Fox Attacks Infrastructure Spending
Fox attacked infrastructure spending as a "a pat on the back" for labor unions after AFL-CIO president Richard Trumka said that the federal deficit is not the primary short-term crisis. In fact, economists and studies say that government spending is needed to repair America's crumbling infrastructure, and such spending would stimulate the economy and create jobs -- while the borrowing cost to fund such spending is historically low.
Fox Uses Claim That Deficits Shouldn't Be Immediate Priority To Attack Unions, Infrastructure Spending And An Infrastructure Bank
Fox Derides Infrastructure Spending And Additional Economic Stimulus As A "Union Pat On The Back." On Fox & Friends, guest host Eric Bolling and co-hosts Gretchen Carlson and Brian Kilmeade discussed comments by AFL-CIO president Richard Trumka that were dismissive of deficits as the main priority facing the nation with Fox Business host Stuart Varney. Varney and Bolling dismissed past infrastructure spending from the 2009 American Recovery and Reinvestment Act, otherwise known as the stimulus, and a potential infrastructure bank, attacking it as a "pat on the back" for labor unions:
VARNEY: The bottom line here is, look, Trumka is saying don't worry about the debt. We've got to keep spending and therefore, we've got to keep borrowing.
BOLLING: You know after President Obama won his first term, the first thing he did, even before Obamacare, he signed $850 billion in stimulus. He signed the check. Unions benefited greatly from that, right?
BOLLING: During this first administration, they floated the idea of an infrastructure bank, who the unions -- the unions would love to see that. (crosstalk) Do you think we see in the second term another kind of union pat on the back, here is an infrastructure bank?
VARNEY: Yes. Whether it's an infrastructure bank or not, I don't know. But there is another stimulus plan being drafted as we speak. And we -- we rebuild the roads, rebuild the bridges, and spend money on education, teachers unions are very big, that's what it will be. It's a stimulus plan by another name. It's going to happen. [Fox News, Fox & Friends, 11/16/12]
In Fact, Infrastructure Spending Is Desperately Needed
Princeton Economist Reinhart: It's Amazing That Americans "Put Up So Fatalistically With This Old-Fashioned And Decaying Infrastructure." In a November 16 post to The New York Times' Economix blog, Princeton economist Uwe Reinhart commented on how out of date the U.S. power and transportation infrastructure is and compared it to mid-twentieth century Europe. He also explained how the inadequacies in power infrastructure were highlighted by Hurricane Sandy:
Instead of setting about to bring our infrastructure up to 21st-century standards - which might, alas, involve more of the much detested public-sector investment -- we angrily and yet meekly suffer for days or weeks without light, heat and transportation, verbally shaking our fists at the power companies but leaving it at that.
We are, at most, prepared to stock our households with flashlights and candles and, if we have the money, buy portable generators that can produce a modest amount of electricity, albeit at great expense. How can this be an efficient way of bringing electric power to households?
In so many ways the United States is a great country. The American people are innovative and hard-working, more so than most Europeans. It amazes me that they put up so fatalistically with this old-fashioned and decaying infrastructure. [The New York Times, Economix, 11/16/12 ]
Urban Land Institute: U.S. Infrastructure Systems Are "Operating Beyond Their Planned Life Cycles." In a 2011 study on the country's infrastructure systems, the Urban Land Institute concluded that current U.S. infrastructure is inadequate and outdated:
In contrast with its global competition, the United States is lurching along a problematic course -- potentially losing additional ground. After more than 30 years of conspicuously underfunding infrastructure and faced with large budget deficits, increasing numbers of national and local leaders have come to recognize and discuss how to deal with evident problems. But a politically fractured government has mustered little appetite to confront the daunting challenges, which include finding an estimated $2 trillion just to rebuild deteriorating networks. Operating beyond their planned life cycles, these systems include roads, bridges, water lines, sewage treatment plants, and dams serving the nation's primary economic centers.
