Wednesday, June 29, 2016
The U.S. Doesn’t Believe in Its Own Future Enough to Invest in It
Railroad Station in Wuhan, China
I’ve blogged about the collapse of public educational standards in this country – and Bernie Sanders’ rise to popularity among the young has more to do with staggering student loans and college tuition burdens as much as anything else – and how governmental research has slowed to a trickle. These represent what a government does today to make sure it has a bright tomorrow. Right now, we are all living on the investments from past generations, failing to understand the bitter difference between spending without a rate of return (a hallmark of most defense spending) and investing where there is a rather clear economic payback. We think blind austerity with blind defense spending are good for the country. Think again.
I’ve blogged a lot less about American infrastructure, a third leg of government investment, which is today’s topic. A little look back. “America saw two great booms in infrastructure spending in the past century, the first during the Great Depression [think Hoover and Grand Coulee Dams, the Tennessee Valley Authority the Pulasi Skyway bridge in New Jersey], and the second in the 1950s and 60s, when most of the interstate highway system was. Since then, public infrastructure spending as a share of GDP has declined to about half the European level. America is one of the most car-dependent nations on earth, yet it spends about as large a share of GDP on roads as Sweden, where public transport is pretty good... The federal government scrimps on airports and sewage pipes so it can pay for pensions and health care.
“[Money for infrastructure is hardly a federal priority these days.] The Highway Trust Fund, a pot of federal cash that covers a quarter of spending by states on infrastructure, will have to start withholding money this summer to keep its balance above zero, as required by law. ‘The problem with the trust fund,’ says David Walker, a former head of the Government Accountability Office, ‘is that it’s not funded and you can’t trust it.’ A short-term fix may be found: Congress has already passed ten of these, shifting money from elsewhere to make up for a persistent shortfall in revenue from fuel taxes, which have been held constant since 1993. But such hand-to-mouth financing makes planning difficult and encourages city, state and local governments to put off repairs for as long as possible.
“Something similar is unfolding at the state and local level, where three quarters of all spending on infrastructure occurs. States cut their budgets by 3.8% in 2009 and 5.7% in 2010—and have not made up the lost ground. Meanwhile bills for repairs are coming due. Much of what was built after the war was only designed to last for 50 years and now needs replacing. That includes almost half the country’s bridges.
“Signs of the shortfall are everywhere. Airports are funded by passenger fees and another trust fund. Neither has kept up with the increase in air traffic. The last big new airport was opened almost 20 years ago, in Denver. Everything about America’s major airports is too small, starting with the gates for parking planes. Last year Boeing began offering aircraft with folding wing-tips because so many are damaged while trying to squeeze in. At the busiest international airports, clearing customs can take hours. At New York’s JFK the average wait is about 30 minutes, but some poor souls wait four hours.” The Economist, June 24, 2014. Anyone stuck in a traffic jam or jostled over pothole infested roads and highways knows how bad our infrastructure is. Or the dilapidated school and government buildings that are the picture postcards of modern decay.
And then there are countries that actually believe in their future, willing to invest in the necessary building blocks (education, research and infrastructure) for their future with mountains of cash. Like China. As I recently blogged, on my last trip to China earlier this year, I traveled to Beijing, Hangzhou and Shanghai (with tons of driving in and around these cities)… with a focus on finding a pothole. Just one. I failed. Did I mention the bullet train I took from Beijing to Hangzhou? Fast. Luxurious. Amazing.
“China spends more on infrastructure each year than North America and Western Europe combined. That’s according to a new study published [in early June] by global management consulting firm McKinsey & Company. The fact that China is investing so much in roads, rails, ports—and everything else that keeps society up and running—hints at big trends that could shape the global economy in the coming decades.
“‘Infrastructure investment has actually gone down in half the G20 economies,’ says Jan Mischke, senior fellow at McKinsey Global Institute, who worked on the report. The culprit was the global recession in 2009. But it hasn’t stopped China.
“Between 1992 and 2013, China spent 8.6% of its GDP on building roads, railways, airports, seaports, and other development projects that are key to keep people and goods on the move, and keeping the economy strong. That same spending figure was just 2.5% for Western Europe, and 2.5% for the US and Canada put together…
“Europe’s and North America’s infrastructure is getting old, fast. It needs more money to be replaced, made better, and made safer. More investing also means greater environmental sustainability, more jobs, and innovation that fuels new technologies.
“Last year, for example, the US Department of Transportation study revealed that more than 61,000 bridges in the country are ‘structurally deficient’; in 2014, US Vice President Joe Biden described New York’s LaGuardia Airport as ‘third world.’ In 2013, the UK government announced a £100 billion [$1.47B] infrastructure plan, saying that the UK had ‘for centuries been pioneers in infrastructure,’ but in recent decades, ‘let this proud record slip.’
“[The McKinsey] study asserts that, based on the current trajectory of investment, the world will be left with major infrastructural gaps: The world will need to invest $3.3 trillion a year for the next 15 years to keep pace with economic growth forecasts.” BBC.com, June 20th. What are we doing with our infrastructure? Not much, barely a fraction of the estimated $3.6 trillion (through 2020) that the American Society of Civil Engineers says is required to bring our infrastructure up to “passable.” Well less than half the $356 billion/year Congress currently allocates for that purpose.
We cannot expect to remain a great nation – sorry Donald – without believing enough in ourselves to become competitive with those hungry powers around us with greater ambitions and solid commitments to do what needs to be done to get there.
I’m Peter Dekom, and we either invest in our future now or continue to watch our standard of living continue to fritter away.