An Infrastructure Program for Millions of New Jobs

Some men see things as they are and say why. I dream things that never were and say why not. —Robert F. Kennedy

According to figures compiled by the America Society of Civil Engineers, a multi-year program of just repairing all existing U.S. infrastructure requires an additional $1.134 trillion dollars than already planned funding.

Using various employment multipliers specific to types of infrastructure (more discussion below), such a program spread over five years cen be expected to create 4.605 million direct and indirect jobs.

I have further identified a greatly expanded infrastructure program, to bring the United States economy into the 21st century. Building the infrastructure required to end our dependence on burning fossil fuels and shift the United States entirely to renewable energy, and also ensuring all drinking water and waste water management needs for future Americans, requires another $4.686 trillion.

As a ten year program, this would create another 9.644 million direct and indirect jobs.

There are only two obstacles between the grim reality of gradual economic decline we now face, and the alluring picture of a United States busily and noisily rebuilding itself back into prosperity: one, the financial system, with its insistence on quick returns and profit rates well above single digits; and two, a cowardly political leadership which is terrified that doing what is needed to re-impose the idea of the national good in economic policies would cause panic in the financial markets.

There’s more downstairs.

This diary draws upon two major sources. First, the 2009 Report Card on America’s Infrastructure, by the American Society of Civil Engineers. At the beginning of this year, the ASCE hurriedly updated its 2005 Report Card in an attempt to influence the design and debate of the stimulus program. Since then, the ASCE has greatly expanded its 2009 Report Card web site, with additional commentary, and sourced footnotes. ASCE collects a number of sources to tally the funding shortfall for maintaining America’s roads, bridges, schools, waterways, airports, railroads, electricity systems, and other infrastructure. This rapidly growing funding shortfall is a huge hidden cost of our infatuation with Ronald Reagan and “free market” economics, especially the supply-side theory that cutting taxes will lead to a boom in economic growth. (The economy did not grow – only asset prices did.)

Second, a February 2009 report by the National Governors Association: Strengthening Our Infrastructure For a Sustainable Future, which is a treasure trove of sourced footnotes.

A National Inventory of Infrastructure

The National Governors Association report notes that

. . . the nation’s infrastructure currently includes approximately 4 million miles of roads, 117,000 miles of rail, 600,000 bridges, 79,000 dams, 26,000 miles of commercially navigable waterways, 11,000 miles of transit (including more than 5,000 miles of rail transit), more than 3,000 transit rail stations, 300 ports, 19,000 airports, 160,000 miles of high-voltage transmission lines, 55,000 community drinking water systems, and 30,000 wastewater treatment and collection facilities.”

Much of this infrastructure was designed and built a full half century ago, and to make matters worse, it has not been properly maintained. Or, to be more precise, the funding needed for proper maintenance has not been forthcoming. It is no exaggeration to assert that crumbling infrastructure, and the fatalities it causes, is one of the most damaging legacies of the 1980s wrong-wing tide and the Reagan Revolution it washed up on our shores.

The National Governors Association report references a May 2007 report by the American Association of State Highway and Transportation Officials, America’s Freight Challenge:

Tons shipped in the United States are expected to rise from 16 billion today to 31.4 billion by 2035.48 The nation’s previous infrastructure investments in the 20th century have continued to pay dividends as economic productivity has risen and U.S. businesses benefited from logistics (procurement, storage, shipment, and delivery of products) gains.

However, underinvestment is now leading to negative consequences, including congestion which reduces the efficiency of the transportation system. Logistics costs had been steadily declining for decades until recently. In 2003, logistics costs were 8.6 percent of GDP but rose to 9.5 percent in 2005, the largest such increase in 30 years. A full one-third of the increase in cost was attributable to inefficiencies in the transportation system. (Emphasis mine.)

A spike in logistics costs is only one artifact of our under-funded physical infrastructure, as the following quick review makes plain. Please note that the money figures you find below may not always jibe with what is in the table summarizing the American Society of Civil Engineers’ 2009 Report Card on America’s Infrastructure. Many of the numbers will be larger, because of sources I found in the National Governors Association report which appear to have more current numbers, or a better understanding of what is required to meet future population growth. In fact, I should note here that the Civil Engineers’ report presents funding requirements only for repairing existing infrastructure. The much higher figures for building new infrastructure are tallied in another table at the end.

