I just love David Stockman!
Folks... if you don't have "Contra Corner"
bookmarked... I strongly urge you to do so!
* * *
* *
The Amtrak tragedy has predictably elicited another round
of jawing about the allegedly “disgraceful” condition of America’s “infrastructure”.
If Washington only had the “courage” to spend and borrow itself silly... why...
the nation could "leap out of its growth and jobs rut in a single bound."
(Or... so goes the claim of mainstream politicians and
pundits.)
The overwhelming share of the nation’s infrastructure is
not obsolete or dangerous; is not being starved for dollars; and has virtually
nothing to do with the dramatic trend-line of decline in main street growth,
investment, good jobs and real living standards.
Ninety-eight percent of US infrastructure is either the
responsibility of the private business system or state and local government. Arguably,
the only thing that Washington has any business being involved with is the
interstate highway system.
(But the latter is generally in excellent shape along
most of its current 47,000 miles of surface!)
In fact, it was the recipient of a huge dollop of
largesse compliments of the $800 billion Obama stimulus, but most of these
billions were wasted on pre-mature resurfacing of highways that didn’t need it
and low priority interchanges. There were simply few “shovel ready” and
necessary projects to fund.
(*SIGH*)
In any event, the interstate highway system could be more
than adequately maintained for $30 billion per year. That’s partly because it's
only a small piece of the highway pie, accounting for only 1.1% of the 4
million miles of streets, roads and highways in the entire nation. Indeed, the
reason we have 89,000 units of state, county, municipal and township government
in the U.S. is precisely to take care of the 99% of road surfaces that the
great Dwight D. Eisenhower said should remain a non-Federal responsibility - even
as he pioneered the Interstate highway system and trust fund.
The unheralded truth, in fact, is the current gas tax
generates more than enough to fund the interstate system... that is... before
two-thirds of the incoming trust fund dollars are dissipated on mass transit,
bike paths, beautification, and state and local highways which should be funded
by local users or taxpayers.
(*PURSED LIPS*)
So if the interstate highway system could be maintained
in high style for 0.17% of GDP, where’s the beef?
* NOW... TO BROADEN THE DEFINITION OF
"INFRASTRUCTURE..." (READ ON!)
National investment spending has been running in the
$90 to $100 billion range annually for the last half-decade - or more than double
the level of the early 2000s. Even after accounting for a 20% rise in the GDP
deflator over the last 10 years, current investment in the utility sector is up
by 80% from its 2004 level.
The self-evident point is that there have been no
blackouts, brownouts or power shortages of any kind that could plausibly have
interfered with economic production and growth during that period. What the
infrastructure hobbyists are really complaining about is economic outcomes they
don’t like. That is, only a tiny fraction of the ample utility power available
to U.S. businesses and households is generated by green fuel such as wind and
solar.
But... that’s because it is not economically competitive
- not because capital investment is being starved! After all, the overwhelming
share of utility investment is accounted for by the private sector and is debt
financed. Are we therefore not talking about bringing coals to Newcastle?
Thanks to the Fed’s misguided financial repression, long-term utility financing
has never, ever been cheaper.
(*NOD*)
Another category of alleged infrastructure starvation is
waste water and sewerage treatment, and here the story is even worse. Ever
since the EPA started making multi-billion grants for sewer plants during the
early 1970s, municipalities have been wasting massive of amounts of resources
building over-sized plants, and then under-charging their business and
residential customers for their use! So the truth in this category is not
starvation, but economic obesity!
Now it is absolutely true that in selective localities in
the U.S. there are obsolete sewer treatment plants, just as in the case of
roads and streets. But you can’t blame that on inadequate spending. The real
problem is local government corruption, inefficiency, pork barrel politics and
the excessive power of the municipal unions and the construction trades.
In the local transportation sector, for example, the
disgraceful condition of roads and streets in places like New York City and
Philadelphia is owing to the fact that billions have been siphoned off by
drastically overpaid union labor and deeply corrupted contract award processes.
(*SHRUG*)
* DOES ANYONE... ANYONE AT ALL... DOUBT THE TRUTH OF
STOCKMAN'S STATEMENT?
Nationwide highway spending has averaged between $80 and
$85 billion since 2009 - or about 25% higher in real terms than a decade
earlier!
Finally, there is the mythology about crumbling bridges
based on the occasional bridge failure that becomes a momentary cable news
sensation, but is not representative of the actual facts.
Indeed, the crumbling bridge myth deserves debunking
especially because it has become a metaphor for the entire phony campaign for
massive infrastructure spending and borrowing. I addressed this awhile back,
but the points bear repeating:
It seems that after 32 years and tens of billions of
Federal funding that the nations bridges are still crumbling and in grave
disrepair. In fact, according to DOT and the industry lobbies there are 63,000
bridges across the nation that are “structurally deficient”, suggesting that
millions of motorists are at risk for a perilous dive into the drink.
