Swapping drilling for spending?

posted at 8:41 am on March 27, 2013 by Ed Morrissey

Maybe this was inevitable after Senate Democrats started passing budgets again after a four-year hiatus.  That was the last time we heard about using infrastructure spending as a stimulus, when it flopped in Barack Obama’s ARRA program, otherwise known as Porkulus.  One of Obama’s advisers at that time, former OMB director Peter Orszag, warns that the nation’s infrastructure is ready to crumble unless we start spending big money to rescue it — and now, apparently, is the “perfect time” to start borrowing heavily to do it:

Roads, bridges and other infrastructure in the U.S. are steadily growing older and weaker. Given low interest rates and elevated unemployment, this is an ideal moment to invest in fixing them.

Our structures are aging as fast as we are. From 2000 to 2010, the median human age in the U.S. rose by almost two years, from 35.3 to 37.2, and the average age of nonresidential corporate fixed assets increased by about the same amount. Fixed assets as a whole aged from an average of 20.7 years to 22.1.

Does age matter? Unfortunately, with infrastructure it does.

December 2010 report from the Department of Homeland Security underscores the threat. “Age,” it says, “often acts together with and may reinforce the effect of other factors such as design, maintenance, and operation in increasing the vulnerability of infrastructure.”

How do we find the money for this — which Orszag says will require $250 billion up front? Easy — issue bonds:

First, we need to couple immediate federal spending on public assets with substantial, credible deficit-reduction measures that are scheduled to take effect later on. Such a “barbell”approach to fiscal policy would require that Republicans acknowledge the value of additional stimulus while the unemployment rate is high, and that Democrats see how Medicare, Medicaid and Social Security could be preserved and strengthened through certain cost-saving measures over time. The upfront piece should include an ambitious $250 billion infrastructure program (including federal, state and local spending) over the next two years.

Second, we should bring back Build America Bonds. The traditional approach to state and local infrastructure financing allows the interest on the bonds to be excluded from federal taxation. That approach has been shown to provide undue benefit to purchasers in the top marginal-tax bracket. Build America Bonds, in contrast, provide a direct subsidy to the borrowers, and thereby deliver more of the federal subsidy to the state and local governments.

More than 2,000 Build America Bonds were issued in 2009 and 2010, and the Treasury Department has estimated that state and local governments have saved $20 billion in present value as a result. It’s time to bring the program back.

Good thing we paid off all the borrowing from Orzsag’s last round of stimulus and infrastructure spending, huh? Oh, wait

Here’s a good question to ask: just how bad is our infrastructure? The Obama administration certainly likes to tell scary stories about it, but after the Nightmare on Sequester Street, a little double-checking might be in order.  Rick Newman at US News revealed yesterday that American infrastructure isn’t anywhere near as bad as politicians like to claim when demanding more spending:

We’ve gotten so used to the narrative of America as a has-been nation that we tend to readily accept all evidence of decline. But if America has a critical infrastructure problem, business leaders aren’t aware of it. In its latest global competitiveness index, the World Economic Forum ranked the United States 14th out of 144 nations for the quality of its infrastructure. The top 10 were dominated by small places such as Singapore and Hong Kong, along with European nations with proficient rail systems and strong labor unions able to lobby effectively for construction projects. The United States, by contrast, is a huge landmass with inherent infrastructure challenges. So 14th is a pretty good showing.

Yet many news outlets duly reported the ASCE grade as if broken-down America is a fact beyond dispute. This woe-is-America storyline matters for a couple of reasons. First, the ASCE’s grade is regarded as authoritative. It’s routinely cited by politicians to lobby for more infrastructure spending, or to prove that America is going down the tubes under the current leadership (which, naturally, ought to be replaced). Second, it contributes to a declinist mentality which itself may be one of America’s biggest problems.

In real life, things often work better than the ASCE grade suggests. Take aviation, one of 16 categories ASCE analyzes, which earned a D in the latest report. The reason: Delays caused by congestion supposedly cost the economy $22 billion in 2012, with government projections claiming they’ll cost $34 billion by 2020 and $63 billion by 2040.