American Society of Civil Engineers 2009 Infrastructure Report Card (in billions)
  5-Year Needs Spending Shortfall
Aviation $87.0 $46.3 $40.7
Roads and Bridges $930.0 $380.5 $549.5
Dams $12.5 $5.05 $7.45
Drinking Water & Wastewater $255.0 $146.4 $108.6
Energy $75.0 $45.5 $29.5
Solid & Hazardous Waste $77.0 $33.6 $43.4
Inland Waterways $50.0 $29.5 $20.5
Levees $50.0 $1.13 $48.87
Public Parks and Recreation $85.0 $36.84 $48.17
Rail $63.0 $51.30 $11.70
Schools $160.0 $125.0 $35.0
Transit $265.0 $74.9 $190.1
Total $2,109.5 $976.0 $1,133.5

(Unless otherwise noted, most of the numbers and excerpts below come from the Civil Engineers’ Report Card.)

Aviation
The Airports Council International calculates that U.S. airports need $17.5 billion per year in maintenance and improvements. But since 1990, capital funding for airports in the U.S. has never exceeded $7.3 billion annually.

Roads
The current spending level of $70.3 billion per year for highway capital improvements is well below the estimated $186 billion needed annually to substantially improve the nation's highways.

Bridges
Bridges in the United States are usually designed and built to last 50 years. By the beginning of 2009, the average age of the 600,905 bridges in the U.S. was 43 years. The U.S. Department of Transportation categorize over a quarter of those bridges as either structurally deficient or functionally obsolete. The situation is worse in urban areas, where the Department of Transportation finds that one in three bridges require immediate attention.

The American Association of State Highway and Transportation Officials (AASHTO), calculates that all levels of government spend an annual total of $10.5 billion on bridge improvements. But, AASHTO believes that $17.0 billion a year is required.

Dams
Under the Bush administration, the number of dams in the U.S. rated “high hazard potential dams” by the U.S. Army Corps of Engineers jumped nearly four fold, from 488 in 2001 to 1,826 in 2007. But the number of these “high hazard potential dams” that were repaired fell from 124 in 2001 to 83 in 2007.

In 2009, the Association of State Dam Safety Officials (ASDSO) estimated that the total cost to repair the nation’s dams totaled $50 billion and the needed investment to repair high hazard potential dams totaled $16 billion. These estimates have increased significantly since ASDSO’s 2003 report, when the needed investment for all dams was $36 billion and the needed investment for high hazard potential dams was $10.1 billion.4

The 2009 report noted an additional investment of $12 billion over 10 years will be needed to eliminate the existing backlog of 4,095 deficient dams. That means the number of high hazard potential dams repaired must be increased by 270 dams per year above the number now being repaired, at an additional annual cost of $850 million a year. To address the additional 2,276 deficient—but not high hazard—dams, an additional $335 million per year is required, totaling $3.4 billion over the next 10 years.

Drinking Water
Drinking water systems in the United States face an annual shortfall of at least $11 billion to replace aging facilities that are near the end of their useful life and to comply with existing and future federal water regulations. Taking into consideration future improvements in water standards, the EPA has estimated that the U.S. requires one trillion dollars over the next 20 years for drinking water systems . This is nearly five times more than the $110 billion per year figure given by ASCE

A February 2002 report by researchers at Harvard School of Public Health, Harvard Medical School, Resources for the Future, Natural Resources Defense Council, and U.S. Geological Survey, U.S. Drinking Water Challenges in the Twenty-First Century, states that

Investment by the United States in maintenance and repair of public water infrastructure has generally been inadequate over the past half century. The 1996 amendments to the Safe Drinking Water Act required the U.S. Environmental Protection Agency (U.S. EPA) to regularly conduct a survey of the infrastructure needs of public water supplies. In its recent survey on these needs, the U.S. EPA estimated that the nation's water utilities must increase investments at least $151 billion over the next two decades to maintain our public water infrastructure and to ensure safe and healthful community water supplies. Of this total, about $38 billion is for water treatment, $83 billion to repair and/or replace components of the distribution system, and $28 billion to protect watersheds and maintain storage reservoirs. Only a small part of the total--20.7%--is for investments required by the SDWA.

Two other studies support these estimates. The Water Information Network (WIN), a coalition of engineering and construction firms, an environmental group, and water utilities, recently estimated that total annual spending for capital investments and operations by U.S. community water supply systems, currently about $36 billion, must increase by $15 billion. The estimated needs for wastewater infrastructure are even larger: an increase of $19 billion over the current annual expenditure of $25 billion.

Wastewater
The Environmental Protection Agency estimates that the nation must invest $390 billion over the next 20 years to update or replace existing systems and build new ones to meet increasing demand.

Inland Waterways
The present system of locks is now near or beyond the end of their design life and have become a serious constraint to increased river traffic, which is even more fuel efficient than rail. Replacement cost is estimated at more than $125 billion.

Levees
A preliminary estimate by the National Committee on Levee Safety, established after Katrina, put the cost at more than $100 billion to repair and rehabilitate the nation's levees.

National Parks
For its 2016 centennial, the National Park Service estimates the agency's facilities will face a $7 billion maintenance backlog. Further studies to identify needed improvements and their cost have not yet been undertaken.

