Tag Archives: infrastructure

The Buffet Rule and the Self-Made Myth

Predictably, the Buffet Rule–which would have raised tax rates on those making a million dollars or more a year–failed for lack of the 60 votes needed to break a Republican filibuster. The GOP defended its position as necessary to encourage entrepreneurship and job creation, despite literally mountains of data disproving the link between lower taxes and economic prosperity.

It may be instructive to consider a couple of observations from a new book written by Bill Gates Senior. It’s titled “Self-Made Myth.”

In the book, Gates explains that Bill Jr. could not have built Microsoft without the United States’ publicly-supported infrastructure, tax laws, government-funded scientific research, public education and patent protection.

The book cites a number of other successful entrepreneurs who readily acknowledge their immense debt to the broad-based, publicly-financed goods our society offers, from the roads over which they ship their goods to the police and firefighters who maintain public safety.

A foreign student of mine once observed that there are plenty of bright, entrepreneurial people in third-world countries who cannot succeed on the scale Americans can, precisely because they lack those public goods, and because the absence of our extensive but largely taken-for-granted public infrastructure prevents the development of a middle class with the wherewithal to purchase their products. Market-based economies require–duh!–markets.

The question we face right now is what happens if we continue down the reckless path we seem to be traveling, a path that promises–among other things–to eliminate or vastly reduce the American middle class?

Ironically, in their zeal to avoid even moderately higher taxation, their unwillingness to repair or improve our crumbling infrastructure, their attacks on the public servants who provide security and education, the wealthiest Americans and their apologists and courtiers run a significant risk of killing the goose that makes their golden eggs possible.

The reality, as Neil Pierce has recently noted, is that government has been an indispensable player in developing America’s prosperity, from the early canals to our transcontinental railways, great dams to the interstate highway system, the first telegraph lines to the government-funded research that led to the Internet. It’s equally true at the local and state level, from public schools for all to our great public universities, the first minimum wage and workplace safety laws.

None of these public goods are free. They are an investment, and over the years, they’ve generated a remarkable rate of return in general prosperity and in all of those “self-made” men.

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Audacious in Chicago

This morning’s New York Times reports that Rahm Emmanuel will announce a 7.1 billion-with-a-b infrastructure improvement plan for Chicago. Improvements will be made to everything from the water system to the airport, from public transportation to parks. The improvements will be financed primarily through a public-private investment trust, details of which Mayor Emmanuel is supposed to announce later today.

I found this paragraph particularly interesting:

Some public-private partnership projects have been criticized as giveaways to the private businesses that take them over — including two prominent cases in Chicago itself, the privatized Chicago Skyway and the city’s parking meter system, which obligate the city to leases that span generations. Mr. Emanuel says that the city has learned an important lesson, and that “I am not leasing anything,” or selling off the city’s assets, he said in an interview. “I’m using private capital to improve a public entity that stays public.”

Great cities are places people want to live. As former Mayor Hudnut repeatedly reminded us, livable cities are first and foremost “cities that work.”

Most of us don’t want to live in housing that is unkempt and run-down, but we also understand that we aren’t improving our situation if we sell the stove to pay for new carpet.

In order to build a great city–especially in these days of fiscal hurt–its leaders need vision, and the audacity to insist that investment in the public square is both necessary and important. The audacity to refuse to sell off public goods to private profiteers.

The audacity to defend and maintain great urban spaces for the generations of citizens who will enjoy them.

Who Should We Trust?

These may not be the times that try men’s souls, but they sure are times that confound economic policymakers.

We have one set of economists telling countries to implement austerity measures, and another group insisting that for now, stimulus is the answer. For those of us who are not trained in the “dismal science,” it’s increasingly difficult to distinguish between medicine and snake oil. Prescriptions sounding eminently reasonable to those of us unschooled in economic arcana turn out to be counter-productive in practice—case in point: research showing that so-called “right to work” legislation just depresses wages without generating the promised economic growth.

So where should we look for advice?

An October paper for the New America Foundation, by Daniel Alpert, Robert Hockett and Nouriel Roubini (not-so-affectionately dubbed “Dr. Doom” after he predicted the mortgage meltdown) proposes a way forward, and the logic seems—at least to this non-economist—pretty compelling.

The authors spend considerable space analyzing “how we got here,” and they note that digging out of the present crisis will be particularly difficult because, thanks to the entry into the world economy of “successive waves of new export-oriented economies,” and the concurrent, dramatic rise in productivity gains “rooted in new information technologies and the globalization of corporate supply chains,” the world economy now has excess supplies of labor, capital and productive capacity relative to global demand. Furthermore, the integration of new economies with competitive workforces has shifted the balance between capital and labor, resulting in income inequality as bad as—if not worse than—the gilded age.

The bottom line, as they see it: it will be difficult to sustain even current levels of consumption without improved wages and incomes, but such increases are unlikely due to the gluts of both labor and capital. In such a situation, austerity simply leads to a vicious downward cycle of weaker demand, weaker investment and more unemployment.

What to do? The authors lay out a three-part prescription: first, a “substantial” five to seven year public investment program to repair America’s crumbling infrastructure; second, a “comprehensive” debt restructuring plan; and third, global reforms to offset diminished demand in the developed world and correct the current imbalance in supply and demand.

