Saturday, March 5, 2011

Public investments near 60-year low

From the Economic Policy Institute two weeks ago, we get a very short article and one graph showing that public investment in infrastructure is at its lowest level since the end of the Second World War. What I want to point out here is that it is exactly public investment in infrastructure that we need to create a real economic recovery that will be felt by all Americans, not just the rich and the political elites. More importantly, it is exactly public investment in infrastructure that we need to address the problems of global climate change and peak oil, as well as breaking out of our current petroleum price trap in which any uptick in economic activity causes and increase in demand for petroleum, which causes an increase in price, which has to be paid out of shrinking incomes, leading to a collapse back into "recession."

Moreover, the public investment in infrastructure required is massive. Obama's $700 billion stimulus package of two years ago is a joke compared to what we actually need. It might have been a good down payment - if it not half of it had gone for tax cuts, which provide very little economic stimulus, and if it had been part of a national commitment to a huge, bold national goal, such as getting 100% of our electricity from renewable sources within twenty years. Such programs easily come in with price tags measured not in billions, or even hundreds of billions, but in trillions of dollars. The May 2008 U.S. Department of Energy report "20 Percent Wind Energy by 2030," estimated the U.S. needs to invest $2.4 trillion to meet projected electricity demand of 2030 - and note, that is on our current pathway of continued dependence on fossil fuels. In December 2009, I sketched a national infrastructure program that would create over 14 million new jobs, but which requires nearly six trillion dollars in funding.

Where will the money come from? Six trillion dollars is what Wall Street and the finanial system pushes around its various casinos in a mere two days. There's plenty of money out there - it's just a question of political will to force Wall Street to actually start investing in what society needs, rather than what Wall Street sees as "most profitable." Moreover, the United States is a sovereign country, and has the ability to create an allocate money at will. The problem, again, is political will: too many Americans believe the "free market" nonsense that only Wall Street and the banksters should decide who gets how much money and credit.

So, the programs needed for an actual, sustained economic boom are not at all difficult to envision. But, amazingly not a single American elite seems to be capable of such vision. Not our politicians, least of all President Obama, not our media talking heads, certainly not our entertainers. Religious leaders? You're kidding, right? It is a national tragedy that our elites today are so feckless and so clueless.

Public investments near 60-year low
Ethan Pollack
February 23, 2011

Public investment—which includes strategic investments such as education and infrastructure—are near a 60-year low as a share of gross domestic product (GDP). As the Recovery Act recedes, the already low investment share is likely to fall below the historic nadir. Increasing these investments, as President Obama has proposed, is long overdue and will lead to immediate job creation, long-run global competitiveness, and economic growth. The chart, from the Bureau of Economic Analysis, shows all public investment (federal, state, and local) as a share of GDP since 1947.

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