But here’s the thing....
Roughly one-third or 20,000 of these purportedly
hazardous bridges are located in six rural states in America’s mid-section:
Iowa, Oklahoma, Missouri, Kansas, Nebraska and South Dakota. The fact that
these states account for only 5.9% of the nation’s population seems more than a
little incongruous but that isn’t even half the puzzle. It seems that these thinly
populated country provinces have a grand total of 118,000 bridges. That is, one
bridge for every 160 citizens — men, women and children included.
(*SMIRK*)
And the biggest bridge state among them is... well, yes...
Iowa.
Iowa has three million souls and nearly 25,000 bridges – one
for every 125 people.
(*SNORT*)
So suddenly the picture is crystal clear. These are not
the kind of bridges that thousands of cars and heavy duty trucks pass over each
day. No, they are mainly the kind Clint Eastwood needed a local farm-wife to
locate — so he could take pictures for a National Geographic spread on covered
bridges.
(*SMILEY SMIRK*)
Stated differently, the overwhelming bulk of the 600,000
so-called “bridges” in America are so little used that the are more often
crossed by dogs, cows, cats and tractors than they are by passenger motorists. They
are essentially no different than local playgrounds and municipal parks. They
have nothing to do with interstate commerce, GDP growth or national public
infrastructure.
* AND THEY ARE - OR AT LEAST SHOULD BE - THE
RESPONSIBILITY OF LOCAL AUTHORITIES!
If they are structurally “deficient” as measured by
engineering standards that is not exactly a mystery to the host village,
township and county governments which choose not to upgrade them. So if Iowa is
content to live with 5,000 bridges — one in five of its 25,000 bridges — that
are deemed structurally deficient by DOT, why is this a national crisis?
* GOOD QUESTION...
Yes, the few thousands of bridges actually used heavily
in commerce and passenger transportation in American do fall into disrepair and
need periodic reinvestment. But the
proof that even this is an overwhelmingly state and local problem is evident in
another list maintained by the DOT. That list would be a rank ordering called
“The Most Travelled Structurally Deficient Bridges, 2013.″ These are the
opposite of the covered bridges of Madison County, but even here there is
a cautionary tale. It seems that of the
100 most heavily traveled bridges in the U.S. by rank order, and which are in
need of serious repair...
(*DRUM ROLL*)
...80% of them are in California!
(*SNORT*)
Moreover, they are overwhelmingly state highway and
municipal road and street bridges located in Los Angeles, Orange County and the
Inland Empire. Stated differently, Governor Moonbeam has not miraculously
solved California endemic fiscal crisis; he’s just neglected the local
infrastructure.
(*DARK CHUCKLE*)
There is no obvious reasons why taxpayers in Indiana or
North Carolina needed to be fixing California’s bridges so that it can continue
to finance its outrageously costly public employee pension system.
* NONE THAT I SEE!
(*GUFFAW*)
And so it goes with the rest of the so-called
infrastructure slate. There is almost nothing there that is truly national in
scope and little that is in a state of "crumble and crisis."
What is crumbling politically is the case for deficit
spending.
At the end of the day, that’s what the infrastructure
brouhaha is all about.
It's just another variation of the misbegotten Keynesian
notion that the state can command economic growth via borrowing or - in the
case of the Federal Government - printing money in order to fuel aggregate
demand.
In fact, however, true economic growth and wealth
generation stems from the supply side of the economy. That is, from the
exertions and productivity of labor and the efficiencies, innovations and
investments generated by entrepreneurs.
And that leads to the real reason for our present stall
speed economy...
Over the last 15 years, there has been a sharp decline in
real net business investment (after depreciation of the existing capital
stock), labor hours utilized by the business economy and net business formation
and entrepreneurial activity.
If Washington really wants to deal with faltering
economic growth it should work on removing the regulatory, tax and welfare
state barriers to the ominous trends shown in the graphs below.
(*NOD*)
Indeed, we do not need any more Federal subsidies for any
category of infrastructure - especially transportation!
If we need more airport capacity or modernization than is
being funded by the $36 billion per year we are already spending, then the 10%
of the population which accounts for 90% of air travel should pay for it in
higher user charges on their tickets.
(*SHRUG*)
Likewise, if the $65 billion currently being spent to
subsidize the capital and operating costs of local mass transit systems is not
enough... then let local taxpayers absorb the burden - not unborn generations
which will inherent the nation’s $18 trillion public debt!
And when it comes to enhancing real economic productivity
and growth, nothing could be more inimical than to pour tens of billions into
hopeless white elephants like Amtrak and the Obama high speed rail boondoggle.
* AMEN...!
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