November 6, 2016


Trump And Clinton Both Want To Fix Infrastructure. But That Doesn't Mean They'll Succeed. (Andrew Flowers, 11/05/16, 538)

[M]any economists see infrastructure spending as a long-term investment that enhances productivity. By eliminating bottlenecks in energy, transportation and communications, they say, an infrastructure-spending boost would make the whole economy more efficient, which in turn would let it grow more quickly. (In economics jargon, it would raise the economy's potential growth rate, which has been lagging.) In this framing, the economic returns to upgrading our infrastructure won't materialize quickly, but will be realized over decades. The Congressional Budget Office recently estimated that it often takes 20 years for the full effects of federal infrastructure investment to be felt.

"I think of it as a long-term economic growth issue," said Keith Hennessey, a lecturer at Stanford and the former head of President George W. Bush's National Economic Council. "If it increases short-term employment, great -- but that's not as important."

Short-term employment is, however, important to politicians, who want results that will help them win re-election. That difference in emphasis can have practical implications: It gives politicians an incentive to push for projects that create the most jobs quickly, rather than ones that offer the best payoff in the long term.

Not all economists see a tension between short-term and long-term goals. Larry Summers, a Harvard economist who has become a prominent advocate of increased infrastructure spending, said that part of what makes such investments attractive is that they offer both immediate and longer-lasting benefits.

Another decision that policymakers face is whether to focus on building new projects or maintaining old ones. The nation's roads, bridges and airports have a massive backlog of deferred maintenance. Many economists see that backlog as a top infrastructure priority: A 2011 report from the Brookings Institution recommended redirecting all revenue from the federal gasoline tax to "repair, maintain, rehabilitate, reconstruct, and enhance existing roads and bridges."

Economists like spending on repairs and maintenance because it's cheaper in the long run to maintain existing infrastructure than to let it deteriorate and be forced to start over. Maintenance also takes out the guesswork -- we already know which bridges and highways are the most valuable. "One of the benefits of an emphasis on deferred maintenance is that it's done on the infrastructure that's heavily used," said Summers, who served in the Clinton and Obama administrations.

President Clinton can fairly quickly get an infrastructure bill, immigration reform, corporate tax reform and a major trade bill.  Whether that paves the way to collaborating on Obamacare reform will be the big question.  

Posted by at November 6, 2016 8:06 AM