguration speech, pledged to rebuild it.

    Infrastructure is sometimes termed as the ‘lifeblood’ of the economy. It is a form of increased economic capacity, while also creating jobs via the investment spending in the short run. It can create new business opportunities for jobs and investment in the private sector, so it would seem to be ‘win-win’ for the economy.

    As far as funding goes, historically infrastructure is not necessarily funded by the public sector, but to prevent, for example, private investors duplicating a new highway route as a form of wasteful competition, the government would need to coordinate the investment at the very least, even if much of it is funded privately.

    Since much of the economy-wide return to infrastructure spending takes many years to accrue, it does require some vision on the part of those involved. In the long term, a more productive and larger economy means increased tax revenues, but measuring the impact is surely difficult.

    Private funding, which Trump’s plan aims to mobilize to a massive degree, does mean that the private companies are likely to require a higher rate of return on new projects than the public sector, and over a shorter time frame, so that private charges such as tolls etc shift the cost onto households and businesses. Tax rises would do the same thing, but with a different distribution of costs depending on which taxes were raised.

    Alternatively the government could fund the plan through borrowing. This would further increase a deficit which is already rising again due to the recent tax cuts, so is probably out of the question and would seem to be reckless. Unemployment is quite low, but there is still some disguised unemployment among those who dropped out of the workforce over the last decade or more. So employment has the potential to rise further as the economy continues to expand. But this does not require a major fiscal boost, so for me tax rises to fund infrastructure would have been the best solution, though I know Republican priorities would never countenance this.

    Since Reagan, Republican administrations have been pretty good at running up the national debt, with tax cuts for the wealthy and increased spending on defence. Clinton increased taxes and the economy boomed for a while. Bush Jnr cut taxes and increased defence spending and the recovery was pretty sluggish. The Obama administration ran a large deficit as a crude Keynesianism briefly came back into vogue, but this was due to the financial crisis and recession, so much of it was the outcome of the automatic stabilizers. I am not claiming that these economic policies and outcomes operate as a simple cause and effect over such short periods, but such is the division and partisanship in the US, and elsewhere, that each side often seems to be living in its own closed reality and ignores such arguments.

    For me, the current US government has sabotaged the prospects for funding major public infrastructure investment with its reckless tax cuts. Public-private partnerships, as you say, seem to be the only remaining possibility in the present ideological climate, and even that may not have widespread support.

    The key question, which probably doesn’t get asked enough among politicians, is this: will the public spending on infrastructure projects generate a more productive economic outcome than the spending which it replaces due to the latter being subject to higher taxation or private charges in some form? The issue of funding is inevitably political: who gains and who loses?

    This may be a hard question to answer, but at some point the need for improved transport, energy and internet (for example) will become clear. If Trump really wants a more successful economy, a massive infrastructure programme would surely help.

    1. Thx for the comment Nick! I’m glad to get a seasoned economics perspective from the other side of the pond in England.

      Since you mention that the closed-reality political style is common in other countries as well as America, I imagine that infrastructure issues have a somewhat similar feel in Europe. Due to increasing pressure on many levels, the dysfunctional closed-reality political approach has unfortunately become common. Sadly…echo chambers that shut out the true purpose of democracy, which is dialogue used as a basis to govern, abound. Seemingly lost in the current political noise is the fact that issues like infrastructure should have broad-based bipartisan appeal.

      And yes, your points about how private investment has played a role historically is well taken. If we could maintain strong federal oversight of the infrastructure project, the public-private partnership aspect of the upgrade may work out.

      Personally, I feel it’d be best to increase the amount of federal dollars above the $200 Billion level. If that means that the deficit increase brought on by this will be dealt with in the future by a tax increase, that’s ok. After all, taxes need to go up at times. However, having said that, I agree that the private aspect of the plan holds promise.

