A Modest Proposal...

There are a lot of moving parts to the U.S. economy today. Let me focus on just two. The first is the general feeling of anger across the country.  As Robert Samuelson the columnist in The Washington Post said recently, “the sense of boundless optimism and national superiority that characterized the boom years” of the 1990s is gone. Much of the appeal of Donald Trump comes from this pent up anger.  

The second thing is, the economy has improved significantly since 2009, employment is up but productivity has gone virtually nowhere.  Usually in an economic expansion the number of widgets a worker produces per hour goes up as demand increases.  Not this time and no one is exactly sure why.  

Well one modest proposal from me here might address both these issues. We should invest in Infrastructure. And I mean in a big way. This is not a novel idea I concede but it is something we desperately need. Travel to Emerging countries, especially China, and see all the new airports, subways, fast trains, roads, etc.  In our nation’s capital the Metro (built as recently as 1974) is in such bad shape they are closing down whole lines due to fires and outages. We need a shot in the arm like the Interstate Highway System of the 1950’s or the Los Angeles Aqueduct or the Hoover Dam from earlier decades.  The chart below shows the grade that the American Society of Civil Engineers gives America’s overall infrastructure.  Pretty dismal, a D+, that’s not even sliding by.

So what’s to be done?  Let’s borrow some money, some serious money. Interest is so cheap today, why not?  Italy, not a paragon of economic virtue, recently issued 50 year bonds at an interest rate of 2.85%.  France a little earlier raised 50 year money at 1.36%.  Why can’t we issue bonds for 50 years, maybe even 100 years at 2 to 3% and jump start a system that was built 100 or 150 years ago?

Now I know the refrain, we can’t possibly do this, debt is already way too high. Publicly held government debt is 80% of GDP now. The only time it was significantly higher was during World War II. I appreciate all this, especially since we have other things to pay for like Medicare/Medicaid and Social Security which gobble up everything we feed them.

But rates will never be lower (probably) and our infrastructure has never been in more need. So I say, time to bet the ranch. Let’s start the bidding at one trillion dollars for 50 years! That would buy a decent amount of “stuff”.