Public Parks and Recreation
According to ASCE, states in fiscal 2007 “spent more than $463 million on new construction of state park improvements to accommodate growing populations. States and territories received nearly $28 million in federal funds in 2007 through the Land and Water Conservation Fund Program. However, they reported more than $15 billion in unmet needs, a significant increase over the amount reported in 2006.”

Freight Rail
More than $200 billion is needed through 2035 to accommodate anticipated growth. The ASCE figure of only $63 billion is for immediate maintenance and repair needs.

Transit (repair only)
The Federal Transit Administration estimates $15.8 billion is needed annually to maintain conditions and $21.6 billion is needed to improve to good conditions. In 2008, federal capital outlays for transit were only $9.8 billion.

Energy
Projected electric utility investment needs could be as much as $1.5 trillion by 2030. The ASCE report card notes:

The U.S. generation and transmission system is at a critical point requiring substantial investment in new generation, investment to improve efficiencies in existing generation, and investment in transmission and distribution systems. The transmission and distribution system has become congested because growth in electricity demand and investment in new generation facilities have not been matched by investment in new transmission facilities. This congestion virtually prohibits outages required for proper maintenance and can lead to system wide failures in the event of unplanned outages. Electricity demand has increased by about 25% since 1990 while construction of transmission facilities decreased by about 30 percent. While annual investment in new transmission facilities has generally declined or been stagnant during the last 30 years, there has been an increase in investment during the past 5 years. Substantial investment in generation, transmission, and distribution are expected over the next two decades and it has been projected that electric utility investment needs could be as much as $1.5 to $2 trillion by 2030. Some progress in grid reinforcement has been made since 2005, but public and government opposition, difficult permitting processes, and environmental requirements are often restricting the much-needed modernization.

 

In September 2008, a report by NextGen Energy Council and Management Information Services, Inc. warned that

Electricity baseload generation capacity reserve margins have declined to 17 percent as of 2007, down from 30 to 40 percent in the early 1990s, and near the 12 to 15 percent that is considered the minimum for a reliable electricity system.

 

Schools (repair only)
The funding needs just to repair schools was assessed in 1999 at $127 billion, ASCE now estimates $268 billion. The National Education Association's best estimate to bring the nation's schools into good repair is $322 billion.

In September 2008, the Economic Policy Institute reported that

School infrastructure spending, after being adjusted for increased construction costs, has decreased dramatically since 2001. While student enrollment has increased 3% since 2001, adjusted spending on school maintenance and construction has dropped by 42%, from $34.9 billion in 2001 to $20.3 billion in 2007. Inadequate facilities can have a negative effect on academic achievement and student health.

One thing I learned that surprised me is that America’s school buildings are in such bad shape, especially in major cities, that groups of parents have filed lawsuits in 31 states, with the physical conditions of their local schools a major part of the complaint. This flood of lawsuits has forced local and state governments to significantly increase capital spending on schools, but a quarter trillion dollar gap still remains.

Hazardous Waste and "Brownfields"
ASCE estimates total funding needs are $77 billion, more than double the $33.6 billion actually spent. In 2006, the National Solid Wastes Management Association estimated that states have disposal capacity for only another 20 years.

Infrastructure for the Future
Thus far, we have reviewed only the areas of infrastructure identified in the Civil Engineers’ report as requiring more funding just to achieve an acceptable level of repair and maintenance. Next, we will look at other areas of infrastructure where a national commitment is required to move our economy off its dependence on fossil fuels, or in which the Civil Engineers’ were simply unable to account for future needs.

Infrastructure for America’s Future (in billions)
Drinking Water (EPA) $300.0
Freight Rail $200.0
Urban Rail Transit $3,195.0
Hi Speed Passenger Rail $450.0
Wind Energy $350.0
Electricity Transmission Grid $66.0
Energy Efficiency of Buildings $125.0
Ports unknown
Infrastructure Security unknown
Communications unknown
Total $4,686.0

Urban Rail Transit
$3.195 trillion is my own estimate, which is fully explained in a diary I wrote last year. Basically, this is for building rail mass transit in the 38 largest urban areas in the U.S. to the same density of route miles and stations as is found in New York City. My estimate is only for costs of actual construction, and does not include equipment such as train sets, and communications and signaling systems.

Robert Pollin, co-director of the Political Economy Research Institute (PERI) at the University of Massachusetts, wrote in his January 2009 article in The Nation, Doing the Recovery Right

Public transportation accounts for an abysmally low share of travel in the United States, even though ridership rose over the past two years, following the oil price spike. As of 2007, automobile travel accounted for 99 percent of transportation spending even for the least well-off 20 percent of households, despite the fact that public transportation is about 60 percent cheaper per mile. The reasons most Americans, including those with less money, do not use public transportation are straightforward: access is bad, off-peak service is limited and transferring is difficult. If the average lower-income household were to increase its public transportation use to just 25 percent of its transportation budget, it would save nearly $500 a year, raising its living standard about 2.4 percent.

