by Mario Rizzo
The incessant discussion and demand for job-creating infrastructure spending on the part of the news media, Democratic politicians, and some unreconstructed Keynesian economists is both frustrating and pathetic. It is frustrating because how many times can people repeat the same thing without listening to the objections? It is pathetic because the level of understanding is akin to pre-Newtonian physics.
The case for infrastructure spending must be made on the value of what is to be built or repaired and the efficiency with which that is done, not on the number of jobs that may be created. Frederic Bastiat made this point in the middle of the nineteenth century.
The Obama administration is making wild estimates of how many jobs a $60 billion expenditure on infrastructure spending (that is, construction-union largesse) will create. “The median estimate [of economists surveyed by Bloomberg] was 275,000 jobs in 2012 and 13,000 jobs in 2013 for a total of 288,000 jobs — far fewer than the 2 million claimed by the president.” This is about $208,000 per job.
But all of these guesstimates are beside the point. In order to have a recovery we must have sustainable lines of spending, not one-shot spending. Furthermore, the problem with infra-structure spending is that there are few “shovel-ready” projects. Local governments must get their acts together and then proposals must generally clear lengthy environmental impact assessments. Local interest groups will launch objections (especially in places like New York City). Minority groups will want their “fair-share” of the spending projects.
Then, of course, thanks to the Davis-Bacon Act, union labor which keeps out the poor, but able, must be used – or, at least, union-prevailing and above-market wages must be paid. (Herbert Hoover thought during the Great Depression that it was good to pay high wages to keep total demand from falling. His disciple FDR agreed.)
So what we are going to get, under the guise of making jobs, is a total disregard for the efficiency with which infrastructure is created or repaired. Bridges to nowhere with political support will be built with the cost over-runs. Even the normal pressures to introduce some sanity into the spending projects will be absent because of the political exigencies to get the projects up and running to save the Obama presidency.
On the other hand, if you were a private entrepreneur thinking about investment projects, how confident would you be in the present tax and regulatory climate? I venture the guess – and truly it is only a guess – that the more this administration gets done the less confident entrepreneurs will become. The confidence multiplier may be negative.
The infrastructure-jobs mantra by the Obama administration may simply be its death rattle.