Yet in some ways, the aviation system is more efficient than ever. In 2012, nearly 84 percent of airline flights arrived on time, the highest percentage in the 17 years the government has been tracking such data. The rate of mishandled baggage hit an all-time low. Airfares, meanwhile, were 15 percent lower than they were in 1995, accounting for inflation. And aviation safety consistently improves, with airplane crashes now extremely rare.

What is ACSE, you may ask? ACSE is the American Society of Civil Engineers, the same industry that would benefit from a lot more government spending on infrastructure.  Their rating system, Newman points out, doesn’t suffer from grade inflation as a result:

So it’s curious that the engineers who build those roads and bridges rate America’s infrastructure as far worse than most of the public would if you asked them. In its latest report on the state of the nation’s infrastructure, the American Society of Civil Engineers gave the United States the shocking grade of D+. If there’s any good news, it’s that the latest grade improves on the D handed out the last time ASCE published such findings, in 2009.

“Curious”? I’d call it “rent-seeking,” but then again, I’m just a big old cynic when it comes to demands for increased public spending.  The rent in this case is $157 billion a year, by the way:

The ASCE wants government at all levels to spend $157 billion more per year to repair and maintain all those systems. It’s unlikely to happen: That would be nearly twice the $85 billion in federal spending cuts that just went into effect under the sequester.

John Boehner has a proposal for Democrats who want to talk infrastructure spending.  He’s willing to increase the allocations for that purpose, but only if the money comes from a specific new source of revenue:

As Congress continues to hunt for ever-elusive money to rebuild roads, bridges and transit systems, House Republicans are likely once again to turn to black gold.

In the tax-averse and conservative-heavy conference, transportation interest groups’ ideas about raising the gasoline tax or looking at distance-based fees are a tough sell. But expanding oil and gas drilling and using those revenues for infrastructure improvements represent what Speaker John Boehner has called a “natural link.”

That’s one way to test whether Democrats are serious about infrastructure repair, or are looking only to create more pork-barrel projects for people back home — as the ARRA “Porkulus” did in 2009 and 2010.


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250 billion … to pay off cronies, stuff pockets, and finance campaigns.

Leftists have been feasting off the taxpayer for decades. They finance their agenda through us.

darwin on March 27, 2013 at 8:49 AM

The ASCE wants government at all levels to spend $157 billion more per year to repair and maintain all those systems.

Why not? What’s another $157 billion when we’re already spending a trillion more a year than we take in?

Doughboy on March 27, 2013 at 8:50 AM

Let the Congress defund all those oh-so-important departments dotting D.C. landscape like flies on a pile of cow dung, and we’ll have plenty of money for infrastructure repairs. Republicans should adopt “for the children” mantra – it cuts both ways.

Archivarix on March 27, 2013 at 9:01 AM

First, we need to couple immediate federal spending on public assets with substantial, credible deficit-reduction measures that are scheduled to take effect later on. Such a “barbell”approach to fiscal policy would require that Republicans acknowledge the value of additional stimulus while the unemployment rate is high, and that Democrats see how Medicare, Medicaid and Social Security could be preserved and strengthened through certain cost-saving measures over time. The upfront piece should include an ambitious $250 billion infrastructure program (including federal, state and local spending) over the next two years.

Trust us, Republicans. You grant us our payoffs to environmentalists and labor unions and we’ll follow through with entitlement reform at some undetermined point in the future. We promise.

FIFY. (Bait and switch has been tried too many times lately (e.g., fiscal cliff).)

blammm on March 27, 2013 at 9:07 AM

$157 billion, that’s about 3 to 4 acres of new money trees. Certainly we can find 4 acres to plant those trees on, yes?

Bishop on March 27, 2013 at 9:12 AM

Two Cents from the Public on half of the subjects here:

55% Favor Cuts Over More Spending on Education, Clean Energy, Infrastructure

Source: Rasmussen,Thursday, February 14, 2013

The Bad News:

MEDIA IGNORES GAO REPORT: DEFICIT UNSUSTAINABLE

Source: Breitbart, 01/22/2013

IlikedAUH2O on March 27, 2013 at 9:13 AM

The crossed fingers of those who vote against spending.

