I hate when economic issues are hashed over without hard numbers. There is a strong incentive for the US to upgrade its aging infrastructure, which was estimated in 2010 as needing $1.6 trillion by the American Society of Civil Engineers: this is dams, bridges, the interstates, the railroads, and our ports. It’s likely to be much higher now, since the Great Recession led to cuts in spending so maintenance has fallen off. And of course, the longer you wait to fix these these, the more they age and fall apart, causing even more expense.
Eduardo Porter, In a Shovel, a Cure for Our Stunted Economic Growth
“We’re almost there in terms of fiscal adjustment,” said Simon Johnson, a former chief economist of the I.M.F. who is now at the Massachusetts Institute of Technology and the Peterson Institute for International Economics. “If we don’t do it now,” he asked, “when will we?” […]
But there is another way to look at our policy options. It just requires analyzing more closely the potential return on public investment over the long term.
Mr. Summers points out that there are many profitable investment opportunities for the government to improve the nation’s physical infrastructure, opportunities that would yield much more than a dollar in economic output for each dollar spent. There is also plenty of idle capacity in the construction industry — unemployed workers, unused machinery. And the government can borrow for 15 years at negative real interest rates.
While he argues that we also need commitments now to reduce future budget deficits, not borrowing the money now to make the investments would be unconscionable. Some of them may even pay for themselves.
Putting fallow resources to work — which also means employing men and women who are becoming obsolete — will, he suggests, bolster growth more than people expect. “It’s not like we’re never going to fix our infrastructure,” Mr. Summers said. “Not doing it now burdens future generations just as surely as more debt does.”
The US has the lowest lending rate available now: it’s actually negative. So President Obama should move as aggressively as possible to attack this grave and growing problem.
And of course, he should use the opportunity to create a much faster nationwide Internet, in partnership with corporations like AT&T and Google, or better yet, to nationalize it, like we did with the highway system. This should also include high speed train between major US cities, to decrease the costs and CO2 of airplanes to the greatest extent possible.
It is your time to lead us in the future, Mr. President.