Wednesday, August 17, 2022
Green Reporter
  • Home
  • Biodiversity
  • Climate Change
  • Energy
  • Filmmaking
  • Food
  • Investment
  • Management
  • Sustainability
  • Technology
  • Transportation
No Result
View All Result
  • Home
  • Biodiversity
  • Climate Change
  • Energy
  • Filmmaking
  • Food
  • Investment
  • Management
  • Sustainability
  • Technology
  • Transportation
No Result
View All Result
Green Reporter
No Result
View All Result
Home Investment

Inflation, foolish priorities will zap infrastructure investments

GrR by GrR
March 2, 2022
in Investment
0
55
SHARES
238
VIEWS
Share on FacebookShare on Twitter


Nicole Gelinas

President Joe Biden’s only legislative accomplishment is the Infrastructure Investment and Jobs Act, signed about 100 days ago. The $1.2 trillion law is supposed to “rebuild the backbone of this nation,” as Biden said.

But a trillion-and-change dollars doesn’t buy as much back surgery as it used to. Thanks to runaway inflation, we’ll have to squint to see anything “transformative.” 

The law was always going to be less “historic” than the president billed it.

No matter who is president, the country spends tens of billions of dollars every year on roads, bridges, flood protection, transit and the like. In December 2015, President Barack Obama signed into law a $305 billion, five-year plan, meaning $61 billion a year. Spread over 50 states, it (mostly) kept the bridges from falling down.

What about the latest law? Despite the 10-figure price tag, it provides only $550 billion in new spending, over the new Obama-level normal, over a decade. That is, $55 billion a year. 

OK, a 90% increase over Obama-level spending sounds like a lot. 

But: That assumes the dollar keeps its Obama-era value. Already, you have to spend $119 to buy what $100 bought in late 2015.

Drivers navigates orange cones used to route traffic through a project to replace old water lines.
Obama signed a $305 billion five-year plan in 2015 to help maintain infrastructure.
Charlie Riedel

Much of that fall in the dollar’s value came in the past year. Thanks to our current 7.5% inflation rate, the highest in 40 years, you have to spent $107.50 to buy what a dollar bought just last January. 

So compared with what $55 billion a year would have bought, in new roads and bridges, in 2015, we’re down to $46 billion a year in new spending, or a 75% increase over Obama-era levels. 

But inflation in the building industry is running even higher. As The Wall Street Journal reported last week, construction inflation is up 13% from a year ago. Steel, cement, fuel — the price of everything and everyone is up.

The West’s failure to deter Russia from declaring war on Ukraine won’t help these figures. 

If the Federal Reserve can’t rein in inflation with higher interest rates, these numbers compound quickly. Four years of 7.5% inflation shaves 30% off the value of the infrastructure bill. Four years at 13% inflation shaves more than half off. 

A road construction crew repairs underground pipes
Construction inflation is up 13 percent from a year ago.
Robert Nickelsberg

You can say that the Fed would never allow inflation to rage for so long. The problem is that for four decades, the country has had no real tool for growth but massive debt, powered by low interest rates. Without cheap debt, it is hard to consume as much as we do — and consumption powers the economy.

Households, business, the government itself — adjusted for inflation, we all owe four times what we did in the early 1980s.

It’s not so simple as to say, “Just raise interest rates.” After a decade of zero and even negative interest rates, it’s really hard to do in practice, as the Fed will soon find out. What do house prices look like when mortgage rates are 8%? 

Biden didn’t create this problem — but he hasn’t tried to fix it. He proceeds as if more money can fix any problem. 

Construction workers make infrastructure repairs on the intersection of Church Avenue and Coney Island Avenue in Flatbush, Brooklyn.
Due to the inflation rate, the budget allocated for infrastructure doesn’t stretch as far as it used to.
Michael M. Santiago

Rather than fixate on a trillion dollars, the White House and congressional Democrats should have decided what infrastructure is important. Instead, they’re obsessed with electric cars, to show how green they are.

