Infrastructure Money Should Buy Us Things Worth Having
Larry Summers this weekend argued in favor 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 chokepoint 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 depoliticizing 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.