Embracing the Softer Side of Infrastructure – 04/06/2021 – Paul Krugman

Republicans are struggling to explain why they are against President Biden’s plan for the employment of the United States.

Their real motivations are not a mystery. They want Biden to fail, just like they wanted President Barack Obama to fail, and they will once again offer scorched-earth opposition to any proposal from a Democratic president. And they are particularly against public programs that can be popular, and thus help legitimize an activist government in the minds of voters.

But exposing these real reasons wouldn’t appeal to the electorate, so they look for alternative lines of attack. And in recent days, many Republicans seem to have focused on the claim that most of the proposed spending isn’t really on infrastructure.

As it stands, they can’t help but go to ludicrous extremes, and their claims that only a small percentage of the proposal is “real” infrastructure are easily overturned. The only way to come close to their numbers is to state, bizarrely, that pouring only concrete into transportation counts, which means excluding spending on things essential to a modern economy like clean water, reliable electricity. , broadband access and others.

It is true, however, that a large part of the proposed spending relates to support for intangible things – spending on research and development, increased support for innovation, and investment in people. So what you need to know is that the thesis of these intangible investments is just as strong as the thesis of repairing decaying roads and collapsing bridges. In fact, it’s even stronger.

Let’s start with the technology.

The idea that the investment is not real if it does not concern steel and concrete would be new to the private sector. It is true that, in the 1950s, around 90% of business investment spending was devoted to equipment and structures. But today, more than a third of business investment is in “intellectual property”, mainly in R&D and software purchases.

Companies therefore believe that they can achieve real results by investing in technology – a view endorsed by the stock market, which today places a high value on companies with relatively few tangible assets. Can the government do the same? Yes you can. In fact, the Obama administration did.

Investment in technology, especially renewables, was only a fraction of Obama’s stimulus, but it was the part that was criticized the most. Remember how Republicans have repeatedly complained that loan guarantees for solar company Solyndra have gone awry?

The point is, if your tech strategy is only producing winners, you’re not taking enough risk. Private investors do not expect all bets to succeed; three out of four startups backed by venture capital fail. The question is whether there is enough success to justify the strategy.

And Obama’s investment in green technology has produced many successes. You’ve probably heard of Solyndra; and heard about the crucial role of a $ 465 million loan to a company called Tesla?

More generally, the years after 2009 were marked by spectacular progress in the field of renewable energies, solar and wind power being today often less expensive than fossil fuels. There are still people who seem to imagine that green energy belongs to hairy hippies, but the reality is, it’s the wave of the future.

We don’t know how much of this progress can be attributed to Obama’s revival, but he certainly played a role.

What about human expenditure, which amounts to hundreds of millions and could be the main subject of an additional proposal? There is overwhelming evidence that this is a good idea.

The truth is, it is difficult to assess the reward for spending on physical infrastructure because we cannot observe the opposite fact – what would have happened if we had not built that bridge or that road. We will only have strong evidence of the value of the physical investment if, as seems entirely possible, some key pieces of our infrastructure collapse.

In contrast, we do know a lot about the effects of investing in people, as some of our most important family-oriented programs, such as food stamps, have been gradually implemented by the country. This allows researchers to compare the lives of Americans who received help as children with those of those who did not.

The results are clear. Children who received help did better than those who did not in all areas: education, health, income. The social return of aid to families, especially children, is enormous.

Should the more flexible and less tangible elements of Biden’s spending program – encouraging new technologies, especially electric vehicles, aid to education and more broadly to families with children – be seen as ” infrastructure ”? The correct answer is: who cares? Everything is a productive investment in the future of the country.

And the future needs work. Recovery from the pandemic should only be the beginning; we need a strategy to address our old problems of low productivity growth and low private demand. Large-scale public investment, whether or not it is infrastructure for some people, is the way to go.

Originally translated from English by Luiz Roberto M. Gonçalves

LINK PRESENT: Did you like this column? The subscriber can release five free accesses from any link per day. Just click on the blue F below.

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button