A good time for infrastructure investment
THERE have been so many forehead-slapping moments in the policy-making process over the last few years that it's very difficult to choose the biggest howler of them all. One surely deserving of at least some votes is America's persistent failure to substantially increase infrastructure investment. It could certainly use it:The Congressional Budget Office estimates that America needs to spend $20 billion more a year just to maintain its infrastructure at the present, inadequate, levels. Up to $80 billion a year in additional spending could be spent on projects which would show positive economic returns. Other reports go further. In 2005 Congress established the National Surface Transportation Policy and Revenue Study Commission. In 2008 the commission reckoned that America needed at least $255 billion per year in transport spending over the next half-century to keep the system in good repair and make the needed upgrades. Current spending falls 60% short of that amount.The Treasury has just published a white paper full of reasons to favour additional investment. Even if you are sceptical of the utility of fiscal stimulus qua stimulus, now seems like a very good time to undertake much more investment than normal. As the Treasury paper points out, very low interest rates and high unemployment mean that the odds of crowding out private spending and investment are much lower than normal. Cheaper than normal capital and labour also imply that taxpayers will receive a better deal on spending than would typically be the case. The cost-benefit calculus on infrastructure investment has shifted toward doing more of it, or at least squeezing more expected investment into the present period. Other research, like the new Brookings paper by Brad DeLong and Larry Summers, also indicates that the bar for greater investment should be lower. Given the potential that unemployment will become increasingly persistent as time goes on, the value of government spending that reduces joblessness—even temporarily—is higher than may be appreciated. Any projects that seemed like good ideas in general, and there are a lot of them, look like really, really good ideas now.And yet Congress has struggled mightily to keep even existing spending going. The nation's primary transportation-funding law expired in 2009. Normally a wholesale replacement or reauthorisation would follow that expiration; Congress has instead repeatedly extended the old law while bickering over how to come up with money to replace the increasingly meagre take from the nation's petrol tax. The latest extension is set to expire, and legislators are arguing over what to do next. They might extend the measure again—for 60 to 90 days. Or they might stonewall themselves into a temporary shutdown of all federally funded projects.Inaction is absurd and embarrassing, especially since funding is the primary (though not the only) source of disagreement and the costs of borrowing and unemployment (and the likelihood of a decent return on infrastructure investment) indicate that just borrowing the money to spend on new roads and rails would be a reasonable course of action. If ever there should have been a policy so obviously sensible as to attract bipartisan support, more money for infrastructure was it. Right now, when it comes to partisan politics, sensibility's got nothing to do with it.