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Here's what's wrong with the economy, and how to fix it...

Stashed in: Economics!, @hblodget, policy

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Solutions are always good. Or at the very least, they're better than more problems.

Even Henry Blodget advocates more short-term spending on infrastructure until the economy is on more stable ground, and then start to pay off the debt.

That's a sensible solution.

It's too bad the Republicans in Congress won't listen to a reasonable Republican like Blodget.

I wonder what chance Obama has if they won't even listen to reasonable Republicans.

Japan has proven that infrastructure spending for it's own sake does not have a net positive effect. While we should definitely be spending money to fix and maintain our existing, crumbling structure, investment into additional infrastructure needs to have clear economic benefit... Essentially it needs to make a profit in increased tax revenue.

There is an additional problem with the fact that new infrastructure spending has always served to open up and exploit new markets. In this country, freeways pretty much go everywhere, even if they're too narrow or in poor repair. There aren't any markets which could be opened up by new shipping infrastructure, we've managed to jam a barge lane into any body of water which can take it. IMO, air doesn't count as infrastructure since it's essentially a luxury.

We _could_ build a new national rail network, but there isn't any area new that isn't already served by roads, so it would likely never, ever pay for itself (even tho I really really really would prefer rail over air!!!), and it wouldn't even add efficiency to commerce since it's far cheaper to ship goods thru the Panama canal than rail could _ever_ hope to cost. The only value to rail is to make personal mobility marginally cheaper for lower and middle class people, but not much a net aggregate economic benefit.

What's left?

A national electrical grid? That could add some efficiency to the economy so it might be worth it but it doesn't add any new markets.

A national hydrocarbon distribution system? that's one that might show some promise, since we could more easily exploit our vast hydrocarbon resources instead of buying oil from dictators, ayatollahs and salafists.

A national desalination/irrigation system? So we're pretty much left with geoengineering here. Re-greening Nevada and the rest of the West would certainly open up those regions to settlement, not to mention restoring the agricultural output of the high Plains as the Oglala Aquifer runs dry. There is certainly economic benefit, particularly in the era of climate change, to an agricultural economy no longer dependent upon rainfall. The downside to this one is most people would consider it batshit insane.

Number 1 is high speed Internet. It's something everyone should have and it costs way too much right now.

Then, rebuild our crumbling bridges, dams, levees, ports, water and sewer lines, railways, roads, and public transit. There's so much we can do here.

I do love the idea of a modern smart electrical grid, and a hydrocarbon distribution system.

I forgot about high speed internet. However, I think we'd be at the margin of diminishing returns if we did something like the Rural Electrification Program for internet access. Most of the US population has access to something that doesn't completely suck.

Rebuilding crumbling infrastructure is absolutely necessary, but the overall ROI would be low, more of an unquantifiable lack of negative. What Japan's stagnation has proven, despite massive infrastructure spending, is that this type of spending does not add net positive effects to a sophisticated economy. There is little new economic activity resulting from the rebuilt infrastructure.

The point here is that infrastructure spending for it's own sake isn't going to provide any increase in gross value for our economy, unless the spending is a legitimate investment with determinable returns, like massively increased efficiency or the creation of new markets. Aside from a smart energy grid or preemptively solving the coming fresh water crisis, there isn't a whole lot to be done which could accomplish that.

I still think something like gigabit fiber network would be a game changer for most towns and cities.

Ditto blanketing towns and cities with wifi or WiMAX. We're nowhere near saturation.

Even if ROI of bridges, roads, railways, and public transit is low, it's likely necessary to keep the engines of the economy going. We can't have jobs if we can't get to the jobs.

Agreed that no spending should be for its own sake but there are reasons besides straight ROI to invest.

Of course there are reasons beyond ROI, it's just that ROI is the only measure that can quantify a net gain for an economy. We mostly have all the roads we need, they simply need repaired and/or widened. We have all of the interior shipping lanes we're ever going to be able to support, I don't think we're going to get any benefit from building a canal to Denver. And as much as I would like national high speed rail, roads and jets pretty much get the job done.

Our infrastructure is already, for the most part, comprehensive and sophisticated (tho it is in dire need of repair).

We would probably gain more of an economic benefit by building infrastructure in Mexico or elsewhere in Latin America where such investment would build new markets.

So I think we're in agreement.

1. Repair our infrastructure.

2. Invest in places that build new markets for our companies to sell their goods and services.

3. Profit!

ROI is a short-term measurement. I personally don't give a crap about easy-to-measure stuff like repairing roads -- especially in cities that have lost residents -- compared to hard-to-measure super impactful stuff like funding CRISPR-Cas9 which EVEN THE LEAD SCIENTIST thought would not have an economic impact. And widening roads actually doesn't have the ROI that people think anecdotally... read "Traffic" by Tom Vanderbilt to find out why.

If it were easy to figure out where to deploy capital, any idiot could do it.

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