Monday, October 11, 2010

Build S***

You know what the trouble is? We used to make s*** in this country, build s***. Now we just put our hand in the next guy’s pocket.
- Frank Sobotka

Not much is more blue-collar and un-disagreeable-with than infrastructure. Roads, bridges, rail, water pipes, ports, smart grid – real stuff built by real Americans. It’s both the foundation on which the private economy rests, and the oil that allows it to run smoothly—and with most of it decades to centuries old, it’s time to upgrade. Ezra Klein has a great post on why it’s more important now than ever to invest in infrastructure:

The Council of Economic Advisers has a report (pdf) out today making the case for more infrastructure investment…

Lots of stimulus programs can create jobs. But infrastructure investment creates the right jobs, for the right people, doing the right things -- and at the right time. Or, to say it more clearly, infrastructure investment creates middle-class jobs for workers in a sector with high unemployment and it puts them to work doing something that we actually need done at a moment when doing it is cheaper than it ever will be again.


And then there are all the other arguments you've heard me make. Raw materials are cheap. Labor -- due to the high unemployment rate -- is cheap. Borrowing money is cheaper than at any time since the 1950s. And this is one sector where the normal deficit objections simply don't apply. "You run a deficit both when you borrow money and when you defer maintenance that needs to be done," Larry Summers told me. "Either way, you're imposing a cost on future generations." Not spending a dollar on infrastructure repairs today means we'll have to spend it tomorrow -- and by that time, it will cost more than a dollar. More so than anything else I can think of in the economy, infrastructure investment is win-win-win-win, and I'm not certain I've tacked enough "wins" on there.

That last point is especially important, because it neutralizes the typical “deficits bad” argument: we HAVE to repair our crumbling infrastructure at some point, so why not get it out of the way now when interest rates are low and borrowing is cheap? In fact, this is exactly what the private sector is doing, with companies like Microsoft issuing billions of dollars of debt at low interest rates even though they haven’t figured out what to spend it on yet besides share buybacks. That’s why deficit hawks would make terrible businessmen: because they’d never be willing to issue debt to finance investments.

I’ll add one more point of my own – this is the stuff that is unquestionably the role of government. No matter what you think about OTHER government interventions in the economy, even the most hard-nosed libertarian would never argue that natural monopolies like roads or utility lines should be wholly privatized.

So the arguments typically leveled against OTHER government spending, whether “government power bad” or “deficits bad,” simply do not apply to infrastructure spending. Like energy efficiency, it’s not just a win-win—it’s a win-win-win-win.

I’m sure extremists will still dream up ways to argue that the government should not spend money building roads and bridges, but for most of us, it’s the sort of no-brainer that everyone should be for.


Deficit hawks would make terrible businessmen

Yes, government creates jobs

Monday, October 4, 2010

Free Market Firemen Watch as Home Burns to Ground

Taxes sure suck… until your house catches on fire and you need taxpayer-funded firemen to put it out.

That’s the lesson an Obion County, TN family learned last week—whose house burned down as firefighters stood watching because the family hadn’t paid their $75 fire department fee:

Imagine your home catches fire but the local fire department won’t respond, then watches it burn. That’s exactly what happened to a local family tonight. A local neighborhood is furious after firefighters watched as an Obion County, Tennessee, home burned to the ground.

The homeowner, Gene Cranick, said he offered to pay whatever it would take for firefighters to put out the flames, but was told it was too late. They wouldn’t do anything to stop his house from burning. Each year, Obion County residents must pay $75 if they want fire protection from the city of South Fulton. But the Cranicks did not pay. The mayor said if homeowners don’t pay, they’re out of luck. This fire went on for hours because garden hoses just wouldn't put it out.

It wasn't until that fire spread to a neighbor's property, that anyone would respond. Turns out, the neighbor had paid the fee.

"I thought they'd come out and put it out, even if you hadn't paid your $75, but I was wrong," said Gene Cranick. [...]

We asked the mayor of South Fulton if the chief could have made an exception. “Anybody that’s not in the city of South Fulton, it’s a service we offer, either they accept it or they don’t,” Mayor David Crocker said.

And you know what? I almost agree with the mayor. The Cranicks took an irresponsible gamble that they could free ride off other people’s fire department fees… and they lost. If you don’t want to pay your taxes, don’t blame me when you get burned.

Almost. The only problem with this way of thinking is that fires don’t exactly stay put, and they don’t just harm the irresponsible people who don’t pay for fire protection. Check out the bold text above. The next door neighbor was responsible, paid his $75 fee so he’d be protected from fire… and yet saw his house catch fire anyway because his neighbors exercised their “freedom” to not pay a fire protection fee.

It’s a lesson on the limits of rugged individualism: you’re free to do whatever you want on your property, until the effects of whatever you’re doing spread onto my property (or into a commons like the atmosphere or ocean). And in today’s interconnected world, where we find ourselves increasingly at the mercy of actions taken by people we’ve never met, we’ve all got a bit more say in the risks others take, whether with fires, finance, or fossil fuels.

It’s why bailouts were necessary—not because we want to save an irresponsible few from the consequences of their actions, but because the actions of those few could have brought down the entire system. You wouldn’t let a boat sink to punish the captain for hitting an iceberg. Likewise, innocent businesses shouldn’t suffer to punish a few irresponsible financiers.

There’s also a global warming lesson here for Joe Romm. Because like fires, pollution doesn’t stay put—and like a fire spreading from your house to mine, as soon as the pollution leaves your property, I have every right to tell you to stop.

If my neighbor’s house catches fire, it could spread to mine—meaning I have a right to make that neighbor to pay for fire protection. If an Arkansas farmer dumps his farm waste into the Mississippi River, it travels down to the Gulf where it fertilizes algae and starves fish of oxygen—meaning that those fishermen have a say in what the farmer does with his waste (or else they must be compensated). And if a utility decides to burn coal to save money, the CO2 gets into the atmosphere and wreaks havoc on the climate other people depend on—meaning that we have a say in the utility’s choice of fuel.

I’m basically a libertarian: do what you want, as long as you only hurt yourself. I would be fine with other people’s right to burn coal and drive Hummers if they were the only ones who had to live with the consequences of global warming. But that’s not the world we live in. No matter how energy conscious I am, no matter whether I live close to work and don’t drive, my responsible choices can’t protect me or my children from the pollution-intensive lifestyles of others.

Like it or not, we’re all in this together. As the Cranick family found out, we now live in such close connection to others that one person’s rugged individualism can set his neighbor’s house on fire, mortgage loans in California can bring down banks in New York, and Hummer-driving soccer moms in Kansas can affect monsoon seasons in Bangladesh. And as soon as the CO2 exits someone else’s tailpipe and enters my atmosphere, it absolutely becomes my business.