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Jeff Harding: The Hoax That Is the Infrastructure Bank
Does anyone seriously believe that the reason we have high unemployment in America is because we have a substandard infrastructure?
Apparently the politicians in Washington believe that is so because they are trying to make a case for massive infrastructure spending in order to “create jobs” and to “prepare our economy for the 21st century.” I was watching that fountain of conventional wisdom, Fareed Zakaria, tonight and he seems to buy into this proposition. He interviewed Sen. Kay Baily Hutchison about her proposal for an infrastructure bank: The Kerry-Hutchison Bipartisan Infrastructure Bank also known as the BUILD Act. It won’t cost the taxpayers any money, she says, because it is a one-time, $10 billion funding of this bank that will lend money for projects.
As she says on her website: “The idea of a national infrastructure bank is an innovative way to leverage private-public partnerships and maximize private funding to address our water, transportation and energy infrastructure needs. In our current fiscal situation, we must be creative in meeting the needs of our country and spurring economic development and job growth, while protecting taxpayers from new federal spending as much as possible.”
This is viewed as a “sensible and business-like approach” to solving this “problem.”
When anyone does reporting on this topic you see shots of China’s high-speed trains zooming along as well as Brazil’s new super port that will be “the road to China.” We don’t need any of these things because we have an excellent infrastructure despite what the “experts” say. Most of these experts want to cash in on this spending boondoggle.
Let me be clear: Not one new job will be created by this infrastructure bank.
The truth is, we don’t need it. Our freeways, trucks, railroads and aircraft do just fine getting around delivering people and goods. I’m not arguing that some things need repair, but that is minor compared to what this Infrastructure Bank envisions. As we all know, like all things run by government, they have let some of our bridges, roads and schools go into disrepair because they manage it incompetently. While I am sure some kids go to run-down government schools, it’s not the buildings that are the problem, it’s the unions.
I haven’t heard that our water supply is unsafe or that anyone has been poisoned by drinking out of the tap (spare me the occasional example, please). Our ports are fine despite the longshoremen’s union. We don’t need high-speed trains because they are expensive and inefficient and people will fly instead. Please see Bob Poole’s work at the Reason Foundation if you need confirmation of this fact or on any matter dealing with public transportation.
Here are some things to think about when the politicians spout this nonsense:
» 1. Jobs aren’t created by government. That is not to say that government employees or contractors do not work; they do. What it means is that government does not create wealth-creating jobs that are self-sustaining as would a private business. This should be fairly simple to understand. Taxes fund government operations. Only the private sector creates wealth that pay taxes. We can have an argument about whether or not government should provide much of the services that it does. For example, we know that private schools do a far better job at providing an education because they are not controlled by unions who control politicians. But, that is not the topic here.
» 2. Government spending known as fiscal stimulus, or Keynesian stimulus, as a cure for unemployment is another matter. The idea here is that since consumers aren’t spending all we need to do to revive the economy is to start spending somewhere in the economy and magically things will revive and take off. Unfortunately, such stimulus never works to “jump start” the economy. It never has and never will. The American Recovery and Reinvestment Act of 2009 pushed $840 billion into the economy under this theory, and it failed.
No one (especially our politicians) asks where the money comes from to stimulate the economy. It comes from us, whether through taxes today or taxes tomorrow. And, the more you take out of the private economy, the less capital is available for businesses to create real jobs. Politicians never seem to see this.
Right now, the Keynesians are pushing on a string with this idea. Until we clean up all the excess houses, commercial real estate and related debt, no amount of spending or tax cuts will work.
» 3. Then there is the “quality” issue. Assuming that such infrastructure spending worked, the projects chosen are those favored by government politicians and bureaucrats, and we know how well they do competing with the private sector. Need I mention the $535 million government loan guarantee to the soon to be bankrupt Solyndra? These folks shouldn’t be handing out your money; they don’t know what they are doing.
Solyndra may be the tip of the iceberg. This selection below is just the first four contracts on the Recovery Act web site that you can bid for. (If you wish to see all of them, go here or here.)
As you can see, as with most of these Recovery Act contracts, it is just another way to pay for things the government needs or want. Nothing here will create real jobs, the kind that will be market-based taxpaying jobs. It’s a waste of your money.
» 4. Union workers will be employed for these construction projects since they are all federal contracts and that requires union workers. No big issue here; we all understand this is a payoff to the Democratic Party base.
» 5. Then there is Japan. They spent trillions of dollars on fiscal stimulus for much of the same things that are proposed by the Infrastructure Bank. It was all a huge waste of money there and the result was 20 years of sluggishness and the highest debt to GDP of any industrialized nation (225 percent; we are at 100 percent). Their economy is still in the doldrums and they stupidly push for even more such stimulus spending. We are going Japanese with all this spending but with a twist: We have inflation, and we will have more inflation from quantitative easing and more spending.
The Infrastructure Bank is a hoax. Kill it now before it grows.
— Jeff Harding is a principal of Montecito Realty Investors LLC. A student of economics, he has a strong affinity for free-market economics. This commentary originally appeared on his blog, The Daily Capitalist.
» wrote on 09.19.11 @ 07:49 PM
Couldn’t agree more.
» wrote on 09.20.11 @ 08:44 AM
Really? Do you ever get out of your bubble? Do you read anything written by people other than your chosen writers, your corporate warlords?
This diatribe is ignorance at its finest. You sit in your luxury home, in your safe and clean town and you proclaim that all is well with the world. Holy crap.
You are an idiot. An idiot with a narrow view and a myopic sense of reality. Without any foresight, without investment our country will continue to slip. It does not take much to understand that the vast majority of our “infrastructure” is starting to fail. Whether its the power grid, the overstuffed highways or the things you dont see - like the failing damns and bridges. Most built 80 years ago.
