If there’s something awry in the logic of Larry Summers’ argument here for more infrastructure investment, I certainly can’t see it. Based on low real interest rates, still high unemployment particularly among blue-collar production and construction workers, and most of all, the need for productivity-enhancing investments in our aging public goods, Larry is very much correct to ask “if not now, when?”
A few key points:
–we are, at some point, going to wise up and start engaging in the needed maintenance of our depreciating stock of public goods. America’s roads, airports, and public schools of 2024 will not be those of 2014. So given the confluence of factors Larry identifies, shouldn’t we start now?
–there are many “two-fers” in this space: create jobs for the un- and underemployed WHILE improving productive capacity; borrow to invest WHILE real rates are still low; repair our public schools WHILE improving their energy efficiency (see our FAST! idea)
–Larry doesn’t get much into the politics, but they’re of course central. One could historically count on bipartisan support for this type of investment. I mean, business interests might oppose the minimum wage and unions, but of course they want and need adequate ports, roads, airports, and so on, not to mention a skilled work force. No firm can supply these public goods.
–But in a sign of how different these times are, not only is bipartisan support for infrastructure investment far from forthcoming, Rep. Paul Ryan’s new budget significantly cuts transportation funding. According to the Senate Budget Committee’s analysis of the Ryan budget “… would cut funding for transportation projects next year by $51 billion…and a total of $167.5 billion from federal transportation programs over the next decade if no additional revenue is identified. Roll Call (no link) points out that the budget “…also suggests a pilot program to allow states to opt out of the federal motor fuels taxes and funding programs entirely and pay for transportation projects strictly with state revenue.”
Rep. Ryan calls his plan a “Pathway to Prosperity.” All’s I can say is that if you’re driving down that pathway, you’d better have some serious shock absorbers because that path is fraught with deep, deep potholes.