Hi Speed Passenger Rail
According to blogs by Bruce McF I reviewed, $250 billion would build a national network supporting 79 mph rail traffic. That is miserable performance, compared to what Europe, Japan, and China have already achieved. To support 110 mph rail in the United States is going to require $450 billion.

Wind Energy
In May 2008, the Department of Energy released a report, 20 Percent Wind Energy by 2030, which is one of the best, industrially detailed economic reports any government agfency has put out in a very long time. Approximately 100,000 turbines will be required to produce 20% of the nation’s electricity in 2030. Most of the commercial-scale turbines installed today are 2 MW in size and cost roughly $3.5 million each installed. Hence, $350 billion for 20% Wind Energy by 2030. Scaling up this program to, say, 50% by wind energy by 2020, would of course increase the funding needed accordingly.

One of the pioneers, and leading expert, of wind energy in the United States is Paul Gipe. In a presentation to Al Gore's January, 2008 Solutions Summit, Gipe unveiled One Million Megawatts of Wind Capacity for the USA: A Target Worthy of a Great Nation.

Gipe’s website point out that Spain has already achieved wind energy providing a full one half of national electricity consumption on very windy days. A November 2009 London Times article Gipe links to notes:

High winds across Spain on Sunday meant that for over five hours, over 53 per cent of the country’s power came from wind energy. . .

Most of the wind power was used immediately, 6 per cent was stored and 7.7 per cent was exported to France, Portugal and Morocco. . . .

Spain began its wind power push in 1997, but five years ago critics believed it could not produce more than 14 per cent of the country’s electricity.

Wind farms have produced 17,700 megawatt-hours (mWh) of electricity so far this year, but renewable energy industry figures believe this figure could rise to 40,000mWh by 2020.

Spain’s Socialist Government invested €991 million (£890 million) in wind power in 2007. Already it has reaped a return on its investment; in 2007 it saved €1 billion on fossil fuels, according to the Spanish Environment Ministry.

Electricity Transmission Grid
The Department of Energy report, 20 Percent Wind Energy by 2030, found that in order to transmit electricity from the wind-rich central plain states (the Dakotas and Iowa down to Texas) to urban areas in other regions of the country, "An investment of approximately $60 billion (in undiscounted terms) in transmission between now and 2030, as suggested by the NREL analysis, amounts to an expenditure of approximately $3 billion per year over the next 22 years." (See also the American Electric Power report.)

Energy efficiency of buildings
Robert Pollin, co-director of the Political Economy Research Institute (PERI) at the University of Massachusetts, wrote in his January 2009 article in The Nation, Doing the Recovery Right

In terms of residential energy efficiency, for the average individual family residence, a one-time $2,500 investment in retrofitting--caulking air leaks and windows, improving insulation and buying more efficient appliances--can reduce annual energy consumption by 30 percent. This would produce an average saving in home energy costs of about $900 a year. Of course, low-income families are much more likely to be renters than homeowners.

Figure around half the housing stock, or 50 million units, being retrofitted, and you need $125 billion. This is a good figure to use by which to judge any proposed “cash for caulkers” program,.

Ports
I could not find much on funding requirements for the nation’s seaports. However, a January 2009 report from the U.S. Maritime Commission notes,

Almost every one of the Nation’s top 50 ports handling foreign commerce requires regular maintenance dredging. Together, these ports move nearly 99 percent of U.S. overseas trade by weight and 61 percent by value.11 Without routine dredging, sections of the navigation channels can quickly become shallow, reducing the draft and size of vessels accessing these ports. In addition, as the size of ships continues to grow, approach and alongside depths in several key ports must be increased to as much as 45 to 50 feet. If we do nothing more than merely maintain existing channels at project depth, the Nation’s competitive edge ultimately will erode. The Nation has to do more than maintain, it must deepen channel depths to accommodate the largest vessel sizes. But meeting this challenge requires a significant investment by both the Federal government and private industry.

The Army Corps of Engineers is responsible for maintaining 300 commercial harbors and more than 600 smaller ones. Each port area is made up of a number of different channels all of which have different depths and their own set of dredging needs. For example, there are 31 different channels alone that make up the Baltimore port area, with depths ranging from 22 to 50 feet. A recent Army Corps of Engineers Study reports that almost 30 percent of vessel calls at U.S. ports are constrained due to inadequate channel depths. If ignored, America’s waterways will be unable to support future growth in trade.

Where do the job numbers come from?