Continue to bury your head, refuse to accept facts and just wait out your turn… that seems to be the mantra of your generation. You got yours to hell with the rest!.
» wrote on 09.20.11 @ 11:45 AM
No doubt the “Montecito Realty Investors LLC” are actually just realty speculators. I’m sure we all have some heroic example of a self-made realtor we can look up to. Or, maybe not.
We need to invest in our national infrastructure, just as companies and businesses invest in corporate infrastructures. Investors understand this; speculators…well, not always.
Wealth creating businesses rely on a stable infrastructure. Without it, there is no FedEx Overnight, there is no reasonable assurance that things you ship make it to your customer on time. There is no confidence that you can make it to an important meeting. Talk about uncertainty.
Wealth creating businesses are started by smart people. Not all of them start out rich, so we need good public schools to make sure we raise as many potential “wealth creators” as possible. I read somewhere that the washout rate in business is about 80%, so it makes sense that more is better.
Blaming unions for… what? The recession? You’ve got to be kidding. Tell you what, stick to the property bets. Your opinion pieces are low quality drivel.
» wrote on 09.20.11 @ 12:19 PM
Rambo, you are absolutely right, growth of our wealth generating sectors does rely on a stable infrastructure. But the best way to fund that infrastructure is by building the wealth first, you know like we did half a century ago. This act puts the cart before the horse and it’s not unreasonable to assume that socialists and Keynesians would see that is an advantage.
When Ike signed the Highway Act into law back in 1956 we were running a trade surplus and the government was in the black. We need to get there first and that means government needs to quit stealing capital from the markets to “spread around” so some jerk off can get re-elected or some guilt ridden socialist can “feel good”.
The one area you and I seem to agree on is wealth generation versus wealth accumulation. You grasp the meaning of it and its significance as the root of all our economic troubles right now. I recognize, as you do, that it is not partisan, no socialist or capitalist economy can survive long unless more value is added. You see, as I do, that there are more forms to “wealth redistribution” than socialist or Keynesian economic principles, that skimming wealth through investments, inflating value through speculation, adds no new wealth to the economy and are as destructive (in my opinion) as just moving wealth around. Even those wonderful socialist worshipping Europeans get that right.
I get heartburn every time I hear a rightwing pundit or GOP candidate lump the accumulators in with the generators as though it’s all the same. It’s not and at least you and I, two polar opposites politically, get it. That said, let’s back the cart up and get it behind the horse. Infrastructure can wait (somewhat) until we have the money to pay for it and that means unleashing our economic might.
Politically you and I can argue the best way to do that. I still believe in allowing the private markets to do the job, they have the best track record. They also have a track record of allowing greed to influence capital decision making. No amount of law or regulation will contain or eliminate greed. That has to start at home with the way a child is raised, not by punishing all humanity for the sins of a few. But hey that’s my opinion and you can argue yours.
Please don’t get caught up on Somenutcase’s diatribe, its rather embarrassing. Cheers!
» wrote on 09.20.11 @ 02:21 PM
AN50, we were running a trade surplus in 1956 because we were about the only ones between 1945 and 1955 who had an undamaged infrastructure to work with.
In 1945, our debt was over 120% of GDP. We were investing in the GI Bill and building tons of schools anyway. We were integrating the military, spending tons of money in Korea and on the Marshal Plan, and investing the educations of all those GI’s coming home from that one.
All that spending and investing primed the pump. And it paid dividends for the Nation and the People. Public education and the GI Bill have been two of the best investments we ever made. The Interstate highway system, ostensibly for landing bombers (a bit of BS to get the right wing on board), connected farms, ports, cities, and factories to make further economic growth possible.
Yes, we both agree about the accumulators, and I agree with you about wealth creation, but wealth creation is a growth process that requires good soil.
» wrote on 09.21.11 @ 12:36 PM
Sadly, the thoughful Harding knows even less about infrastructure than he does
about economics.
America’s interstate highway system, and the bridges which link it together, are
at or far past their originally intended engineering shelf-life.
The transportation volumes, and aggregate vehicle weights, which use it are also
way beyond their original design specs. Deterioration is accelerating, not easing.
Forget what you may think about a high-speed train up the central valley to link
LA, SAC, and the Bay Area (as if we were still a First World innovator).
The shortfall on basic maintenance and repair for our existing infrastructure is in the scores of billions of dollars, now, even assuming we built nothing else.
To let our nation’s internal infrastructure continue its decay will only speed our
economic decline, and make us more vulnerable to quick responses to either natural or human-caused disasters we know are coming.
And with all due respect to Mr. Harding, funding capital repair or replacement
of basic infrastructure will create tens of thousands of construction jobs in all
parts of America, which could remobilize all our idle construction equipment
and workers from depressed office and home-building sectors.
Those contracts and related paychecks could jump-start domestic spending and
consumption.
And the final product would be a stronger, more secure national system for the
movement of people, goods and services.
» wrote on 09.21.11 @ 10:59 PM
Wow, I have not seen Bishop ANchove so quiet for so long. He must be doing research.
I think he may convert. We should all have breakfast at Cody’s.
Maybe Dan will show up. Then I’ll order a Bloody Mary!
» wrote on 09.26.11 @ 02:49 PM
Jeff is mostly correct. This infrastructure bank is Fannie and Freddie Part II. It is the exact same thing. There is plenty of funding coming in on gas taxes and the like to do what needs to be done now, the problem is it being used for other things. Subsidizing all this green energy and high speed rail feel good nonsense is insane. Either they are good ideas that can survive on their own or they aren’t.
This idea, which hopefully never materializes, will inevitably turn into another scandal ridden fiasco that we taxpayers are on the hook for.
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