The paper is long and quite detailed, and the descriptions of each proposal deserve to be read in their entirety, but I was particularly struck by the logic of the infrastructure recommendations.

  • Fixing infrastructure now would take advantage of a “historically unique opportunity” to put idle capital and labor to work rebuilding at an extremely low cost and with potentially high returns. Capital costs are now at historic lows, and labor is in abundant supply. It will never be less expensive to fix our decaying infrastructure than it is now.
  • The American Society of Civil Engineers estimates we need 2.2 trillion to meet even the most basic infrastructure needs. Less than half of that is currently budgeted.
  • Every billion dollars invested in infrastructure generates 23,000 well-paying jobs. Over the course of five years, such a program would create over 5.52 million jobs.
  • The CBO estimates that every dollar of infrastructure spending generates a 1.6 dollar increase in GDP.
  • Fixing our infrastructure is also essential to restoring American competitiveness. China invests 9% of GDP annually in infrastructure—we spend less than 3%. Public infrastructure investment lowers the costs of transportation, electricity and other core business expenses.

Even if these economists are overstating the case, what’s the worst that would happen if we took their advice? Our bridges might stop falling down? Pollution levels would abate? Workers with jobs might have money to spend?

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Getting From Here to There

In his latest column, urbanist Neal Peirce recounts the deteriorating condition of mass transit in the U.S., and details the ways in which that deterioration–if left unattended–will further depress the economy and damage the environment. It’s a gloomy picture, not just because it is clearly accurate, but because our political system is in the thrall of people who find reality inconvenient, and are determined to ignore real problems in favor of culture war diatribes against gays, immigrants and women’s reproductive rights.

Fix transit? How pedestrian (terrible pun intended)!

One of the few positive elements in this otherwise gloomy state of affairs is the steady growth in the number of people who bike rather than drive–to work, to do errands, and of course, for recreation.

As Jay Walljasper (no, I did NOT make up that name) has recently reported, biking has even taken hold in places where the climate doesn’t seem hospitable. He chronicles the things that Minneapolis, of all places, has done to encourage the growth of people who pedal, and there is a lesson for Indianapolis here.

“In a city where bicyclists of all ages and backgrounds already ride recreational trails the goal is to encourage people to hop on their bikes for commuting or short trips. This is not a far-fetched dream, since nationally half of all automobile trips are three miles or less—a distance easily covered on bike in twenty minutes.

To make that happen, Minneapolis is committed to creating separate rights-of-way for bikes wherever feasible — which helps explain why the city defies trends of bicyclists as overwhelmingly male. While only a quarter of riders are women nationally, the Census Bureau’s American Community Survey reports 37 percent in Minneapolis.

Research shows that most people — including many women, families and older citizens — are wary of biking alongside motor vehicles on busy streets. Having the option to ride apart from heavy traffic encourages more people to try out biking as a form of transportation.

Since the 1970s Dutch planners have separated bicyclists from motor vehicles on most arterial streets, with impressive results. Women now make up 55 percent of two-wheel traffic and citizens over 55 ride in numbers slightly higher than the national average.”

The lesson here is that how governments do things is every bit as important as what they choose to do.

Here in Indianapolis, one of the things the Ballard Administration has actually done right is focus on expanding bicycling. The Mayor has received a good deal of –deserved–commendation for extending bike lanes. But as a female rider, I can certainly attest to the accuracy of Walljasper’s report on the importance of separating those lanes from busy streets. Even my husband, a far more intrepid biker than I will ever be, tries to avoid the bike lanes that take riders across Michigan and New York Streets alongside speeding automobiles that far too frequently seem intent on running bikes off the road. A colleague of mine who doesn’t own a car, and commutes everywhere by bicycle, was seriously injured when a car sideswiped her last year.

As unglamorous as infrastructure may be, our elected officials need to learn to do things the right way. Just as it isn’t enough to pave roads if you don’t maintain them, it isn’t enough to slap some paint on an existing street and call it a bike lane.

So I’ll give Ballard an A for effort, but a D for execution. Come to think of it, that’s pretty much a description of his last four years.

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The Tortoise and the Hare

Okay–this isn’t a very good analogy, but it’s the best I can come up with on a rainy Monday morning.

Today’s Star editorial–with which I strongly agree–reminded me of Eric Hoffer’s observation that the true measure of a civilization isn’t what it builds, but how well it maintains what it builds. Maintenance requires the skills of the tortoise–a steady, persistent attention to what needs to be done. Not flashy, like the hare, but reliable.

The editorial contrasted the money and energy being expended on Georgia Street upgrades for the Super Bowl with past projects like Pan Am Plaza that are now suffering from neglect.  Not too long ago, I commented here about the deplorable condition of the canal–another expensive and important amenity that is suffering from deferred maintenance, despite the fact that it is heavily used.

We are heading into political season, and we’ll hear a lot from candidates about their new ideas and bold plans. We need to hear from them about their intentions to polish existing jewels, and how they will propose to maintain what taxpayers have already built. To put it bluntly, I’m much less interested in building a faux Chinatown than I am in repairing the deteriorating bridges along the canal.

It’s not glamorous, but I’m with Hoffer–it’s the real test of leadership.

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