I had originally used an employment multiplier of 27,000 jobs created per each one billion dollars of infrastructure spending. I selected this multiplier based on a February 2009 news release by the Democratic Senate Caucus, intended to promote passage of the stimulus package, cited a number of experts and studies, with a range of 27,000 to 37,000 jobs created for every one billion in transportation infrastructure; about 10,000 jobs for every one billion dollars in new energy infrastructure; and 22,500 jobs for every one billion dollars in new information technology infrastructure.

However, a news release from The Alliance for American Manufacturing gave a figure 18,000 direct and indirect jobs created by every one billion dollars in infrastructure spending. The AAM number was taken from a January 2008 study by a team of researchers at the Political Economy Research Institute (PERI) of the University of Massachusetts-Amherst, How Infrastructure Investments Support the U.S. Economy: Employment, Productivity and Growth. The PERI researchers used and infrastructure spending model based on the national input-output tables, to calculate three types of job creation:

1. Direct effects: the jobs created by the production of the infrastructure itself (e.g. road construction jobs);
2. Indirect effects: the new jobs associated with increased demand for materials, goods, and services used in the construction of infrastructure (e.g. steel production and fabrication);
3. Induced effects: the expansion of employment that results when people who get jobs generated by the direct and indirect effects spend their incomes on goods and services (e.g. retail).

The resulting employment multipliers are presented on page 25, in "Table 3.1. Estimated employment effects of increased infrastructure spending,” shown in the picture below. Note that the PERI researchers found there are different multipliers for different types of infrastructure. (The methodology and input-output models used to calculate the multipliers are discussed in detail in two technical appendices at the end of the PERI report.)

Infrastructure Job Multipliers

How do we pay for it?
Unfortunately, economic neo-liberalism has become such an overwhelmingly dominant ideology that many readers are dismayed at the prospect of spending $5.820 trillion on building new infrastructure. But the $1.134 trillion of needed infrastructure repairs identified in the Civil Engineers’ Report Card is for a five-year program, or $227 billion per annum. The $4.686 trillion program for new infrastructure I propose is for a ten-year program, or $467 billion per annum. The total of annual spending proposed is $694 billion, much less than the $841.2 billion stimulus program passed earlier this year (of which 34.8% went to tax cuts, which have a nearly negligible stimulative effect when compared to direct spending on infrastructure).

Not all this funding need come from government spending. However, a number of federal laws and regulations need to be changed so that the financial system no longer finds it profitable to engage in speculation, usury, and economic rent, but instead finds profitable investment opportunities in funding these new infrastructure programs. Jerome A Paris’ November 9, 2009 diary, The stimulus and green jobs, explains an excellent example of how government incentives work: in the case of wind power, production tax credits have been the key to attracting large amounts of private capital for the building of new wind turbines. When the production tax credits were allowed to lapse by Congress, the private funding stopped, and the construction of new wind energy capacity collapsed as a result.

There is, in fact, a huge amount of private capital out there, sloshing around the hot money centers of the world, desperately seeking for the highest return. In fact, the dollar equivalent of the entire annual U.S. Gross Domestic Product, about $15 trillion, is traded on the various financial markets in the U.S. – stocks, government bonds, corporate bonds, corporate paper, futures markets, and foreign exchange markets – about once every three days. (Back in the 1960s, it took almost nine months for the financial markets to trade the dollar equivalent of U.S. GDP.)

The great economic theory of the past four decades has been that this massive flow of funds would generate the greatest wealth for society if left to its own devices, with minimum interference and oversight by governments. In other words, that the rich know better how to invest society’s wealth than anyone else. The result has been the creation of a financial oligarchy, the slow collapse of the real economy under the burden of supporting the speculation, usury, and economic rent imposed by that oligarchy, and the “regulatory capture” of government by that oligarchy. In a perverse sense, the rich did know how best to invest those funds; what was not admitted was that the rich would invest almost solely for their own benefit, and not that of society at large. In other words, the great economic theory of the past four decades has been proven wrong. Not just by the financial crises that erupted with the collapse of Bear Sterns in April 2008, but more importantly by the increasing inability of the society to ensure its own survival, as evidenced by the difficulty in funding just proper maintenance of existing infrastructure, not to mention a nearly complete lack of effective response to the approaching environmental disasters of climate change caused by a dependence on burning fossil fuels. Proper laws and regulations, such a financial markets transactions tax, most recently endorsed by economist Paul Krugman would penalize and discourage much of the speculation, usury, and economic rent, that makes up so much of financial trading today, and force investment flows back into the real economy, rebuilding and retooling factories and entire industries to supply the goods, materials, and services needed to build – and maintain - the infrastructure American needs to move into the future.

