Why Doesn't America Have an Infrastructure Bank?
M.S. at The Economist agrees that the Republican Party deserves political annihilation:
More stimulus: Buffers for the flighty: ON BALANCE, I agree with the "it's insane" analysis offered by Matthew Yglesias of America's refusal to borrow money at historically cheap rates and spend it on infrastructure and other job-generating activities that will need to be undertaken eventually anyway.... [T]echnological change and globalisation have absolutely nothing to do with high unemployment in the construction sector. The people who build things in America will always be Americans, and there haven't been any revolutions in construction technology between 2007 and 2011.... The reason the construction sector is sitting on the couch playing with the Wii instead of out fixing America is that America isn't spending the money to do the fixing. America has a $2 trillion backlog of infrastructure maintenance, according to the Urban Land Institute. With the government able to borrow money at ridiculously low 10-year rates, it seems pretty convincing that we should be borrowing that money and spending it now, both to improve that infrastructure and to get the economy going. (Insert sub-argument: yes, but infrastructure programmes take a long time to get underway. Response: did you or didn't you say this was structural unemployment that will take many years to resolve?)...
[I]s the American government like a busines...? Will creditholders begin to demand higher yields because they worry that, if things go pear-shaped, the government cannot pass on costs to consumers, viz raise taxes, should it need to? Creditholders certainly haven't demanded higher yields yet. And you can see why not. America is the world's largest economy. Its citizens are among the richest and least-taxed in the developed world. American citizens will not move to other countries en masse if taxes go up (the equivalent of "losing market share"), and citizens can't simply refuse to pay their taxes (the equivalent of "elastic demand"). Setting politics aside, there should be no question that the American government can "pass on its costs to consumers" if necessary. This ought to mean that debtholders will continue to trust the credit of the government....
There is, however, a low but mounting level of anxiety amongst ratings agencies that in fact the American government will not be able to pass on costs to consumers. The reason is that one of the two political parties, and the voters who support it, appear unwilling to pass those costs on, and are sending ambiguous signals that they may default on debt obligations rather than do so.... To the extent that I do worry that increasing America's debt to pay for infrastructure improvement now rather than later is a dangerous thing to do, it's mainly because I worry that political irresponsibility...
