Fix Infrastructure – But Not With Blank Checks

Repairing infrastructure can help repair economy – The Washington Post.

Barry Ritholtz, author of Bailout Nation and finance blog The Big Picture offers his list of infrastructure projects that the U.S. needs to undertake in order to ensure our future competitiveness.

While he draws some of his data from a report by The American Society of Civil Engineers (which, apart from being a professional association, is also a lobbying organization with a political point to make), Ritholtz is correct when he notes:

We still enjoy the benefits of the interstate highway system, which allows goods to be moved cheaply around the nation. Innovations at NASA led to many new products and industries, including innovations in the semiconductor, satellite and mobile computing sectors. And DARPAnet? You might recognize that as today’s Internet. All three are massive economic wealth generators, filling a role that is too long term and too expensive for the private sector. [Emphasis mine]

Ritholtz makes an essential point. Whatever the virtues of the private sector, long-term vision and a willingness to make investments of this nature are not among them. Nor should they be. Some infrastructure and research needs to be government-driven, or it simply would not happen, to the detriment of us all.

What we should not do, however, is write checks for infrastructure projects without thinking through the process and oversight first. The nation has plenty of money to spend on roads, ports, the grid, and future-oriented research, but it does not have a single penny to waste. As important as infrastructure reconstruction is to this country, a massive project of this nature can all to easily turn into a morass of waste, inefficiency, corruption, and worse.

History has proven that organizations both public and private will, if left to their own devices, become bogs of lousy performance, especially when the taxpayer is paying the bill. We need to stop trusting both businesses and bureaucracies to do things right: we need to build performance standards into every contract, and painful penalties for failure to perform.

Hung Up on Size

In a thoughtful Wall Street Journal editorial, Michael Barone condemns as misguided what he perceives liberal nostalgia for World War II, an era where big government accomplished historic things and Keynesian spending yanked the nation out of the Depression. He takes liberals to task for failing to realize that “Big Government, Big Business, and Big Labor” turn ordinary people into faceless cogs in a very large machine.

Barone is not wrong. Any large institution tends to eat away at individualism, and the larger governments, corporations, and unions get, the more the welfare of the individual is subsumed by the need to attend the flock. (To his list of “Bigs” I would add Big Education, Big Science, and even Big Church.)

Ironically, Barone misses a point. Faced with a global onslaught of facism, itself the total mobilization of government, industry, labor, education and science in an effort to conquer the globe, the centralization of political, industrial, and labor institutions was the only logical response. Big government, in that case, was the appropriate response.

Where Barone and other libertarian conservatives are correct is in contending that big government is not the appropriate solution to every vexing issue. Where they are wrong is in their fearful orthodoxy that implies that the only good institution is a tiny one – or a dead one – regardless of circumstance.

We need measures of institutional virtue that rise above the crypto-Freudian obsession with size, that adjudge effectiveness, efficiency, relevance, and costs in a more thoughtful way than simply watching budgets and counting noses.

American history proves that big government can be great, and it can be awful; that big labor can be a force for progress and human dignity at some times, and at others it can suck the lifeblood out of an industry or an economy; and that big business can be the engine of prosperity for the many, or a source of enrichment and empowerment for an aristocracy of merchants and financiers.

Our quest must be to seek the point of balance and to constantly evaluate how it is shifting. Using a simple measure like size is, to borrow from H.L. Mencken, simple, workable, and wrong. Such thinking makes for great sound bytes, but the tools of demagogues too rarely craft good policy.