Higher taxes are simply part and parcel of this, but not merely for the reason of “make the rich pay.” The fact is that high marginal tax rates strongly correlate with economic growth. If you look under the hood of the industrial economy, you easily see why. With high taxes, the only way to retain the bulk of the wealth created by a business is by reinvesting it in the business -- in plants, equipment, staff, research and development, new products and all the rest. But if tax rates are low, then there is more incentive to pull the wealth created out, by declaring it as profits that are taxed at what turns out to be too low a rate. In other words, low taxes create so strong an incentive for profit taking, it devolves into asset stripping. Essentially, the low tax rates of the past three to four decades allowed a bunch of financiers and banksters to literally asset-strip most of the U.S. industrial base, one company, one labor contract, and one pension fund at a time.

Tariffs are also needed to prevent the massive daily flow of capital moving to countries with “lower costs” resulting from inadequate workplace safety and environmental safeguards, as well as countries that maintain artificially low currencies. Part of the answer is to re-impose cross-border capital controls. After all, if we’re going to be creating a policy regime that favors investment in the building of new infrastructure over the next decade or two, why does anyone need to transfer huge flows of capitals overseas? In short, we need to return to the type of strictly managed international monetary system that characterized the post-war quarter century, before Nixon – on the advice of an Undersecretary of the Treasury named Paul Volcker – destroyed the Bretton Woods agreements by abandoning managed exchange rates for the dollar.

Of course, the political power of the financial oligarchy makes it difficult to envision actually achieving the types far-reaching financial reforms required to force financial flows back in alignment with the needs of the real economy. Does that mean that we will be forced to borrow, on the banksters’ terms, the trillions of dollars needed to build tomorrow’s infrastructure?

This is almost the same problem Abraham Lincoln faced in financing the Civil War. Confronted with the immediate need to arm, equip, feed, and transport new armies tens of times larger than the pre-war U.S. Army, Lincoln sent emissaries to the big financial centers of Boston, Philadelphia, and New York, and was disturbed to be offered loans with staggering interest rates of 24 to 36 percent. What Lincoln finally did was to direct the Treasury to issue its own notes, usable as legal tender, in direct payment to soldiers and military contractors. These Treasury notes became known as “Lincoln greenbacks,” and the banksters absolutely hated them.

The same can be done today. Say a construction company gets a $10 million contract to help build a high speed rail line. The Treasury simply issues $10 million in new notes directly to that company, to pay its workers and vendors. Since the Treasury Notes are legal tender, workers and vendors can use the Notes to buy food, clothing, pay bills, and so on.

Because these new Treasury notes issued as legal tender would be directly linked to the building of new infrastructure, there is no danger of creating hyper-inflation. The new infrastructure is new national wealth, and as long as new wealth is being created, there is no problem with an increase of new money.

This is the big secret the banksters fear you will learn - there is no need to borrow from them, ever, at all, for anything that the national government does. (Special plea – there was a website that had some useful quotes from a handful of central bankers who marveled that people just don’t realize how simple banking really is. Now I can’t find it. Does anyone have it?)

Conclusion
A massive program of building new infrastructure would not be all that different from what Franklin Roosevelt and the New Deal -- and the industrial mobilization for World War Two -- did. Very simply, we would have to put people back to work producing real goods again. Building infrastructure requires a lot of steel, concrete, wood, fasteners, insulation, pipes, valves, gaskets, wiring, electronic controls and all types of other material, not to mention lots of construction equipment And the money to do it will come from forcing the financial system to stop gambling and arbitraging. The issue is to create and implement policies, regulations, and laws that discourage and penalize financial speculation, usury, and economic rent, thereby forcing the flow of credit back into big construction projects and the industries that support them. In other words, we need to change the rules of the game, so that nation building is the order of the day, not speculation, gambling, greed, and big bonuses.

We can create 11 million new jobs if we want to. So, I want to end with this quote again,

Some men see things as they are and say why. I dream things that never were and say why not. —Robert F. Kennedy

Are you asking why? Or why not?

Meta: 

Comments

where are you getting 27k jobs per $1 B funds?

Seriously. Even assuming all of that $1B went towards wages, that's $37k per worker. Of course with large infrastructure projects, you're talking a lot of capital. Heavy equipment then one needs engineers, management, logistics to do that work.

I don't think those numbers are realistic and unfortunately these assumptions, which are not spelled out are how you are titling your post 19 million jobs.

Sorry Tony, I'm a math head, plus involved in real world projects and that's just not adding up.

When doing any sort of large construction, infrastructure types of projects, materials and heavy equipment, are going to be a huge portion of the total costs.

Then, beyond unskilled labor, for heavily skilled labor to engineers, I don't think $37k is anywhere near market value.

but what I do really like on this post is connecting just how much U.S. GDP is lost by ignoring crumbling infrastructure.

