This is the second article in a four-part series, “Fix the Economy, Stupid.”
Listening to Hillary Clinton’s speech on the US. Economy last Thursday (August 11), she sounded as if she was fighting hard for the little guy, the American worker, those who have been left behind by bad trade deals and companies moving production offshore to hold down labor costs. But dig a little deeper and what you find is a plan that is woefully inadequate to meet the country’s investment needs and stimulate renewed economic growth.
As was pointed out in last week’s article, the U.S. economy is in serious trouble. Growth in Gross Domestic Product (GDP) has averaged just about 2% since 2000, compared to average growth rates of 3% to more than 4% in prior decades since the 1950’s.
With the notable exception of Bernie Sanders, Democratic politicians have been slow to acknowledge the issue, in part because it’s seen as tarnishing President Obama’s legacy. The reality is that under the circumstances, Obama has done about as well as could be expected given the Great Recession of 2008 and the Congressional gridlock that followed.
Enter Hillary Clinton. She acknowledges the need for greater investment in U.S. infrastructure, and touts her plan as “the biggest investment in new, good-paying jobs since World War II”.
Well, not exactly. She proposes to spend $275 billion over five years, or an average of $55 billion annually, less than 0.3% of GDP, and a mere 9% increase in current Federal investment – investment levels already far too low by orders of magnitude.
Some $25 billion of the $275 billion would be used to fund an “infrastructure bank” designed to attract an additional $225 billion non-Federal investment. That’s not a bad idea for the long term, but it’s not going to stimulate growth or move the needle short term. It seems like something designed to make the numbers sound bigger than they are, but not alienate her conservative supporters.
Bernie Sanders has proposed infrastructure spending of more than three times the amount recommended by Hillary – $1 trillion through 2020. Meanwhile, the American Society of Civil Engineers estimates the cost even higher — at $1.4 trillion through 2025 to repair existing infrastructure, or bring it to a “state of good repair,” as they say in engineering parlance.
Quality public infrastructure is a key to the efficient functioning of modern economies. Allowing it to deteriorate as it has in the U.S. is fiscally irresponsible. Our highways, airports, ports, railways, water and sewer systems and electric power supply grids are all in need, not just of repairs, but major upgrades.
If you include upgrades in the estimates, the real cost is probably in the tens of trillions to modernize our infrastructure and bring it into the 21st century. Just as one example, most advanced European and Asian countries already have high speed rail, with trains routinely operating at speeds of more than 200 mph. In the U.S. our fastest train, Amtrak’s Acela, which runs between Boston and Washington, travels at an average speeds of just 65 mph.
The longer we put off much needed infrastructure investment, the higher the costs and the greater the disruption to our economy. Now is the time to act. The economy is faltering badly; interest rates are at historic lows. Effectively, the cost of borrowing is next to zero.
Hillary Clinton’s economic plan is, in reality, no plan at all. Her proposed spending levels are too meager to lift the economy, create significant numbers of new jobs, or make a real dent in our huge investment needs. By pretending to offer a plan that falls so far short, Hillary Clinton is actually putting the future of the U.S. economy, and its workers, at risk.
Next week, in part 3 of our 4-part series “Fix the Economy, Stupid” we’ll examine why mainstream politicians continually underestimate investment needs; why that is a cause for worry; what we can do help remedy the situation, and possible sources of funding.