Despite the nation's unemployment woes, the vast job-creation potential of infrastructure projects is being sidetracked by concerns about government spending appetites and potential cost overruns. Related benefits from reducing carbon footprints -- energy efficiencies and greater independence from problematic foreign energy sources -- are also failing to gain much traction. [Urban Land Institute, May 2011 ]
GAO: "One In Four Bridges In The United States Is Either Structurally Deficient ... Or Functionally Obsolete." A July 2010 Government Accountability Office report found that out of the more than 600,000 bridges in America, "[o]ne in four bridges in the United States is either structurally deficient and in need of repair, or functionally obsolete and is not adequate for today's traffic." [Government Accountability Office, 7/21/10 ]
Infrastructure Spending Stimulates The Economy
Congressional Budget Office: Spending On Infrastructure Is More Stimulative Than Tax Cuts For The Wealthy. A Congressional Budget Office (CBO) report on the estimated economic impact of the 2009 stimulus found that transferring money to state and local governments for infrastructure spending had an economic impact of nearly four times as much a one-year tax cut for wealthy Americans would have had:
[Congressional Budget Office, February 2012 ]
Moody's: For Every Dollar Spent On Infrastructure In 2009 Stimulus, $1.57 Was Returned To The Economy. In its July 2010 analysis of the stimulus, Moody's Analytics found that every dollar of infrastructure spending resulted in $1.57 returned to the economy:
[Moody's Analytics, 7/27/10 ]
New America Foundation: "Long-Term Investment In Public Infrastructure Is The Best Way Simultaneously To Create Jobs, Crowd In Private Investment." A study from the New America Foundation found that infrastructure spending makes the economy more productive and would "generate a multiplier of growth in other sectors of the economy":
U.S. public infrastructure is in shambles and is rapidly deteriorating. The American Society of Civil Engineers estimates that the United States must spend $2.2 trillion on infrastructure over the next five years to meet America's most basic infrastructure needs but that less than half that is currently budgeted, leaving an approximately $1.2 trillion shortfall. A multi-year program designed to close that infrastructure deficit would not only help fill the demand hole but make the economy more productive and efficient in the long-term. Indeed, long-term investment in public infrastructure is the best way simultaneously to create jobs, crowd in private investment, make the economy more productive, and generate a multiplier of growth in other sectors of the economy. [New America Foundation, October 2011 ]
Economists Agree That The U.S. Should Borrow Now To Invest In Infrastructure
Krugman: "U.S. Borrowing Costs Have Fallen To Their Lowest Level In The Nation's History." In his New York Times column, Nobel Prize winning economist Paul Krugman explained that "U.S. borrowing costs have fallen to their lowest level in the nation's history" and "investors are, in a sense, offering governments free money for the next 10 years; in fact, they're willing to pay governments a modest fee for keeping their wealth safe." Krugman concluded:
[W]hen money is cheap, that's a good time to invest. And both education and infrastructure are investments in America's future; we'll eventually pay a large and completely gratuitous price for the way they're being savaged. [The New York Times, 7/26/12 ]
Summers: Governments That Enjoy Such Low Borrowing Costs Can Improve Their Creditworthiness By Borrowing More Not Less. In a Financial Times column, former Treasury Secretary Larry Summers similarly explained that during "a time of negative real rates, accelerating any necessary maintenance project and issuing debt leave the state richer not poorer":
These examples are the place to begin because they involve what is in effect an arbitrage, whereby the government uses its credit to deliver essentially the same bundle of services at a lower cost. It would be amazing if there were not many public investment projects with certain equivalent real returns well above zero. Consider a $1 project that yielded even a permanent 4 cents a year in real terms increment to GDP by expanding the economy's capacity or its ability to innovate. Depending on where it was undertaken, this project would yield at least 1 cent a year in government revenue. At any real interest rate below 1 per cent, the project pays for itself even before taking into account any Keynesian effects. [The Financial Times, 6/3/12 ]
Economic Policy Institute: "The Markets Are Paying The Government To Borrow Money." An Economic Policy Institute blog post explained that if the U.S. government were to borrow money now for infrastructure spending, the markets would pay the government money to borrow:
The cost of borrowing is at historically-low levels, with interest rates on five-, seven-, and 10-year inflation-protected securities (TIPS) actually negative. This means the markets are paying the government to borrow money. But this is a temporary situation--as the economy picks up again, private returns will increase and the government will be forced to offer more generous borrowing terms to remain competitive. [Economic Policy Institute, Working Economics, 3/30/12 ]
An Infrastructure Bank Could Also Help Finance Infrastructure Spending
Washington Post: A National Infrastructure Bank Would "Leverage Private Investment To Fund New Roads, Bridges, Mass Transit And Other Public-Works Endeavors." A Washington Post article explained how the infrastructure bank proposed in Obama's 2011 American Jobs Act would work, saying that it would "leverage private investment to fund new roads, bridges, mass transit and other public-works endeavors":
The proposal, modeled after a bipartisan bill in the Senate, would take $10 billion in start-up money and identify transportation, water or energy projects that lack funding. Eligible projects would need to be worth at least $100 million and provide "a clear public benefit." The bank would then work with private investors to finance the project through cheap long-term loans or loan guarantees, with the government picking up no more than half the tab -- ideally, much less -- for any given project. [The Washington Post, 9/19/11 ]
Brookings: A National Infrastructure Bank Would Be Good For The U.S. The Brookings Institution tackled concerns related to a national infrastructure bank articulated in a Congressional Budget Office report, explaining that a national infrastructure bank would "focus on projects that are truly national in scope" and be "a strong signal to the private sector" to encourage infrastructure-related investment, among other benefits:
First, the CBO report focuses just on transportation infrastructure and even then just on the limited field of highway and transit projects. Of course, the revenue streams coming from ratepayers do make energy and water projects unique. But that's precisely the point and why those projects may be more appropriate for an NIB than traditional road projects that should be funded in the traditional way.
