Wednesday, August 11, 2010

Infrastructure rehab that leads to recovery

Today's market reaction to yesterday's Fed action was emphatic. Yesterday's post was not nearly as contrarian as was intended. Here's an idea. Why don't we try investing in future productivity rather than investing in the status quo. Fed Chairman Bernanke and the Fed Governors may not have seen the need to take yesterday's stance if the Administration and Congress were confronting and investing in infrastructure needs.

Bill Gross, PIMCO's bond master, favors a sizeable government backed infrastructure development program that would create jobs, stimulate business investment, and address necessities for future business growth. No one would ever mistake Gross for a big government solution liberal. He espouses free markets, limited government intervention, and taxation policies that support private investment, not government regulation. Yet today, he has stepped out of character to promote a plan that brings to mind FDR's WPA.

We can see all around us roads and bridges that need an upgrade. We can envision a rail system that is energy efficient, high speed, and linked to major distribution and transportation hubs. We can imagine airports revamped and runways rebuilt and expanded. We can't see the crumbling water and sewer systems in many of our cities, but every hundred years or so major investment is required. Our big dams may look formidable from afar, not so when seen close up say experts.

These infrastructure needs must eventually be addressed and there is no better time than now. Stopgap measures like the Fed's liquidity exercise, or propping up uneconomic and unsustainable government employee contracts, or repeated extensions of unemployment benefits, yes these may be necessary short term measures but they do nothing to develop structural changes that are required to maintain our standard of living(why not go for it and say enhance our quality of life), and build global competitiveness.

The $787 billion Recovery Act of February 2009 was promoted in a way that suggested infrastructure development as a major component. In fact no more than 15% of the money focused on that need, the effort has been diffuse, and its implementation has been so caught up in bureacratic requirements that pointing to any substantive accomplishment is hardly possible.

Today, a singular focus on rebuilding the basics will address both near term and long term needs. The last comprehensive investment was Eisenhower's interstate road system in the 1950's. Now is the time to get serious again.


Anonymous bobby from 37th said...

Did you read that the $26 billion allotted by Congress the other day to fund state teachers and workers salaries included a cut in the food stamp program to fund it. How perverse is that.

12:00 AM  

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