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Infrastructure Spending Won't Make America Great Again

February 6, 2018 in Economics

By Christopher Westley


By: Christopher Westley

This past Tuesday afternoon, I was speaking with a reporter who was interested in the positive effects of infrastructure spending that occurred in the form of fiscal “stimulus” in my part of the country, back during the dark days of the Great Recession, around 2009 and 2010. How did this help our region, he wanted to know? 

My answer: It didn’t help very much, and that if it did, then (a) it didn’t matter because the growth was not sustainable — it would have stopped when infrastructure spending stopped; (b) you would have to balance any seen positive economic activity with unseen, decreased economic activity on the part real people coerced to finance the stimulus; (c) it may have delayed the correction to the extent that it allowed business owners and workers to put off making tough choices based on market signals: and (d) you would have to believe economic growth is something that occurs due to infrastructure spending as opposed to the development of property rights institutions, saving, time preference, the specialization and division of labor, and so on.

Still, I wondered: Why the concern about infrastructure spending? Then I went about my day, ignoring Trump’s State of the Union, like a normal person. It was only this morning that I read about his infrastructure spending proposal:

Tonight I’m calling on Congress to produce a bill that generates at least $1.5 trillion for the new infrastructure investment that our country so desperately needs. Every federal dollar should be leveraged by partnering with state and local governments, and where appropriate, tapping into private sector investment, to permanently fix the infrastructure deficit. And we can do it.

Then it made sense. Infrastructure spending and its effects on the economy were pre-speech talking points, as were the Keynesian biases that this spending tempered the severity of the Great Recession, and would likely provide an economic boost in the future. 

The assumption is current levels of public infrastructure spending are deficient, and that as a result, highways, bridges, airports, trains, and waterways are today dilapidated, dirty, and dangerous. But if this were true, the more accurate conclusion would be that public infrastructure spending is among the biggest scams of the century. 

Rest assured, it’s not true. The fact is that federal, state, and local spending on transportation infrastructure is well into the tens of billions each month. As the chart below shows, this spending increased …read more


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