Rich Karlgaard of Forbes highlights President-elect Donald Trump’s campaign promise of major increases in infrastructure spending.
President-elect Trump wants to put $1 trillion or so of private but taxpayer-subsidized money into large construction and repair projects–bridges, highways, tunnels, railways and airports. Is this a smart use of funds?
This is where it gets interesting. Watch the acrobatics of both the left and the right. Paul Krugman, the liberal New York Times columnist, was 100% for massive government spending under President Obama. In 2014 Krugman wrote, “All the evidence, then, points to substantial positive short-run effects from the Obama stimulus. And there were surely long-term benefits, too: big investments in everything from green energy to electronic medical records.” Only one thing was wrong with Obama’s stimulus, wrote Krugman. There wasn’t enough of it.
What does Krugman say about a Trump stimulus? “For a time, at least, a Trump administration might actually end up doing the right thing for the wrong reasons.” But the effects will only be short-term, sniffs Krugman. “In the longer run Trumpism will be a very bad thing for the economy.”
Tyler Cowen, a conservative economist at George Mason University, is also skeptical. Government stimulus produces a short-term boost to employment and GDP. The bad effects show up later: bridges to nowhere, bullet trains to the boonies and misallocated capital that could otherwise have been available for the private sector. …
… But the analyses of lefty Krugman and righty Cowen, while sadly true at the macroeconomic level, are incomplete. They do not account for good infrastructure spending versus bad spending. (Example: Road maintenance is good; bullet trains to the boonies are just dumb.) And within good versus bad is another question that needs asking: Why are some big construction projects finished on time and under budget, while others drag on and pile up costs?
Two of Trump’s economic advisors, academic Peter Navarro and investment banker Wilbur Ross, blame regulation and its many burdens. There’s a lot to be said for this. The Golden Gate Bridge was started and completed in just over four years. More recently, a widening of an access road to the bridge took seven years. Environmental studies, court challenges, countersuits and protests often take years to resolve prior to any ground breaking.
And then there’s the age-old challenge of political patronage and whether the architects and contractors of a major project are the best ones available or the dull-witted cousins of a donor. Is the project mission clear? Is the budget absolute, or will it allow sneaky creep?
Trump advisor and tech billionaire Peter Thiel, who leans libertarian but isn’t reflexively antigovernment, asks another key question regarding infrastructure: Why was the U.S. government good at it in the past but no longer? America mobilized and won World War II in three and a half years. We built the atom bomb. We caught up to and surpassed the Soviet Union in rocketry. Then 8 years, 1 month and 26 days after John F. Kennedy said we would, we put a man on the moon.
The miracle of Stanford’s new football stadium is proof that Americans can do construction right–on schedule and within or under budget. Ah, but with two “yugely” important caveats: (1) Silicon Valley billionaire real estate developer John Arrillaga built the new Stanford Stadium, and (2) the Palo Alto City Council did not have jurisdiction. All private, in other words.