Tuesday, March 7, 2017

Here We Go with Infrastructure Again

While economists have mixed views about the value of infrastructure spending, Donald Trump said the following in his recent address to a joint session of Congress:

To launch our national rebuilding, I will be asking the Congress to approve legislation that produces a $1 trillion investment in the infrastructure of the United States—financed through both public and private capital—creating millions of new jobs. This effort will be guided by two core principles: Buy American, and hire American. We’ve already seen this in action with Trump’s executive action on the Dakota pipeline. It stated that the pipes have to be American-made.

  • Do you agree with the statement that whenever government overrides the wishes of the market, it is not producing; it is destroying?
  • Are we really supposed to believe that Trump knows better how to transport pipe than the actual people who transport pipe?
  • What do you think of Pres. Trump's "Buy American & Hire American" agenda?
  • Should infrastructure construction be left to the private sector?
  • To what extent will government spending on infrastructure "crowd-out" the private sector? (Crowding out is a situation where personal consumption of goods and services and investments by business are reduced because of increases in government spending and deficit financing sucking up available financial resources and raising interest rates.)
To help prepare you for this week's discussion, here are some articles:

1 comment:

  1. 1. Why are the wishes of the market the end-all be-all? There is a market for crack cocaine and PCP, yet we as a society choose to have the government override the wishes of this market. The argument here is that we are doing the “greater good”. The same could be said for infrastructure spending. However, I’d include some caveats. One of the papers rightfully described some of the problems with infrastructure spending: that local politicians are using federal funds and hence have little inclination to spend wisely, that large projects can often take the place of multiple, more useful small projects, large cost overruns, and misestimating demand. Making better decisions by protecting against misspending and misallocations would be necessary for the public to get maximum benefit.

    2. Clearly, Trump does not know how to transport pipe better than the actual people who transport pipe. This is outside his area of expertise. Companies interested in building the pipeline, made up of individuals who have a better grasp of what the final pipeline would be, have stated that the pipeline would be about 75 percent U.S. steel. Trump doesn’t have skin in this game. The companies who plan on paying for and using the pipeline do. I wonder how they are going to feel about having to jump through extra hoops and paying more for their pipeline.

    3. I don’t actually have a problem with the idea of buying and hiring American. However, this assumes that the end user (me), hasn’t paid too much extra for a similar quality product. It also assumes that I am not being forced to buy and hire American. It should be my choice to buy American. My feelings do change if we are talking about companies and legislating their hiring and buying. I don’t know if I have exactly thought about why I feel this way, but a lot of it involves their ability to advantage of the infrastructure and business environment of the U.S.

    4. I do think infrastructure construction should be left to the private sector as long as there is considerable oversight, and it doesn’t interfere with national security. KBR was criticized widely for taking advantage of the second U.S. invasion of Iraq. However, consider that they were in-country and American. They were in a position to outcompete their competitors based on those facts, especially considering that many contracts were time sensitive. That said, how they got the jump on their competitors might be an area of debate. The bottom line is that if you are using taxpayer dollars, you should be serving the taxpayer to the best of your ability, not to pad your pockets. Something like a fiduciary relationship where there shouldn’t be conflicts of interests, the fiduciary must not profit in a manner the principal (the taxpayers) is unaware of, and the punishments are greater for violation of this trust. Unfortunately, for private companies whose sole existence is to profit, there may be a systematic conflict of interest.

    5. I guess my question is in what areas should the government have a monopoly? Should there be private armies? Should there be private police? Should we have private prisons? Should there be private railroads and highways? And if so, why or why not?

    My primary concern with public funds is the ridiculous mismanagement for political gain of those funds. Public works projects can and do benefit the public greatly, but some projects can only be charitably described as being unessential. Such misuse includes $120 million for tanks the Army didn’t want (and actually asked for the money to spent in ways that better benefited service members), a billion dollars for a destroyer the Navy never requested, $223 million earmarked for a bridge to an island of about 50 people, $6,000 for a report on how to purchase Worcestershire sauce, and, what’s worse, the Citizens Against Government Waste Pig Book summary of earmarks shows that these sorts of expenditures have gone up by 17.1 percent since 2015.