What you are quoting is 3.16% of GDP can be attributed to inefficiencies in national transport systems.

We need more of those types of numbers....because that makes sense to pour money into infrastructure projects. You can see the overall economic pay out by investing in America through public works projects.

We also need to verify those GDP projections.

I'll also note that much of the original infrastructure was done via the New Deal in the 1930's direct jobs programs as well as Eisenhower's highway projects (Eisenhower would be called a radical socialist in today's world).

Tariffs are ruled illegal by the WTO and are also a "sledge hammer" type of tool to rebalance trade. That's why a VAT is so attractive, it has the features of a surgeon's scalpel. It can be changed dynamically, daily and per individual item, not entire sectors as a tariff is.

I keep writing many times there are much better tools and policies available to balance trade. I don't know why people are still stuck on tariffs as the only option. It's not.

I'm all for infrastructure projects to be chosen for a direct jobs program as well as public works, but Tony, I think to present this idea one needs realistic numbers from real world large civil engineering types of projects. We have many to choose from so getting accurate estimates on total number of jobs created and overall costs should be out there already, or at least could be projected from recent past projects.

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Hi Robert ! Umm, I think you missed the section

subtitled "Where do the job numbers come from?" which has links to sources.

Yes, there must be a better way to manage trade than tariffs. Unfortunately, I've not learned much of a better way, so "tariffs" is what comes out in the "heat of the moment" of writing. I do, however, believe that the WTO and GATT will have to be radically reformed, if not replaced altogether. The real problem that must be solved is "regulatory arbitrage," not of financial regulations (though this is a big, albeit familiar problem, also) but labor safety and environmental regulations as well. I don;t even know if WTO and GATT even consider these problems; I very much doubt it.

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sorry, I checked, not there

a link to a political press release and a very large PDF and I even searched the PDF for estimates....does not tell me where one is claiming $1B creates 27k in jobs.

The AAM study sites 18k jobs per $1B investment. On top of it, they are using generalized multipliers. Specifically a consumption multiplier. This is not the same as specing out a very specific project, budgeting it, calculating it's GDP impact per jobs and jobs created.

The Senate Democratic Caucus, odds are it's worse, note they are quoting a transportation secretary. Dude, where's my spreadsheet? (;)) I'm just about to write some things about use of multipliers via the latest CBO report and if you note....obviously that jobs creation projection is way off and there are good reasons why it's way off.

So, you need to not only pull out that quote, but also cite what model, project estimate they are using to claim such a figure.

If you're going to claim increase of ~12% of the U.S. labor market jobs (and I'm low balling, in terms of total number of jobs currently, 132M, try an increase of 14%, of course that's not accounting for job destruction as well as pop. growth over 10 yrs.), would be magically created in a post title, be prepared to back it up.

Sorry, but as much as I'm in favor of direct jobs infrastructure projects, the site motto is no economic fiction, which implies one needs to back up their numbers explicitly. In addition, if you want to see a direct jobs program based on critical infrastructure projects...it adds credibility to make sure all of your number ducks are straight in a row.

That includes the "left". Frankly the Stimulus projections are a political debacle. While I'm sure Keynes was rolling in his grave over the implementation of Stimulus...bottom line is this is, instead of pointing out they did not implement true Keynes....is hurting the entire credibility of Keynesian economics because results ain't materializing considering the $787B price tag.

If I, an obviously friendly reader, question it to the point the title makes me shake head and immediately dig for where someone is getting their numbers, you can bet our most hostile readership is also.

On top of it, infrastructure projects are pretty damn explicit, so there really is no reason they cannot plain spec out each project, included estimated timeline, costs, capital requirements, needed personal and so on and use those very exact numbers.

On trade, jez, I guess you aren't reading my posts. Gotta be a tally of over 50 on various policy, tools on trade that do not involve tariffs. That's a bummer, I try so hard to make people aware of other policies, legislation possibilities, tools and on top of it link in the middle column to a host of other sites promoting similar actions.

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The employment multipliers are in there

but perhaps we're each looking at different documents.

In the How Infrastructure Investments Support the U.S. Economy: Employment, Productivity and Growth from PERI in January 2009, page 25 includes "Table 3.1. Estimated employment effects of increased infrastructure spending,” listing employment multipliers by type of infrastructure spending. Just like you said, there are different multipliers for different types of infrastructure. Sigh. And I promised the wife I would help get the Christmas lights up.

Appendix B discusses “The Input-Output Model and Employment Multipliers” on pages 49 – 53. And Appendix C discusses “Induced employment effects” on pages 53 – 54.

Having long ago lost the ability to solve a differential equation, I will have to rely on you to peruse the appendices and see if they are accurate. At the very least, look at the table of multipliers and see if they look acceptable.

I will do a spreadsheet tomorrow morning and correct the diary with the resulting numbers.