      Ironically, since Trump, a former Democrat, has complained to Democrats that he wants more federal dollars, there could be a potential silver lining for his infrastructure plan if Democrats gain power in Congress. This is because Trump’s forceful personality would guarantee a certain amount of Republican infrastructure votes that’d be hard to get if a Democratic president was at the helm of such a project.

      Your point about taxes is well taken. Unfortunately again, as opposed to the political climate that prevailed till the 90’s, finding the ability to move talking points politically beyond the cliche level has been rather difficult. As a result, both parties adhere to concepts that appeal more to their base than the broad-based needs of America in general.

      As for the economic benefits to an infrastructure upgrade, I personally feel its a win-win for all in terms of immediate economic stimulus + perfecting the economic stage.

      Nice to hear from ya Nick!

  4. Thanks for thoughtful points on infrastructure. And on partisan politics today, yes, ad hominem arguments have become de rigueur. Policies and rationales no longer matter. Focus on how evil the person is, and oppose everything. Equivalence alert! I am sad to see my liberal friends as guilty as my conservative ones on this score — from the Trump-haters to the identity politics crowd, who seem to have made the Orwellian turn in liberalism (from “skin color doesn’t make you right or wrong” to judging every speech act by the speaker’s skin color or sex organs). The subtlety of reasoning has been pushed aside by ad hominem everything. The casualties include infrastructure, as you mention here, and much more.

    1. As usual Daedalus…you’re spot-on with your assessment!

      Sadly, as we’ve noted before, the rigors of intellectual thought that sustained mankind through the Enlightenment till now, seem to be fading. And yes, ad hominem attacks are becoming so common that its hard to move beyond a bullet point mindset that draws everything into the simplest of terms.

      So many people are learning to react first + think later. Obviously…Trump’s style is not everyone’s cup of tea. However, on infrastructure, Trump, a former Democrat, has some ideas that are good. And given Trump’s forceful personality, he alone may be able to get Republicans on board with infrastructure in a way that a Democratic President couldn’t.

      The good news for me is to run into the many people like you who are trying to stem the recent tide by appealing to a balance between reason + emotion. After all, the Neo-Classical approach to finding balance between opposites in life has as much validity today as it did years ago.

      Thx for stopping by + commenting Daedalus!

  5. You know, in any individual moment, Trump demonstrates he could be a great President for the country, all the people, and a world class leader too But the moments are so fleeting, and the closing ranks occurring behind the scenes, make it difficult if not impossible to celebrate an infrastructure plan, especially when we ride on a wing and a prayer that the trickle down effect actually works, and will replace the trillion dollars of income loss from tax breaks. But so far, there is nothing to prove it will. Every state that tried – Missouri, Louisiana are the first to come to mind – ended in disaster for their economies. But I admit, I think most people will too, that,I wish I did not have a sinking feeling about a President I loved on the first year of Apprentice. Thanks for the informative post and allowing me a chance to vent. (big smile)

    1. Hi Kendall! Thx for stopping by. 🙂

      Yeah…I see what ya mean about Trump. It seems that just as he’s building support for broad-based appeal that’d allow him to build a sense of unity + perfect his agenda, there’s a monkey wrench thrown + we’re back to square one.

      Alas, this seems to be the nature of American politics the last 20 years. Although the liberals are quite smooth, they too chafe a bit at getting broad-based appeal. Oh well…

      Of course though, we’ve not seen anything like Trump before.

      As for infrastructure, I’m hoping there could be an increase of federal dollars from $200 Billion to about $800 Billion. Then it may be good to do the public-private partnerships to fill the gap to $1.5 trillion. Yes, I understand the concern that to rely that heavily on public-private partnerships could be little sketchy. I hear that Trump’s been talking to Democrats about getting more federal dollars allocated. Maybe this can happen + maybe that’s the silver lining if the Dems pick up ground in Congress.

      As you + I talk of Kendall, we live in very intense political times. I credit your blog for attempting to actually talk about issues in a way that creates a common weal of sorts. Without a common weal, we could be entering a chaos zone. In my own way too, I’m trying to help build this gap while still respecting the diverse opinions that are needed to keep America anchored to its great mission of providing both unity + diversity in its attempt to be a melting pot.

