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.
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