As for not reading your blogs on trade, please accept my sincere regrets. I've had little opportunity to read (and write) blogs until this past week, having been on the road almost constantly since the end of June. At least now I know where to find some material on trade worth reading.

 

 

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Enjoy your Xmas lights

Seriously. You might change the title to "Gobs" for the moment.

The AAM doc. is very well done. So, for multipliers they have 18k per $1B but in direct, explicit jobs they have a baseline for calculated jobs per sector, which I haven't found their totals yet, still reading but they are obviously much lower but also should be much more exact.

At minimum I think that's much more realistic than $27k per $1B.

I really want to see infrastructure spending happen, with real jobs and I also want a very strong "buy American" on materials plus tie the jobs to U.S. citizens, legal residents.

I'm concerned because the stimulus is already getting blasted to hell and today I did too, because of using some extremely biased commercial modeling companies who magically find for their clients....well, what they want to hear in so many words.

So, right out of the gate, any more deficit spending is under enormous attack. Personally since they have not spent about $676B of the original stimulus, I've love to see some of those funds plain redirected to an infrastructure, direct jobs program.

Here's another thing, for tax cuts multipliers are used also and there too, because the results are not adding up, so then the claim is it would be "much worse" instead of considering something is wrong with the models w.r.t. global economy and domestic spending pouring overseas.

Anyway, I do have my diffy-q intact so I'll take a strong look at this doc. I have poo pooed some of these models and noted they ignore the phantom GDP, did some posts on that (due to offshore outsourcing as well as productivity) but I haven't dug into the mathematics yet. TBD.

Anyway, it's the post title that's flipping me in this "scan and pan" blog world.

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Exempt / Nonexempt employment

One thing that I don't think I have ever seen discussed in an employment post is the affect that exemption from overtime has had on, in particular, the white-collar workforce. I know that in every company I have ever worked for, it has been a law freely violated by the employer - practically everyone in the company would be designated as exempt from overtime - which technically requires the person to be a "professional" and, if I am not mistaken, in some kind of decision-making role. IT, in particular, aggregiously violates this law. Every place I have ever worked, the lowest help desk worker - who is bound to be on the phones for a certain number of hours each day, has no decision-making authority, has no direct reports, etc., is considered exempt and worked 60 hours a week for a salary without overtime.

I wonder how many jobs we would create in this country if this law were actually enforced? Sure, some employers might decide to pay the overtime, but others might choose to simply add staff appropriately.

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Millions of workers work Millions of unpaid OT hours

GREAT comment Mr Anonymous !!

I am in IT, and I routinely work 60 hours a week, 20 hours of which is UNPAID.

Here's just a little factual info to back up your excellent point.

A large Financial Company I worked for a few years ago, was doing a multi-year System Redesign project , in which they required every worker to work 72 hours per week ( 12 hours for 6 days ). Only 40 hours was paid of course, so each person worked 32 hours of unpaid work every week. And there were over 300 people on the
project which lasted over 2 years.

Just that one company, which made billions of dollars in profit, could have hired another 300 people for that project alone, but instead they abused their employees and took advantage of the 'exempt employee' status :)

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Now my head hurts

I was shocked to find that using the AAM / PERI multipliers for specific types of infrastructure yielded employment numbers much higher than what I had come up with 27,000 as a multiplier. So I thought I had made a huge error in my previous calculations somewhere using that 27,000 multiplier. After a few minutes of anxious recalculating, I remembered that I had not used the total amounts of infrastructure spending, but had used one fifth of the Civil Engineers' repair total, and one tenth of the new infrastructure total, to account for the programs being spread out over five and ten years, respectively.

So now I'm going through the AAM / PERI to see how they handled the problem of annualizing the spending.

It also occurred to me that there is no number in my original table of new infrastructure for new roads and bridges, which is likely to be a huge amount.

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quick note

and I'm now sort of mathematical touristing through some of the models...but one thing I saw immediately in the AAM report, which gives more credibility to me, they assumed materials would be mandated to "Buy American" and it appears they also assume workers, location would be American. this is my main beef so far with these models, not a single variable do I see for imports to outsourced labor to raw funds going offshore. But hold on, I'm still digging around, playing mathematical tourist.

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jobs summit, political clout

I just realized EPI, who has enormous political clout, is touting a really god awful direct jobs plan. Seriously. I linked to it 2x. While I'm still reading the AAM document, frankly this is so much more effective, efficient and has such much needed "payout", from real skills training on the job to adding to the national economy....it's miles above what this crapola is from EPI (and I link to EPI for a reason, they usually recommend some fairly good policy).

So, glad to see you changed your post title but I think we're in for more political wrangling instead of objective analysis on this jobs summit....in terms of what's the best bang for the buck.

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