      Take Care Kendall + I’m glad I helped ya to vent! 🙂

  6. While it’s true that America needs to rebuild its infrastructure that’s only part of the overall solution towards making America great again.

    On one hand, the infrastructure has been desperately neglected. On the other, the national debt has expanded almost exponentially despite the lack of spending on infrastructure.
    In the vein of FDR and his Conservation Corp, this could be a great safety net for the millions of Americans who are being left behind: the homeless, the mentally ill, soldiers returning from combat (from Viet Nam to the present).

    On the other hand, something has to be done about the debt.
    Trump’s tax reform fell way short. While big businesses experienced a great boost through the lower corporate taxes and less regulation, the deficit is still projected to grow with it. The idea is that we were supposed to lower corporate rates while at the same time eliminate the deductions and loopholes that plagued the previous tax code. Eliminating the loopholes seems to be all but forgotten.

    As far as Trump’s protectionism goes, if it is to be called that, Wall Street hates it. Why? Because most corporations on Wall Street are international and not American. By creating tariffs, international corporations stand to be hurt by the tariffs, while American-based corporations stand to gain. Investing in corporations predominantly based in the United States will grow to the good of America’s economy. Investment dollars will be siphoned off to help the American worker and investor,

    We need to go back to what JFK said: Ask what you can do for your country and not it for you. If we want to make America competitive with the rest of the world again, everyone is going to have to pay a price. While the average American worker is having their taxes increased in the long run, Wall Street investors should have to pay a price too.

    The other change we need to make is the way we reward our government and military workers. The way things stand now, the most highly paid and valued workers in the government bureaucracy are the grant writers. Bureaucracies flourish by obtaining grants from the government. Just the opposite of what we need.

    Government workers should be rewarded for cutting costs, not collecting money that comes from raising taxes. If we were to make a flat, across-the-board ten-percent cut in spending, that would help the debt more than anything else.

    1. Thx so much for the comment Luv4all!

      You aptly point out the difficulty of applying rational solutions to today’s political scene.

      As you say about our corporate tax rate, since we had one of the highest rates in the world, its understandable they brought it down. After all, this high rate led to many companies seeking foreign soil to set up business. And yes, a rational solution to our debt crisis would be to look at the myriad loopholes that often help the wealthy while also increasing our debt. However + unfortunately, during the past 20 years we’ve witnessed what many call a retreat from rationalism in politics.

      Since the 90’s there’s been a sea change regarding concern about the debt. As you recall, back in the 90s, under the influence of both the Republicans + the inclination at the time, the Clinton administration pursued policies that led to yearly budget surpluses. Of course, the total outstanding US debt was still high. However, there was a sense that we were chipping away at it + making it manageable.

      Fast forward to today + its apparent the U.S. is approaching the debt danger zone of having our outstanding debt equalling our GDP. How did this happen? Between what many call the questionable Mideast wars, the Bush tax cuts, + our recovery from the Great Recession, Obama + Bush increased the debt massively.

      Unfortunately, although Keynes never advocated this type of debt, its clear that Keynesian theory has contributed to a sense that debt may not matter. And yet it does. After all, countries can, + still do default on the debt with negative consequences.

      Hopefully Luv4all, your ideas about de-emphasizing grant writing, spending cuts, + addressing tax loopholes can be addressed. In addition, as you say, we need to move beyond mostly looking out for Wall Street, but also look out for Main Street. On a positive note, if we all keep the dialogue up there will be some impact. In addition, as for your ideas about infrastructure, I agree that it’ll not only benefit the future of our economy, it’ll provide much needed employment to many in the short term.

      Thx for the dialogue!