The law spends $7.5 billion to build a network of vehicle-charging stations. Not much — only when you don’t think every dollar is important. Why aren’t automakers paying to build out this network, under federal supervision to make sure it is consistent across brands? 

Then there’s $25 billion to airports — when a functional airport should pay for itself, through airline fees. 

It’s not even so much an ideological argument. We’re all going to fly in a plane and, presumably, ride in an electric car, so who cares who pays? 

Men at work sign near truck in Queens.
Inflation rates hit a four-decade high in February.
Lindsey Nicholson/UCG

But the private sector has a prayer of keeping costs down in a high-inflation environment.

The government, by contrast, wants to keep costs up. The infrastructure law has no provisions for making the inefficient and opaque construction industry — the part of it that depends on government contracts, at least — more productive. 

We haven’t begun to see what inflation-fueled wage hikes, as opposed to increases in the price of materials, will do to building costs. Half of construction-project budgets are labor, and construction workers will be asking for big raises. 

We’ll spend more on infrastructure. But we might not get much more infrastructure.

Nicole Gelinas is a contributing editor to the Manhattan Institute’s City Journal.



Source link

Previous Post

Nandan Nilekani: ‘Pandemic, climate, and now third crisis is an intensely digital world’

Next Post

Ron Howard, Gillian Jacobs & Pete Buttigieg Among Final Speakers Set For SXSW – Deadline

GrR

GrR

Green Reporter is a global source for news of sustainability, green industry, green technology, clear energy, sustainable food production, and green investments. Our aim is to deliver the best news and information to you.

Next Post

Ron Howard, Gillian Jacobs & Pete Buttigieg Among Final Speakers Set For SXSW – Deadline

  • Trending
  • Comments
  • Latest

Climate change in our backyard: Manitoba begins to grapple with the consequences – Winnipeg

August 10, 2021

Repsol starts marketing debut sustainability-linked bond sale

June 29, 2021

Sustainability Ambitions Soaring at KCI

December 6, 2021

Chris Pratt explains where the White Spikes originated

July 3, 2021
Stop burning our rights! What governments and corporations must do to protect humanity from the climate crisis – World

Stop burning our rights! What governments and corporations must do to protect humanity from the climate crisis – World

Biden said to mull dropping corporate tax hike to fund jobs plan

Biden said to mull dropping corporate tax hike to fund jobs plan

Global investors pressure Asian utilities to cut emissions

Global investors pressure Asian utilities to cut emissions

Global inequity could derail path to net zero

Global inequity could derail path to net zero

What’s With A24’s Religious Obsession?

August 12, 2022

Governor Hochul Announces Completion of $16 Million Affordable Housing Development in Monroe County

August 12, 2022

EU ban on Russian coal enters into force

August 12, 2022

Immune system insights and Thai climate calculator: News from the College | Imperial News

August 12, 2022

Recent News

What’s With A24’s Religious Obsession?

August 12, 2022

Governor Hochul Announces Completion of $16 Million Affordable Housing Development in Monroe County

August 12, 2022

EU ban on Russian coal enters into force

August 12, 2022

Immune system insights and Thai climate calculator: News from the College | Imperial News

August 12, 2022

Recent News

What’s With A24’s Religious Obsession?

August 12, 2022

Governor Hochul Announces Completion of $16 Million Affordable Housing Development in Monroe County

August 12, 2022

EU ban on Russian coal enters into force

August 12, 2022

Browse by Category

  • Biodiversity
  • Climate Change
  • Energy
  • Filmmaking
  • Food
  • Investment
  • Management
  • Sustainability
  • Technology
  • Transportation

Follow Us

  • Privacy & Policy
  • About Us
  • Contact Us
  • Advertise

© 2021 Copyright Green Reporter

No Result
View All Result
  • Home
  • Biodiversity
  • Climate Change
  • Energy
  • Filmmaking
  • Food
  • Investment
  • Management
  • Sustainability
  • Technology
  • Transportation

© 2021 Copyright Green Reporter