Last year President Obama gave an inspirational Labor Day speech in Milwaukee, Wisconsin entitled “Fighting for American Workers.” Speaking at a union gathering, Obama spoke eloquently and forcefully about a $350 billion six-year government program that would “create jobs” by putting people to work rebuilding 150,000 miles of roads, constructing 4,000 miles of track, and repairing 150 miles of airport runways.
Included with his proposal was the creation of an Infrastructure Bank that would fund public projects that are not covered by the jurisdiction of other state and federal agencies. In addition, Obama sought to close the “ridiculous tax loopholes that actually rewarded corporations for shipping jobs and profits overseas.” His proposal was “frontloaded” to jumpstart job creation during its first year by providing a $50 billion initial investment.
These were all very impressive FDR-type words. However, one year has gone by and what have we seen in regard to new infrastructure programs?
Nothing!
Admittedly, most people saw Obama’s Labor Day speech as nothing more than presidential posturing designed to soothe the concerns of the people. In fact, Paul Krugman summed it up succinctly the next day when he referenced the $50 billion “jumpstart:”
1. It’s a good idea
2. It’s much too small
3. It won’t pass anyway
Krugman was correct on all three counts.
This week we again have been hearing the “I” word being used consistently in President Obama’s speeches. "Infrastructure" spending to increase job growth has been one of his major themes. However, there are two key things that need to take place before the public will gain faith in these initiatives.
First, Obama needs to discontinue using the dreaded “B” and “C” words when he talks about infrastructure programs. We don’t want to hear about “Balance” and “Compromise.” We want an FDR-type “We are going to rebuild America, and this is how we are going to do it” statement.
Second, American business leaders need to get solidly behind the president on this issue. To date, they seem hesitant to back any infrastructure plan because Wall Street appears to be opposed to it.
As the financial community learned from the WPA and other government work programs initiated by the Roosevelt administration during the Great Depression, there is no money to be made on Wall Street by putting people to work on these government plans.
The workers are government employees. There is no private equity or collateralized notes to be traded, bundled and sold off to investors. Moreover, no fancy derivative packages can be created to pump up the income of brokers and hedge fund managers.
Most importantly, Wall Street knows that these programs will most likely work. Hence, they will be expanded to include a myriad of other required long-term infrastructure fixes, keeping Wall Street out of the picture for quite some time.
But this isn’t the way Wall Street should be looking at this. Though a government infrastructure plan may not have immediate impact on their bottom line, it will create demand for all other businesses by putting money into the pockets of consumers. It is this “increased consumer demand” that the financial community should focus on and recognize that the long term impact will help Wall Street as well as Main Street.
Infrastructure programs have kept Australia out of the economic downturn faced by other major industrialized nations. They can do the same thing for the American economy as long as the president and Congress take a strong stand on this issue and if the American business community and the American people back them up.
“Yes we can!”
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Alysa Salzberg
Cenk Uygur
Oryoki Bowl
Robert Greenwald
Frank Michels
Kent Pitman
Salon.com
Comments
He collects his campaign contributions from the same corporations as the republicans; which may mean that his job is to pretend to stand up for the rights of the public while the Republicans play the part of the buffoons with the support of the flake voters.
They're relying on the public settling for the false choice of corporate candidate A or B.
This is the CONSERVATIVE argument for infrastructure spending. Whsy is Obama not making this argument. He has no excuse.
More on that in a second, and I like the idea of the post, but this has always been a limitation of Keynesian Demand Management. That doesn't mean you don't do that, but it is a limitation, namely, that it isn't the case that you have a black box that says,"Break in times of economic emergency," and inside, you have all these nice projects ready to go. Tax cuts enter the economy quicker in that sense, although they just replicate prior spending patterns more or less, unless people save it, which did happen somewhat this time more than expected. That isn't a structural break, and that is what we are living through, which is why it is scary, although life isn't free from fear, but instead lived to the fullest when fear is embraced, and we just accept how things work out.
But, as to the systems we have that have a downside, we want the government to be accountable, so government workers have a lot of rules to jump through before they do anything, which slows things down a good bit as far as the input of "we are spending this money" compared to the output of, that project is done. That might argue for temporarily saying, "This is a rule free zone save for stealing. Move. Think of this as a life and death situation, in which if you argue, people die; just do it." That is a hard sell in some institutional environments in my experience, not because people are bad, and they do work, but more than is optimal of their work is generated by co-workers who really want to do something else, and so delay by making other people answer to rules that aren't really always about the issue at hand in the sense of just doing it
. This also happens in the private sector more than your usual economists want to think too, but, in the governmental sector, we want accountability, and we do, but, sometimes you can have too much of a good thing. The other thing is that I wonder if beyond a labor intensive use of money with the unemployed in such things as for housing renovation or demolition and mainly prepartation to enter the market in an orderly fashion, with the unemployed paid more than they are now and partly as add-ons mainly to not scare government workers that they are next, which is fair, since they get bashed to much for the effects of rules that we insisted on, is there one project that we could pick together with a sense of imagination.
