Why Infrastructure?

Steve Coll
The New Yorker

This weekend, President-elect Obama announced in a radio address a plan to craft what he described as the largest public investment in national infrastructure (roads, bridges, schools, broadband, and health-care-information technology, among other things) since the Eisenhower Administration. The package is being skillfully positioned as a response to the economic crisis, and if it is crafted to support speedy project decisions and fast-track job creation, it should provide as effective an economic stimulus as consumption-sparking tax rebates—but with more transformational long-term effects.

What’s fascinating about his announcement is how quickly this idea has migrated from the relative fringes of economic discourse into a pillar of centrist conventional wisdom. I know this only because of my work over the last eighteen months or so running the New America Foundation, a think tank that happens to house some of the people who have conceived and pushed the infrastructure focus. I take zero credit personally—my job is to keep the lights on and the computers plugged in, and also to serve as chief intellectual cat herder (a characterization meant only to reflect, of course, my respect for the independence of mind that causes cats to resist herding.) Still, I’ve become acquainted with the intellectual history of the recent neo-Keynesian emphasis on public-investment strategies of the sort Obama is now embracing so centrally.

At the end of the Clinton Administration, when it became clear that a combination of tight fiscal policy and the Internet boom would produce a rare surplus in the federal budget, there was a quiet debate within the Democratic Party about what to do about that surplus. Neo-Keynesians such as Bernard Schwartz argued that Vice-President Gore, heading into the 2000 cycle, ought to announce a program of public investment into twentieth-century infrastructure, perhaps using public-private financing mechanisms. The argument was that the U.S. lagged in research-and-development spending, its basic infrastructure was in obvious decay, and the country was falling behind Europe and Japan in broadband, air-traffic-control capacity, education, and other modernizing infrastructure. This argument did not prevail, however; among other things, the fiscally conservative, Robert Rubin-led wing of the Party resisted. Political calculus may also have figured in. It is easy to imagine the temptation of a budget-surplus policy that would protect Gore, in 2000, from attacks against Democratic tax-and-spend profligacy. In any event, although a program of public- infrastructure investments was conceived and argued for at this time, it gained little traction.

If Gore had won, given his interests in climate change, green infrastructure, and the digital economy, he might well have returned to these ideas. The surplus inherited by President Bush was in effect a blank check--and Bush, for his part, wrote it, predictably, for tax cuts, which ended up increasing income inequality.

(More here.)