What If We Invested $680 Billion in Infrastructure?

What if for one year — just one year — we allocated as much money for infrastructure as we did for defense?

What if? Well, this year, that would mean devoting $680 billion to investments in infrastructure. That’s more than $200 billion more than Oberstar’s entire proposed transportation reauthorization bill, which was itself a large increase over the previous transportation law. There’s probably no way we could spend all that money at once, but it would nicely capitalize an infrastructure bank, and the promise of a steady flow of funds would get states thinking about real, long-term investments.

With that kind of money you could entirely build out a national network of true high-speed rail. One year’s worth of defense spending gets you that. Which makes one wonder: where are all the economists, wringing their hands over cost-benefit analyses of these defense expenditures? Does anyone doubt that the net benefit of $100 billion spent on high-speed rail is easily higher than that for the last $100 billion spent on defense? Have a look at this if you’re unsure.

And while the gains to new investments in infrastructure (and not just in transportation) would be large, it isn’t as though we lack critical needs. What was the cost, human and economic, of the I-35 bridge collapse? Of the Metro crash and resulting limitations on service? Of the Bay Bridge shutdown? And of course, investments in infrastructure constitute positive contributions to the economy, which ultimately strengthen our ability to direct resources toward defense. Aimless defense spending, on the other hand, may well make us poorer and less secure.

I don’t get it. I’ll never get it.

Comments

[Mad Hedge F...:]

mns I know what keeps Obama awake at night. Let’s say we spend our $2 trillion in stimulus and get a couple of quarters of weak growth. Then once the effects of the stimulus wear off, we slip back into a deep recession, setting up a classic “W.” Unemployment never does stop climbing. This happened to Roosevelt in the thirties. So congress passes another $2 trillion reflationary budget. Everybody gets wonderful new mass transit upgrades, alternative energy infrastructure, and bridges to nowhere. But with $4 trillion in spending packed into two years, inflation really takes off. The bond market collapses, the dollar tanks big time, gold goes ballistic to $5,000, and silver explodes to $50. Ben Bernanke has no choice but to engineer an interest rate spike, taking the Fed funds rate up to a Volkeresque 18%. Housing, having never recovered, drops by half again. This all happens in the 2012 election year. Obama is burned in effigy, a Mormon is elected president, and the Republicans, reinvigorated by new leadership, retake both houses of congress. We invade Iran. Crude hits $500. This is not exactly a low probability scenario. Remember Jimmy Carter? This is why junk bond yields are still stubbornly high at 12.5%, and credit default swaps live at lofty levels. Are the equity markets pricing in this possibility? No chance. The risk of Armageddon is still out there. Personally, I give it a one in three chance. Pass the Xanax.

Nov 04 06:04 AM

[Dave Wrixon:]

But he is not talking new money, he is just talking about redirecting existing expenditure. The infrastructure argument makes sense. The defense argument does not. Americas defense budgets have alway been more about cushioning nests than anything else.


On Nov 04 06:04 AM Mad Hedge Fund Trader wrote:

> mns I know what keeps Obama awake at night. Let’s say we spend our
> $2 trillion in stimulus and get a couple of quarters of weak growth.
> Then once the effects of the stimulus wear off, we slip back into
> a deep recession, setting up a classic “W.” Unemployment never does
> stop climbing. This happened to Roosevelt in the thirties. So congress
> passes another $2 trillion reflationary budget. Everybody gets wonderful
> new mass transit upgrades, alternative energy infrastructure, and
> bridges to nowhere. But with $4 trillion in spending packed into
> two years, inflation really takes off. The bond market collapses,
> the dollar tanks big time, gold goes ballistic to $5,000, and silver
> explodes to $50. Ben Bernanke has no choice but to engineer an interest
> rate spike, taking the Fed funds rate up to a Volkeresque 18%. Housing,
> having never recovered, drops by half again. This all happens in
> the 2012 election year. Obama is burned in effigy, a Mormon is elected
> president, and the Republicans, reinvigorated by new leadership,
> retake both houses of congress. We invade Iran. Crude hits $500.
> This is not exactly a low probability scenario. Remember Jimmy Carter?
> This is why junk bond yields are still stubbornly high at 12.5%,
> and credit default swaps live at lofty levels. Are the equity markets
> pricing in this possibility? No chance. The risk of Armageddon is
> still out there. Personally, I give it a one in three chance. Pass
> the Xanax.

Nov 04 07:15 AM

[john s. gordon:]

the author's suggestion (surely he is aware) is unreal.
high military expenditure has been a sacred cow since 1981 and even more so since 2001.
d.d.eisenhower warned us about the m.i. complex.
> jack

Nov 04 09:02 AM

[Pat C:]

We should focus on the electrical grid and alternative energy. Over the longer term at least this has the possibility of some pay back. We should cut back on defense, after all we spend twice what the next few biggest nations spend. What's our risk? Moreover, much of the defense is indirectly related to the instability of energy.

Nov 04 09:17 AM

[receipt:]

Great article! Why is it that neither political party speaks to this debilitating malinvestment of national resources? Methinks they are just both wings of the "vested interests" party which relies upon those existing interests for campaign funds while the middle class continues to trudge off to work without complaint or ideas of how to redirect our collective course.

If the money became available from the "defense" budget, I'd suggest it be used to radically transform our pattern of energy usage in the country. Begin with a creation/buildout of natural gas refueling stations along the entire interstate highway network. Require the U.S. Postal Service with its 200,000 vehicles to use natural gas instead of foreign oil and watch as the newly created American jobs reduce unemployment, help reflate the housing market, and increase real incomes--helping to stop the coming commerical real estate crash in its tracks!

An ancillary benefit would be we would no longer see such excruciating international pressure on the dollar and as it was revalued upward, so would our place as the reserve currency be reinforced.

And finally, some of the money from the defense budget would be better utilized mounting an Apollo Moon Landing sytle project to harness the power of nuclear fusion. It's green, virtually inexhaustable, and makes the natural gas bridge a bridge to somewhere instead of nowhere.

Nov 04 10:03 AM

[INOROUT:]

THE QUESTION SHOULD BE " WHAT IF WE SPENT THE ENTIRE STIMULUS PACKAGE ON INFRASTRUCTURE INSTEAD OF ONLY 5 % AND 95 % ON PORK.

Nov 04 11:22 AM

[Valley Boy:]

We need to reduce spending on defense and infrastructure and use the savings to pay down our national debt. There is too much waste in defense spending on weapons we will never use and much of the infrastructure spending turned out to be on projects which were not "shovel ready."

Nov 04 11:51 AM