Is there one project, not very expensive in monetary terms, that could bring us together a little more?
I always thought space would do that, and think it will some day, but maybe that isn't what we are capable in some ways of doing right now.
Economics is not just about money, as inspiration matters in what is known as the Solow Residual.-Productivity.
It seemed to me in this regard that there is another part of the CCC era that was cool, and useful, which was in the arts as the WPA, and they do have broadcast rules about the public interest, not too much, just an hour each weekend, to try to trigger a Roots-like effect.
Media is so concentrated now, like with Comcast-NBC. Film is labor intensive, and a lot of people I bet would help for a collective examination of our history, the History of a Democracy Now in Hard Times if it could tell itself family-like stories, maybe allegories, of what the different parts of the country were and are really like, and use as many extras as possible, Cecil B. DeMille style, and that is a potential export, and was done as part of WPA, but this time on the understanding that .... we need to do something like that because we don't seem to have as much ability to do things together as we used to anymore, and we won't survive if we don't learn that lesson, and local projects along that line as part of a collective venture would teach that in a way that might surprise people as to the enthusiasm it generated, a firestorm of a good sort, like a Great Awakening of sorts. I'm not opposed to roads and bridges, but ... it seems like maybe something a little more, egos out the door.
Obama is an executive- holds the purse, but figuratively. Regulations and stipulations prior to disbursements is there with Obama, and any money used.
Loved the article!
Hard facts like these in your post are not a popular thing right now and don't look to be for the foreseeable future.
do you imagine things would be better, if mccain had won? this is as good as it gets, with this system. in any event, a brown man with a foreign father and a radical rebel for a mother has scrabbled his way into the oval office. this is ipso facto, prima facie evidence that he knows better than you or anyone how to manage the american system.
maybe he is doing all that can be done, in the society of the beltway hyenas? bet on it.
Reduce the corporate tax rate to 16% where the rest of the world is!
Eliminate the Capital Gains tax which is just double taxation
Make all states "right to work" states
Make repatriation of money overseas tax free
Get those Union thugs off the NLRB board
The economy will turn around overnight.
When the GOP noted that the economy was starting to recover a bit, they created the debt ceiling debacle by threatening to (again) shut down the government by failing to pay for expenditures already approved by Congress.
This is all a game by the teaparty to obstruct Obama at every turn, and derail a recovery so they can say --- "See, Obama is responsible for the bad economy" and prevent his re-election. Unfortunately, the GOP's allegiance is to their party, not the country. While I'm not entirely happy with Obama, I believe he has the best interests on the country in mind and is doing his best to turn the situation around, with a congress at each other's throats. Since the GOP has been completely radicalized, there is no other choice but the democratic party. I want Nancy Pelosi as president. Unfortunately, I don't think she will run.
Second, we have to be very clear about this: the only businesses that will actually enable the US to pull itself out of the hole it is in are "international businesses" where American made products are sold to other countries.
The persistent myth that infrastructure renovations, or domestic (as in "not exporting") industries will beneficially affect the balance of trade and, therefore, the deficit, are ludicrous. Worse, they are very misleading to the public, and deliberately so.
Any plan that depends upon the good offices of America's business leaders will fail going out of the gate.
In an environment where these companies are entitled to keep trillions of dollars worth of profit off-shore, and not pay any taxes on them - is not a business environment where the leaders care about America at all. They may be Americans by birth, but they are global citizens by occupation, and that's how they act.
Third, government cannot underwrite a permanent recovery and therefore, as history has shown, all government work plans eventually fail. The New Deal did not succeed in righting the American economy. World War II did that, followed by Korea and then the Cold War. Absent those types of events - and neither Afghanistan or Iraq consume nearly enough resources to generate a significant "War Dividend."
The Australian example doesn't offer an alternative solution because, when their infrastructure programs run their course, Australia will be right where we are now.
Infrastructure development improves internal logistics....but if the infrastructure already exists - as it does in the United States - repairing or rebuilding that infrastructure doesn't increase logistical capacity. It merely preserves or restores the present level of infrastructure development, which - like the decision not to end the Bush tax cuts - changes nothing and therefore perpetuates the status quo.
The only way out of this hole is to create new products for which there is a foreign demand, and that requires entirely new industries because we don't have the ability to compete with the lower wages and cheaper medical care in other parts of the world.
ONe of the few solutions that really will work is a major increase in the highest effective tax rate, which wold drive trillions of dollars currently held in cash reserves into circulation as businesses move to protect their net value by investing funds so as to avoid those taxes.
With taxes at their current and absurd low levels, there is no incentive pushing corporations to invest. They can make more on the interest they're presently earning than they could by putting those funds to work by investing them.
PS: Yes, the US Corporate tax rate is the second highest among the most productive nations....but that tax rate doesn't matter because many of those corporations don't pay any taxes at all, so what difference does the tax rate make, unless you remove the tax write offs?