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Cornell University economist Robert Frank comes back from a recent trip to Berlin, "where the...

Cornell University economist Robert Frank comes back from a recent trip to Berlin, "where the entire city seemed under construction," and urges the government to follow the German example and invest in infrastructure." While the Germans "yield to no one in their distaste for indebtedness...they’ve made investments whose future benefits will far outweigh repayment costs," write Frank. And the "undeniable side effect has been to bolster employment substantially in the short run."
Comments (20)
  • Forget about it.
    We cannot do that in the US.

     

    95% of infrastructure projects end up going to unions. Here in the US it takes 14 months to rebuild one overpass above a highway. In other parts of the world they construct entire intercontinental roadways over the course of one year.

     

    The only industries that would have any incentive to do the work under budget and on time are private industries and they would never be given the job.

     

    We have been talking about infrastructure spending for years and years now and almost nothing gets done.

     

    Move along folks. Nothing to see here.
    7 Jul 2013, 09:08 AM Reply Like
  • You do not know what you are talking about.

     

    "95% of infrastructure projects end up going to unions."

     

    What do you mean? Unions do not contract to build infrastructure projects. Perhaps you mean that the work will be performed by 95% unionized workers. That may be correct, but that percentage is the same or higher for Germany and Japan where they are able to do a pretty good job on infrastructure.

     

    In fact places that do not allow their workers to unionize (e.g. Saudi Arabia) are known for doing very shoddy work.

     

    "The only industries that would have any incentive to do the work under budget and on time are private industries and they would never be given the job."

     

    Private industries are ALWAYS given the job. Any time the government builds something, the government pays some private company to do it. There are some exceptions (the US Corps of Engineers build some things themselves) but they are rare. All the highways, bridges etc. are all built by private construction companies.

     

    Of course there is a lot of corruption in construction I will not deny that. But most of the corruption is caused by the "private industries" you worship and their politician friends. So your blanket contempt of unions and worshiping "private industries" is pretty dumb.

     

    The answer is not as easy. The answer is that we have to be responsible and keep a close watch on government, and that is the only way to stamp out corruption. It is hard work and much harder than watching fox news and bitching about unions but there you have it.
    7 Jul 2013, 04:20 PM Reply Like
  • Investments like new tappan zee bridge where we'll see the toll go from $5 to $15 in 4 years?

     

    Investments like in Baltimore where they'll build new water treatment plant and new water pipes but customers will see their water rates go up 41.7% in 2 years?

     

    The days of privately funded projects like the Erie Canal, where the cost to move a ton of flour went from $100 to $5 and the time it took from 31 days to just 5 are over. ...and after the bond holders of the Erie were paid back, the tolls were eliminated.
    7 Jul 2013, 09:11 AM Reply Like
  • Fat Chance...

     

    Congress and the President can't agree on where to have lunch, let alone on massive infrastructure projects. Besides, the populous never wants to pay for anything that may be beneficial for the future - even if it makes long term economic sense. Ever notice how many school funding projects get voted down? Yet everyone still complains about the educational system. I realize that one thing doesn't directly correlate to another, but I think you get my point.

     

    It's a "what can I get for me today" society and it will be until bridges start collapsing and dams start failing.
    7 Jul 2013, 09:39 AM Reply Like
  • They've spent more money on education yet results are weaker. It's not the amount of money that matters, it's about parenting and students who want to learn, teachers who teach effectively. American youth are the best video game players in the world and know all the celebs' every move.
    7 Jul 2013, 10:17 AM Reply Like
  • > American youth are the best video game players in the world

     

    Nope, the Asians beat Americans at that too. :-)

     

    http://bit.ly/12kkLEo
    7 Jul 2013, 10:35 AM Reply Like
  • You missed the point... as I knew someone would. :(
    7 Jul 2013, 03:59 PM Reply Like
  • If we did not spend $20B on alt energy firms (most of which are either in bankruptcy or created very few jobs) or hundreds of billions to delay firings at the state level on behalf of the public employee unions (most of which got laid off anyway a few years later due to budget distress at the state govt level) in the $800B stimulus package in 2009......we would have money to invest in infrastructure now.......last thing we need is another boondoggle from this administration around "shovel ready" jobs that never materialize.
    7 Jul 2013, 10:12 AM Reply Like
  • Fact checks:

     

    > spend $20B on alt energy firms (most of which are either in
    > bankruptcy or created very few jobs)

     

    You mean 11% (not "most"), accounting for only 4% of the money at risk in these loan (not spending) programs:
    http://bit.ly/14VSGq0

     

    > the $800B stimulus package

     

    To be more specific and less hyperbolic:

     

    Most of it went to tax cuts -- which solve EVERYTHING right??
    http://bit.ly/14VSGq2

     

    Less than $100B went to transportation/infrast...
    Less than $60B went to state and local governments.
    http://bit.ly/14VSGq3

     

    Facts! They're what's for dinner! :-)
    7 Jul 2013, 10:49 AM Reply Like
  • You're quoting from the hyper-partisan Annenberg Foundation, which has about as much credibility as Kermit the Frog to anyone who pays attention to these things and isn't on the left. There are lies, damn lies, and statistics, right?

     

    Out of the 63 companies that were funded, five out of those 63 - a123, Abound Solar, Beacon Power, Ener1 and most famously and spectacularly Solyndra - are defunct, and the "very few jobs" claim, while a broad claim I'll leave to Mr. Jensen, certainly seems to be valid. I'm unaware of any of these companies thriving. Then there is Fisker, another spectacular failure in a related field. 5 / 63 = 8% and I suspect that this number will rise as time passes. Nevada Geothermal, which received $98m in DOE loans, released an internal audit showing $98m in net losses and debt.

     

    http://cnnmon.ie/12kp1no

     

    This, as I indicated, is Mr. Jensen's argument, and I'll leave it up to him as he is quite capable. But I couldn't let your falsehoods and shoddy analysis stand because "boondoggle" is the exact word that should be used to describe these ventures.

     

    Facts! They're what's for dinner! :-)
    7 Jul 2013, 11:23 AM Reply Like
  • > There are lies, damn lies, and statistics, right?

     

    You say this, then you support MY case even more by quoting an even *lower* failure rate than I did? Um...I guess we agree, huh "Kermit"? :-)

     

    So is it your 8% failure rate, or my 11% failure rate? Feel free to clarify which is correct and why.

     

    And is it my 4% money at risk or your [nothing]?

     

    Let's try our hand at math:

     

    The DOE Loan Programs Office lists ~$34B in loans. Let's try that as our total (feel free to suggest a different one, clearly this is sort of apples and oranges because there are only 30+ companies listed here).
    http://1.usa.gov/16XTRqh

     

    Per your article from those scandalously left-leaning hacks at CNN:
    $132M lost by A123 (out of a $250M loan)
    $70M lost by Abound Solar (out of a $400M loan)
    $39M lost by Beacon Power (out of a $43M loan)
    $119M lost by Ener1
    $535M lost by Solyndra
    $200M lost by Fisker (out of a $530M loan)
    $98M lost by Nevada Geothermal

     

    So, rounding up, let's say ~$1.2B in losses.

     

    1.2B / 34B = ~3.6% of money-at-risk lost.

     

    Something is a little off here because I don't see A123 listed on the DOE's list, maybe it was a under a different program? But this should be pretty close? Please feel free to contribute a similar breakdown with your sources.

     

    Also note that I purposely didn't comment on the "very few jobs" aspect, because there is probably a *lot* of truth there -- however my personal opinion is that the purpose of these kinds of loan guarantees isn't so much to create jobs as it is to bolster the adoption of new technologies while they struggle to compete with more developed alternatives.

     

    But per the DOE's numbers, it's more than $575K per job -- ouch! If you want to take that as one more strike against the stimulus for not directly creating jobs, I think that's a /very/ fair complaint.

