Sunday, November 9, 2014

Politicians To Hail Infrastructure Spending As Silver Bullet

Get ready for a barrage of talk from Washington about how new infrastructure spending is going to boost the economy and drive growth. As usual the politicians in search of easy answers often dust off an old idea polish it up and act as is they have a new magic formula. While most people and economist agree infrastructure is important I contend that the old 80-20 rule applies to this vital part of our lives more than they might want to admit. As a rule of thumb it that states that 80% of outcomes can be attributed to 20% of the causes for a given event. In this case I'm highlighting the fact that the first 20% of infrastructure spending goes to the root of our problems giving us the greatest return on our investment and after that more of each and every dollar tends to get squandered.

To the many who see government spending on infrastructure as a silver bullet for the economy and as a job creator I would like to raise a word of caution, It may be time for a "truth off'. More "bridges to nowhere" and wasted spending exist then the taxpayer could ever imagine. Both Democrats and Republicans will be on board this train, but the reality is often this kind of spending falls short of creating real wealth for our country. In my book Advancing Time I talk about a bridge that was recently replaced in Fort Wayne, Indiana that even the city's leading newspaper said we did not need. The newspaper had gone on to state the bridge did not "need" to be replaced, but only needed minor repairs. Here is a paragraph from the book:

Another pork-barrel project that drains federal coffers? 
If we think local media is helping guide government to do the right thing, we should be troubled. In the city where I live a recent Sunday newspaper editorial commented about the cost of a bridge project, that will be covered by a earmark from Senator Even Bayh. The article states "Does the four million dollars represent yet another pork-barrel project that drains federal coffers? Most likely. But once the money is designated, it would be foolish to give it back."

Bottom line, nothing has changed over the last several years that indicates the media, government, or planners have become better and far more responsible in how infrastructure money is spent. More telling is a look at the bridge recently completed. In the end the bridge final cost was closer to ten million dollars, and it now sports the name "The Martin Luther King Jr. Memorial Bridge". After the bridge was structurally complete the plans called for the builder to come back and top it off with a million dollar plus metal structure that gloriously lights up at night, this was all to present a show of changing colors.

This bridge now has a new role, to act as a gateway into downtown. A huge ugly sign over the bridge,  large monuments on each side of the approaching end, plus large plaques along the spacious sidewalks are few of its features. The so far unmentioned and most wasteful use of taxpayer money would be the benches that line both sides of the bridge, why do you need twelve foot wide sidewalks sporting benches on a bridge? Considering the bridge had to be widened to accommodate the benches it means they sit on some very expensive real estate. Taking this into consideration I estimate a shocking finished cost of a around one hundred thousand dollars for each bench.

When decisions are placed in the hands of politicians, most who have never run a business and have little understanding as to the value of a dollar cost soar through the roof. This means the taxpayer often pays a huge amount for a "pigs ear" when promised a silk purse. Politicians will hail infrastructure spending as a silver bullet, but when they do cover your pockets. Over the years I have published two similar articles to make this same point, the latest in February 2014, but as we get ramped up for a new wave of this "salvation spending" a repeat of this warning is in order. People love new and shiny things and this is especially true when they are reassured that someone else will pay the bill or they are free. Government mandates on both design and how federal funds are spent have added to much higher cost and poorer results for the money spent.

As an owner of buildings over the many years I have had as tenants more than one firm that lived off designing projects for both the government and those quasi government institutions such as schools and hospitals. As a contractor and tax payer I have found much of their work not only over engineered but designed in ways that future maintenance was destined to be very intense and costly. Much of their work was in issuing detailed specifications to meet some government mandate or as a way to justify their fees. The shear amount of paper work and studies they were paid to crank out was mind boggling. Sometimes these designs even failed to address and accomplish the most reasonable and basic goals of the initial project.

If you think this kind of mindless infrastructure spending will help America, it might be because the media, many politicians, and the businesses that benefit from it are constantly telling you of its virtues. A "Truth Off" would show that infrastructure is not even close to being a silver bullet, and America is not a uncompetitive third world country. Sure this kind of spending creates jobs, but at a horrible cost that must be paid at a future date or eventually bankrupt the country. The grandiose planners and politicians love free money, unfortunately there is no such thing. And truth be told, the jobs created are often short lived. This is not a fix for the structural and employment problems plaguing America.

Footnote;  As always comments are welcome and encouraged. This article goes hand in hand with another article that focuses on government debt and just how big the problem has become you can find that article below.


1 comment:

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