It remains that the greatest potential for an NIB is for a different set of complex investments such as ports (sea, air, intermodal) and rail (freight and passenger), renewable energy, dams, levies, water treatment facilities, and probably large-scale urban redevelopment projects.
The related second point is that an NIB would ideally focus on projects that are truly national in scope. Not that they're giant mega projects traversing the continent but that they connect to larger national goals. If we truly had a multi-modal freight plan, one could envision the NIB supporting projects necessary to fulfill its goals. Or else projects that are part of a national renewable energy strategy. Then because the projects have national purpose and intent, they should be granted priority and expedited through the federal review process. The point here is that a NIB shouldn't be established to enable us to keep doing what we've always done.
Third is that the establishment of an NIB would be a strong signal to the private sector that the national government is committed and open to private involvement in infrastructure financing and delivery. Today private sector financiers and investors are understandably frustrated by the lack of clarity about the rules of engagement that is--as in many states--a real hindrance to the development of the public-private partnership market.
The fourth point is that an NIB would provide technical assistance and expertise to states and other public entities that cannot develop internal capacity to deal with the projects themselves. Some of the most potentially transformative investments are inherently complex and require a mix of investors from all levels of government, across different federal programs, combined with the private sector, and even from other nations' sovereign wealth funds. Expertise to consider such deals and fully protect the public interest is paramount.
Last is the skepticism expressed by the CBO about the market for projects that fit the criteria I've described. A fair point, though there's probably a bit of chicken and egg thing happening. The establishment of an NIB with clear scope and criteria would undoubtedly result in a range of new and innovative projects. [Brookings Institution, 7/16/12 ]
Infrastructure Development Expert Likosky: An Infrastructure Bank Would "Move Private Capital Now Sitting On The Sidelines ... Into Much-Needed Projects." Michael Likosky, a senior fellow at the Institute for Public Knowledge, explained in a New York Times op-ed that the infrastructure bank legislation proposed in 2011 by Sen. John Kerry (D-MA) and Sen. Kay Bailey Hutchison (R-TX) could bring private capital in to help improve national infrastructure:
Rather than sell debt to investors and then allocate funds through grants, formulas and earmarks, the authority would get a one-time infusion of federal money ($10 billion in the Senate bill) and then extend targeted loans and limited loan guarantees to projects that need a push to get going but can pay for themselves over time -- like a road that collects tolls, an energy plant that collects user fees, or a port that imposes fees on goods entering or leaving the country.
The idea of such a bank dates to the mid-1990s. Even then, our growth was hampered by the inadequacy of our infrastructure and a lack of appetite for selling public debt to cover construction costs. Today we find ourselves trapped in a vicious cycle that makes this proposal more urgent than ever. Our degraded infrastructure straitjackets growth. We resist borrowing, fearful of financing pork-barrel projects selected because of political calculations rather than need. [The New York Times, 7/12/11 ]
An Infrastructure Bank Proposed In 2011 Enjoyed Bipartisan Support
In March 2011, Sens. Kerry, Hutchison and Warner Announced A Bipartisan Infrastructure Bank Bill Supported By The AFL-CIO And The U.S. Chamber Of Commerce. In a March 26, 2011, press conference, Sen. Kerry, Sen. Hutchison and Sen. Mark Warner (D-VA) announced the BUILD act, a bill that would have created an infrastructure bank. The bill was supported by both the U.S. Chamber of Commerce and the AFL-CIO. [U.S. Chamber of Commerce, 3/16/11 ]