What’s the Logic of a $1 Trillion Infrastructure Effort During a Historic Labor Shortage?

Like many Americans, I’m concerned and put off by the size and goals of President Biden’s infrastructure package. Even the scaled-down package is unnecessary. Part of the problem is the timing of this massive spending bill. Such packages are often introduced at a time when unemployment is high and people can’t find jobs, currently, that is not the case. We certainly do not need to stimulate demand at a time suppliers are suffering huge supply chain disruptions.

While many people and politicians see government spending on infrastructure as a job creator and a silver bullet for our ailing economy I would like to raise a word of caution, things are not that simple. Several reasons why the timing of this bill is horrible are staring us in the face, the most notable is that currently, no shortage of jobs exists. In fact, employers are having difficulty finding workers due to the fact many people have dropped out of the workforce and lost interest in returning to work in the current era of “covid-lite.”

People are ignoring that a great deal of money already in the pipeline for states and local governments has yet to be spent. Much of this money could be used for infrastructure is being sent to governments based on a “use it or lose it” system of distribution.  Politicians often view this as “free money” allowing them to use it as they please. With this attitude, it is little wonder so much of it is squandered on stupid programs such as allowing people to ride free on public buses or putting in walking and bike lanes in areas where they will see little use.

Many people have come to think that the money flowing from Washington does not cost us anything because often such bills are shrouded in the message the project will more than pay for itself over time by creating greater growth. The devil is in the details when it comes to such spending. Sadly, politicians often prefer to use such funds on what they view as legacy projects that will shape the future of their area or shiny pet projects that will enrich their cronies. Many of these tend to be rather wasteful and controversial and it is not uncommon to see them plagued by cost overruns.

When recently driving the highways of America, I constantly encounter miles and miles of lanes coned off and in the middle of being resurfaced. 

Still, I often find there are no workers and little equipment present. Blame it on the way road work contracts are granted of work overseen but this indicates the companies performing the work are already stretched thin. Unfortunately, this tends to result in traffic jams. Having employees trapped in

slow-moving traffic costs businesses a great deal of money and reduces productivity.

Throwing more money at companies already overextended is just asking for shoddy work at a higher price is hardly a formula for economic success. Expect no bargains for taxpayers when this bill gets passed. What it will do is push higher the cost of materials and labor which drives inflation. Ironically, it will also encourage the “premature replacement of good infrastructure” that still has years of useful life. This directly conflicts with the idea of pursuing a “green path forward” which those endorsing the bill claim gives it merit.

An example of this pops up in a recent study about how trading in your old car for a brand new electric vehicle may be doing more harm to the environment than good. Researchers in Japan say choosing to keep and drive your older gasoline-powered car longer is better than crushing it and going new when considering all the energy used to build a new vehicle. In short, research shows keeping older fuel-efficient cars on the road longer reduces CO2 emissions significantly more than speeding up the global transition to green technology. A team from Kyushu University says most of the debate over gasoline and electric cars focuses on fuel efficiency and the CO2 emissions they produce rather than the fact a rapid transition shoots up “manufacturing emissions.”

Since we are already suffering from supply chain disruptions and soaring prices, the cynical part of me thinks the timing of this bill is lousy and the American people should get ready to get bent over and taken advantage of. America’s national debt is exploding, this means it might be a good time to revisit the idea a country can create the illusion of economic prosperity by spending while at the same time not accomplishing its goals of long-term growth. History shows that while a country can kick its gross domestic product into high gear by building a false economy based on infrastructure or war, this does not translate into sustainable growth.

When a country gorges at the trough of deficit spending it can easily manipulate a big temporary boost in its GDP but solid growth is often the result of a slower well-planned approach. When Washington begins to talk about infrastructure spending hands go out across America as politicians and businesses rush to endorse such programs claiming they should be administered on a local level so the money is not squandered by the inefficient minions of  Washington that do not understand the priorities we face.

As for the number of jobs we claim are created from such spending are often only temporary and can be easy to overstate. While infrastructure spending brings the illusion of solid growth it is generally a long-term investment financed by creating debt, this debt often lasts for decades and long after the project is completed. Often the jobs such projects create quickly fade away. This makes it important the money is well spent or the bill will come back to haunt society and the economy over time.

Those promoting such massive spending often claim America has a third-world infrastructure, this is poppycock. While things may not always be perfect, it is far from what much of the world has to deal with. The picture above is reflective of a “third world” infrastructure. When things don’t work as planned in America, a lot of other factors are often involved such as a lack of accountability or the people in charge having no skin in the game. As stated before, solid growth is often the result of a slower well-planned approach. This means creating clear smart prudent well-defined goals and long-term strategies on how to meet them.  

In the long run, a country’s economic policies and its system of taxation are far more important to the economy than government spending. It is pure folly to think in our age of crony capitalism that infrastructure spending that tends to be poorly spent during the best of times, will be able to rapidly transform our economy in the way politicians are promising.  Already, people are lining up to steal this money. In the current environment, the one thing we can count on is that when all is said and done, the family members and friends of government officials and business leaders are about to benefit greatly from this poorly timed bill.

Source: Advancing Time