Infrastructural Change

President-elect Barack Obama’s plans for a giant, albeit deficit-producing investment into infrastructure makes sense. Good infrastructure is a primary requirement for real economic development, and America’s infrastructure has been deteriorating ever since the country bought into the Gipper’s glib assertion that “government isn’t the solution: Government is the problem.”

Both Adam Smith and Alexander Hamilton listed infrastructure as a primary responsibility of government. In his The Wealth of Nations, Smith wrote that erecting and maintaining public works was the job of the sovereign. And Hamilton, in his famous 1791 Report on Manufactures, stated that America will always benefit from infrastructure. Moreover, he urged that foreign investment be considered an important source of capital:

But the attraction of foreign Capital for the direct purpose of Manufactures ought not to be deemed a chimerical expectation. There are already examples of it, as remarked in another place. And the examples, if the disposition be cultivated, can hardly fail to multiply. There are also instances of another kind, which serve to strengthen the expectation. Enterprises for improving the Public Communications by cutting canals, opening the obstructions in Rivers and erecting bridges have received very material aid from the same source.

Foreign investment takes several forms. When Toyota builds an automobile plant in Kentucky, the Japanese are effectively investing their money in America. When Americans buy toys and other things from China — increasingly on credit — the Chinese are also investing in America. When foreign countries cover our deficit spending, as China is now doing, they are investing in America. Yet I believe that Hamilton would say deficit spending for infrastructure should be preferred over Toyota plants or toys and trinkets: We don’t own the plants, and the toys are consumed. Infrastructure development, to the contrary, is both “in America” and “of America” — it is an investment in America’s economic future. Hamilton likely would argue that deficit spending to pay for infrastructure is a good idea, both for America and for the foreign countries that will carry the debt. Smith would agree.

Obama views infrastructure as did Smith and Hamilton: legitimate, essential and a public good that is worth borrowing for. But more than this, he sees it in strategic terms that reflect the interconnectedness of multiple needs: the need to reduce fossil-fuel use and dependence on the automobile through in-fill development; the need to stabilize the economy and create jobs; the need to reduce private debt; and the need to make national security decisions that take into account this interconnectedness.

Because Obama must respond to our most immediate and pressing need — jobs — the first dollars spent will go to repairs of roads, bridges and tunnels. We can get the money on the street immediately. But we can assume that Obama is intent on not letting the tactical purposes divert his administration’s attention away from the strategic needs.

The backdrop to the politics of all this is the short duration of the “honeymoon period.” Obama knows new presidents typically can count on clear sailing for no more than six to eight months, tops. As a self-confessed pragmatist, he likely expects a few false starts. But not too many.

At the same time as the road and bridge repairs, his administration must begin laying out its strategic plan for 21st-century infrastructure. This will be the key to bringing “change we can believe in.”

Pulling all this off won’t be easy, even for this very popular and politically skilled young president. The highway-building lobby, a status quo bunch if there ever was one, is both powerful and vast — from the traffic engineers who make it all happen, to the asphalt pourers, to Detroit, to the showrooms, to the parts houses, even to those who rent rooms near freeway off-ramps and the land developers who can’t wait to build yet another inefficient, automobile-dependent suburban enclave.

That our highway builders are so well-positioned comes not by some accident. For the past half-century, they and their traffic engineers have enjoyed what amounts to a private stash of taxpayer dollars — the Highway Trust Fund. Back in the mid-1950s, the Eisenhower Administration caved to the highway lobby and gave America the Highway Trust Fund, rather than a Transportation Trust Fund. Gasoline tax dollars have been held in trust for the road builders. Even today, the highway and road builders get 80 percent of gas-tax dollars right off the top.

America has always needed an enlightened transportation policy. Instead, our always-compromised Congress continues to legislate what amounts to a de facto highway-building policy. And we wonder why our rail and light rail systems are so out-of-date, run-down and — by European and Japanese standards — primitive. (We don’t have rapid rail. Period.)

Finally, we have a president who understands the difference between transportation and highway building. That’s good. And he must know that if he is to bring about real change, he must act immediately to dump this self-serving arrangement, otherwise he won’t be able to align his program initiatives with his strategic objectives. And that will leave us with no real change at all, just status quo — a temporary job boost, a lot more asphalt and a few bridges that won’t collapse anytime soon.