     

    Regardless, the investment failure rate is still laughably low (compared to the private sector, for example), and the loss of money at risk is even lower.

     

    Will both go higher as time marches on? Almost certainly. But let's let it get above Bain Capital's (one of the best in the biz, no?) own failure rate of ~20% before we freak out, shall we? :-)

     

    (I know, I know, many of you will freak out regardless...)
    7 Jul 2013, 12:24 PM Reply Like
  • "If we did not spend $20B on alt energy firms ..."

     

    But thank GOODNESS the $41B we taxpayers spend annually on subsidizing the energy of the 1850s (oil and natural gas) is so well spent: padding the coffers of some of the most cash-rich companies in the world in these long-ago mature industries. And to think, we're helping them along in ensuring that humanity enjoys a catastrophic climate here in the next few decades. What a nice win-win-win for us!

     

    I better go down another shot of Uncle Rupert's Fair and Balanced Kool-aid. Maybe it will make sense to me then.
    10 Jul 2013, 10:20 AM Reply Like
  • Isn't it amazing what a competent government can do. In the USA we would simply waste the money by giving it to the unions to buy more votes.

     

    As Bret stated above, didn't the current administration do this already? Where are the results? Hint, hint; there aren't any.
    7 Jul 2013, 10:21 AM Reply Like
  • > Where are the results? Hint, hint; there aren't any.

     

    Sort of. Except, no, not really.

     

    Most studies indicate it helped at least somewhat. Many of the study-ers indicate that maybe it would have done more if it was bigger, and/or if it was allocated differently.

     

    But the general consensus is that things would have been worse without it.

     

    http://wapo.st/14VT0oO

     

    Facts! They're what's for dinner! :-)
    7 Jul 2013, 10:52 AM Reply Like
  • In my home town, "infrastructure projects" means repaving the same stretch of road that was repaved six months ago.
    7 Jul 2013, 10:25 AM Reply Like
  • Unless Robert Frank has political connections, then this idea of investing in infrastructure (which has been tossed about before) is only a "pipe" dream. (pun intended)

     

    If the US has billions to "give" to other countries, it long past time that the US invested in itself.

     

    There is enough bridge and road work in Western NY to keep construction crews busy for years. It is so bad that bridges are simply closed rather than repaired.

     

    Perhaps this Cornell economist could start making noise in Albany. Governor Cuomo would love to call "Invest in Infrastructure" his idea. Just in time for 2016, you know.
    7 Jul 2013, 10:26 AM Reply Like
  • All great comments. Just an indication that we would rather fight
    with each other(read that Washington,DC) than take care of what
    we all know is needed. Sad state of affairs.
    7 Jul 2013, 10:32 AM Reply Like
  • The City of Berlin has been bankrupt for years. The big CRE lenders in Germany have either failed or been nationalized. It's easy to spend money recklessly, but ultimately it's the taxpayers who gets the bill.
    7 Jul 2013, 10:56 AM Reply Like
  • I would venture that Berlin "appears" like the entire city is under construction because every construction project there takes "forever".

     

    It would not surprise me if their major projects take 3 times longer, though I haven't seen any statistics comparing countries on this.

     

    Don't forget that beyond Sundays, holidays, and unions (which are net positive IMO], Germany also has its quiet hours. I'm all for people living exactly how they want and quiet hours are fine with me, but I don't believe they do anything to speed construction.
    7 Jul 2013, 01:46 PM Reply Like
  • I am spending the summer in Berlin. With its extensive and varied electric train network (street level, below and above ground, plus intercity) and the ubiquitous bicycles (that have their own lanes and traffic lights), Berlin is quieter, less polluted and less traffic snarled than the typical US city and certainly the city i live in Salvador Brazil where the alternatives are autos, taxis or crowded, dirty, expensive and often dangerous buses. The EnergieWende may be expensive but the move to green energy will free Germany from dependence on Russian and Middle Eastern energy. What will the US do when the fracking revolution ends? Hats off to the Germans.
    7 Jul 2013, 04:40 PM Reply Like
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