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.