If you are in office you ignore calls for road and bridge repairs at your peril.

Like weird weather, the left just waits for a disaster then cuts loose the media.

The whole spending discussion has to be held in light of the overall debt and economic situation. And the media is misfiring.

Does anyone remember a “failure to scare” like the sequester horror show? They will make up for it with a chance, however.

BTW, I guess there is no hope for hold the media accountable in a lawsuit like we would home security firms that just ignored selected problems.

…just grasping at straws since my antitrust theory got yuks.

IlikedAUH2O on March 27, 2013 at 9:25 AM

Rush has been saying it for over 20 years now. They have One Game Plan.

One that’s proven to be a galactic failure, to the tune of $17 trillion in debt. Obama’s legacy will be the biggest spending president of all time.

Who delivered nothing but divisiveness and very expensive votes.

fogw on March 27, 2013 at 9:28 AM

When Obama says infrastructure, he means $10 for high speed rail and solar panel plants for every $1 for roads and bridges.

petefrt on March 27, 2013 at 9:30 AM

As Congress continues to hunt for ever-elusive money to rebuild roads, bridges and transit systems, House Republicans are likely once again to turn to black gold.

In the tax-averse and conservative-heavy conference, transportation interest groups’ ideas about raising the gasoline tax or looking at distance-based fees are a tough sell. But expanding oil and gas drilling and using those revenues for infrastructure improvements represent what Speaker John Boehner has called a “natural link.”

This sounds like a good idea, but the Federal Government could only collect drilling-lease fees on Federal land. Some states, notably Virginia, have been debating the idea of leasing offshore drilling sites with the STATE collecting the royalties, since the state would have to bear the cleanup costs in the event of an oil spill. For offshore drilling, there may be some debate about the share of royalties to be collected by the Federal Government and by coastal states.

Ironically enough, the idea of states collecting taxes on offshore drilling leases and using the money to improve (state) infrastructure, and wean the state from dependence on Federal subsidies, was first implemented by a Governor renowned by the MSM as a brainless beauty–Sarah Palin. An idea so ridiculously stupid that the Speaker of the House now proposes it for the Federal Government–maybe Sarah Palin wasn’t as stupid as the media thinks!

Steve Z on March 27, 2013 at 9:32 AM

EVERYTHING Democrats want to talk about is in CRISIS!

GarandFan on March 27, 2013 at 9:36 AM

We need good-paying union jobs; putting people to work tearing down perfectly good overpasses and then rebuilding them, unnecessarily repaving long stretches of highway, building bridges that go nowhere, and creating the sort of jobs that allow even more union money to flow into Dog Eater’s coffers.

Bishop on March 27, 2013 at 9:37 AM

So I guess that bridge I want to sell them needs to be inspected…

hillsoftx on March 27, 2013 at 9:47 AM

How about I build them a short pier with my money?

RDE2010 on March 27, 2013 at 9:53 AM

From the headline I thought this was another gay marriage thread.

happytobehere on March 27, 2013 at 10:02 AM

I thought we fixed all the infrastructure. I remember seeing all the signs around telling me

ctmom on March 27, 2013 at 10:07 AM

Beohner is an idiot and an apologist RINO. Oba-mao is a blatant communist out to destroy the Republic. He said so in his book, but liberals salivate over his every word. Communist and a traitor. Impeachment for violating his oath of office.

ultracon on March 27, 2013 at 10:28 AM

Don’t fall for it…the “set aside” for public lands in the other thread is the key…their won’t be drilling on lands set aside, and it just so happens the new gov. lands will be oil rich…

right2bright on March 27, 2013 at 10:56 AM

The GOP need to remind people that President Obama promised us that he would cut the deficit in half after his first term. He even instructed the Democratically controlled Congress to write a bill that would allow him to succeed. It was called the “Pay As You Go” law. However, it has never been followed. The GOP need to remind the American people that this was a Democratic bill and they need to adhere to the guidelines. Of course, their argument will be for added revenues, but we need to get this law out in front of the people again.

djaymick on March 27, 2013 at 12:10 PM