Tuesday, September 13, 2011

political vent: Federal transportation spending, "stimulus", bike infrastructure, and the Republican Party

Okay, my chance to vent on some political issues right now.

There's been a lot of talk about the federal government, the Tea Party, and spending on pedestrian and cyclist infrastructure. "There's no federal interest" the Tea Partiers will say, and the democrats and their supporters foam at the mouth in return: "what? There's no federal interest in children being able to walk or bike safely to school?"

Yes, that's correct. What's meant here by "federal interest" is that the states have the obligation to take care of their own citizens. However, when there are issues in which a state would be obligated to look out for the citizens of another state, that's a federal interest. So for example if there's an interstate highway going from state A to B to C, and state B were to decide it didn't want to fund repairs, then that would affect states A and C. So the federal government funds that highway.

So the federal government should fund interstate bike paths. But since most bike and pedestrian infrastructure is local, there's no "federal interest" in this local infrastructure. It doesn't mean it doesn't matter, it simply means the states have the responsibility to look after it.

So what about roads? Really what should happen is the federal government should fund only interstate highways, and then charge users of these roads to cover the costs. That's obviously not what happens. What instead happens is the federal government doles out transportation funding to states who find all sorts of justifications to spend it. "Job creation" is a big buzzword. It's while the federal government funded so much road building during the first stimulus program in the Obama administration. "Shovel ready" projects create jobs, right?

Well, not really. Consider the 1930's... Roosevelt... the New Deal. The federal government pumps money into a road. The road builder hires American workers to build the road. He orders equipment like tractors build in American factories. Those factories hire more American workers. Then people use the roads and with more roads there's more demand for cars. The cars are built in American factories, and those factories hire more workers. The gas burned by those cars is pumped from American wells, and refined in US refineries, and these facilities hire more American workers. There's a cascade of jobs, and that's just the first round. There's a further cascade from each of these factories, wells, and refineries, as the equipment they use is built in still more American factories. This is called the "money multiplier effect". If you insert a dollar into the economy, it bounces around many times, and the increase in debt associated with that initial investment is paid back with interest due to all the economic activity which results.

But it's not the 1930's any more. You put $1 into the economy and it's likely across the border pretty quickly. None of those factories are in the US any more. The oil isn't pumped in US. The cars likely aren't built in the US. And workers aren't spending their new income on US-built goods.

Here's a chart related to that I pulled from The Google:

So stimulus doesn't work. Sure, things look good in the short term. If you borrow money you spend more. But the cascade is very limited. There's no exponential expansion of economic activity to pay off the interest on that debt.

Well, increasing spending is good anyway, right? Well, not really. Our problem in the US isn't lack of spending. There's plenty of income. The problem is with how that income is divided. Too many people aren't getting the benefit:

Another random plot from the web:


So there's plenty of income out there. The problem is that income isn't circulating through the economy. It's not creating jobs. Put more money into the economy and it's just going to congregate where the rest does: at the top of the income pyramid.

There's another big problem with auto infrastructure. An analogy I read is it's like getting a puppy for a gift. Only part of the cost is up-front; the real costs are down-stream. You've now got to maintain that roadway or bridge or overpass in perpetuum. That's a future obligation in addition to the obligation associated with the initial loan to build the thing. Building roads and associated infrastructure, because it is maintenance-heavy, is digging the budget into a deeper and deeper hole.

So really the solution is we need to stop focusing on spending, especially on transportation infrastructure consistent with our present infrastructure model. The solution is to change the rules of the game to make it more favorable to create jobs. That means redirecting the tax burden from hiring and business to consumption and spending. You've got to provide a favorable environment for business to create. And you've got to have the human infrastructure in place for business to operate. That means a healthy, well-educated populace which has adequate incentives to go in the sort of professions we need to be internationally competitive: primarily science and engineering. Presently these professions are underpaid relative to finance, law, medicine, and business. Even suburban cops make more, with better benefits, early retirement, than PhD level engineers and scientists in high-tech industries.

So more and more federal funding isn't the answer to anything. To improve the transportation landscape, the solution is simple: encourage people to drive less. And to do that we need to make driving, cost-wise and convenience-wise, less attractive. If we do that, there will naturally be more demand for local investment in bike, pedestrian, and public transportation infrastructure. The federal government need not be involved.

1 comment:

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