Wednesday, June 15, 2011

David Frum's comments on the failure of infrastructure spending, such as on HSR.

David Frum is not one of my favorite commentors. But, that's not important.  His point here is simple and clear.  The United States is unhappy about spending vast amounts of money on infrastructure projects for which it will see no returns, results, or benefits. People have come to understand that there is too much hyperbole and lack of truth behind the government's promotion of stimulus funding for infrastructure. That is, it really won't benefit the economy and it won't reduce unemployment.

These expenditures, particularly with funds we don't actually have but must borrow, are mostly political pork and earmarks, being spread around to stimulate the voters to support one candidate or another, or otherwise enhance the status of an elected official.  

Even though HSR is being presented to us all from the White House and the Department of Transportation as if it were the wave of the future of transit, and that "80% of all America will soon have access to HSR", the fact is that these funds have been going out in dribs and drabs, a few billion here, several hundred million there, to this Congressional District, or to that State.  That makes most of us very uneasy about how our tax dollars are being mismanaged. As we all know, the government hasn't a clue to where all the funds are to come from to actually build all the projects on the drawing boards.
Starting something this big with no idea how to actually complete it is hardly reassuring.

And it should. By now, is it not clear that High-Speed Rail is a kind of manufactured national myth, like the pursuit of the Holy Grail?  It's like a challenge, a quest, a voyage, a journey. In a Nation this size and even with the project population over the next 100 years, a true High-Speed Rail network will remain a political illusion.  A segment here in California, another there out of Chicago, is not a High-Speed Rail network. And, if parts are built, it will surprise all the promoters that so few people want to ride something with ticket costs that high. 

In other countries, HSR is the icing on their railroad system cake. High-Speed Rail came to a continent already rail-riding; that is, Europe began with a passenger rail network.  They added high-speed trains to that.  

What we have is the most skeletal of railroad systems for passengers, Amtrak.  HSR will not be created here from the ground or rails up.  It is intended to be dropped down on us from the heavens, and thereby cure all our ills and solve all our economic and employment crises.  It is being sold to us as the heavenly answer to our prayers.

What it isn't is reality.

David Frum: More spending won’t save U.S. economy. Smart spending might
David Frum  Jun 15, 2011 – 8:53 AM ET
Larry Summers this weekend argued in favour of another round of stimulus, including:

* Extension and expansion of the payroll tax cut
* More aid to states and cities
* $100 billion of additional infrastructure spending.

I say “aye” to number one and number two, but enter a caveat to number three.

What we’ve seen from the prior round of infrastructure spending is that the U.S. government as today organized does not find it easy to spend infrastructure money intelligently. Future generations will look back in amazement at the 2009 stimulus and wonder: what exactly did America buy with all that money? Where is the FDR Drive, where are the Grand Canyon steps, where are all of the equivalents of the amazing things built and done in the 1930s?

And what exactly would $100 billion more buy for us?

The strict Keynesian answer is: it should not matter. Demand is demand. As Keynes himself said in one of his more cynical moments, it would suffice if the government put bank notes in bottles and buried them in coal mines, anything to encourage private investors to put people to work.

Few of us are as strictly Keynesian as that. As we amass debt in hope of accelerating growth, we’d like some assurance that the debt is buying things worth having.

The choke point here is the breakdown in the congressional system of governance. Back in the 1930s, Americans believed more in expertise than they do today. The executive branch chose the projects and assigned priorities. After a little log-rolling, the legislature enacted them. 

Today, the legislature is much more empowered. Within the legislature, power is more diffused. And so the money is divided into hundreds of little pieces that may or may not make sense as a whole: fragments of a high-speed rail line through rural California or windfalls of educational money for states like South Dakota and Wyoming that do not face big funding gaps.

The phrase “infrastructure bank” is catching on. But the key point to the idea is not only to increase the amount spent, but to enhance the effectiveness of the spending by de-politicizing it. Senators Chris Dodd and Chuck Hagel introduced legislation to create such a bank back in 2007.
John Kerry and Kay Baily Hutchison have tried again this year.

Fareed Zakaria endorsed the idea in a noteworthy column last week.

I’ve even noodled the concept myself.

There are a lot ways to imagine how the thing would work, and I’d be keen to hear Larry Summers’ version. Otherwise, Zachary Karabell’s caution will prove depressingly accurate: until Americans feel more confidence that infrastructure money will be spent well, it won’t be spent at all.

[Edit. To which I would add, until it can be well -- and honestly -- spent, it shouldn't be.]

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