  7. Luv4all makes a very good point about taxation and public investment, staying clear of the old conservative tag of tax and spend liberalism. Which is now ironically tax and spend conservatism.
    As he pointed towards cost savings That could and could ameliorate our current deficits. it’s important to note that just as a business must earn money and invest in ways to make more money. It’s not as simple for a government to bring in more taxes and invest in ways to make more taxes. Governments are burdened with certain domestic obligations, not the least of which is providing for the health, safety and welfare of its citizens as well as the providing common defense. This is much more than providing bathrooms, lunchrooms and hiring a mall cop. This is $1 trillion infrastructure budget, on top of $1 trillion domestic spending budget on top of $1 trillion defense budget.
    And this is where luve4all has a very good point, there are probably duplications of services in all of this that could be consolidated.
    I would start with providing healthcare and retirement plans for all US citizens. The effect of this would be to reduce healthcare and pension cost by federal, state and union employees.
    To sell this, it would be reasonable to limit executive salary and retirement packages, beginning with members of Congress.
    And if anybody wants to put America first, they should invest in American households by fixing the banking system to take away the incentives for investment groups buying up housing debt. This has led to the 2008 recession and continues to drive up housing prices leaving most Americans renters and many Americans homeless.
    “The strength of a nation is in the homes of its people” as George Washington once quoted Confucius.
    In the Popes 2016 encyclical, he pointed to the need to decrease the disparity between the rich and poor and for the development of sustainable economies. He called for economies that mimic natures renewable cycle. Those processes, by nature limit growth to around 3%. Ironically that’s our current growth rate.
    if Trump were to use the power of his personality to promote the infrastructure of a sustainable economy and promote strong US households, we’d have it built by now.

    1. Welcome back Tom!

      Thx for bringing up the Pope’s Encyclical. Although there are many different ideas on creating sustainability, this concept is possibly the most dominant big-scale concept on many people’s minds these days. As for sustainability + reducing wealth inequality, that’s a tricky prospect. At one level, it seems quite easy to address by just raising taxes. However, as luv4all pointed out, the myriad loopholes that are setup in complex legalistic formulas, often cancel out the tax effect.

      Although many of us agree that total equality with it’s echoes of communism, is both inefficient + undesirable due to a reduction in incentives, it goes without saying that the amount of wealth inequality we have now is actually leading to inefficiencies. With the change in many western economies brought about by record low interest rates, the financialization of many western economies, the effect of globalization on many economies, combined with strong direct + indirect subsidies for certain sectors, there’s been a major shift in wealth.

      In addition, as you talk of Tom, our banking policies have a net effect of often benefitting the very wealthy. As for easy answers, there are none. Possibly, one of the best things we can do to address long-term economic growth which maintains the capitalist mode of incentives, while also having certain safety net features, is to have complex dialogue that moves beyond the right-left divide. That way, we can then get at the complexities that hamper us towards getting sustainable economies on track.

      As for providing retirement + healthcare for all, some will say we already do that to a degree between Social Security, + Medicare + Medicaid. However, that doesn’t negate the fact many members of western economies suffer from massive under-employment that’s exacerbated by high levels of wealth inequality. To a degree…just setting up programs that transfer wealth to the poor aren’t really gonna address the whole issue. A glance at the streets of many major metro areas in America reveals a high-level of homeless that are truly disenfranchised. Getting them up to speed with employment that’ll help them become a productive member of society is a complex, noble goal, + probably necessary goal.

      A comprehensive infrastructure plan, with both public + private investment, may go a long ways to helping with many of these issues.

      See ya Tom!

  8. A very analyzed share Perry. AOC believes that President Trumo’s goals fon changes within the USA’s infrastructure is only being harassed by the dark agenda of elite-corporate alliance . This alliance utilizes technology and economic power. to destroy truth by paying for fake news.

    1. Nice to hear from you again AOC!

      Yeah…since America’s infrastructure issues are so very important to our future, it’d be a shame if some of the elites are holding back on supporting infrastructure upgrades for political reasons. After all, I’m sure that many elites use our infrastructure + would like for it to be both reliable + safe.

      Take Care AOC + thx for the comment!

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