The Case For Infrastructure Investment

NYT (via Ritholtz):

The same logic applies to overdue infrastructure investments. Yes, paying for them requires more government debt. And while austerity advocates fret that such projects will impoverish our grandchildren, they concede that the investments can’t be postponed indefinitely, and that they’ll become much more expensive the longer we wait.

Our lingering economic doldrums reinforce the case. Many skilled people who can do these jobs are unemployed today. If we wait, we’ll have to bid them away from other useful work. And with much of the world still in a downturn, the required materials are cheap. If we wait, they’ll become more costly. Annual interest rates on 10-year Treasury notes have fallen below 1.5 percent. Those rates will also be higher if we wait. So it’s actually our failure to undertake these projects that’s saddling our grandchildren with gratuitously larger debt.

By itself, the savings from accelerating infrastructure repairs won’t be enough to balance government budgets. But debt is a long-run problem, and as the budget surpluses of the late 1990s remind us, the American economy at full employment can generate more than enough revenue to pay the government’s bills.

The need for infrastructure spending is obvious, but I think we ought to consider higher taxes to pay for it.  The wealthy in this country have gotten an unprecedented deal for the past 30 years, and it is about time that the pendulum swings back the other way for a while.  The high end earners have reaped more and more of the benefits of worker productivity over previous decades, and that fact has been ruinous to overall growth.  Now, more revenue from those who have done the best, combined with much needed investment in infrastructure, provides us with a win-win situation.  The only possible good news that can come from a Republican victory in the fall would be that they will finally have to increase government spending or destroy their party's future.  My guess is they'll become born-again Keynesians if they come into power.  Unfortunately, they'll probably pick the worst ways to stimulate the economy, like tax cuts for the super wealthy.