Infrastructure Spending needs to Triple

Posted by Michael A. Kamperman on June 12, 2011

In the rush to cut spending the easiest thing to cut is often infrastrucure spending on roads and waterworks.  Projects on the drawiing board are simply delayed.  But it is precisely these types of projects that create jobs in the private sector.  For the most part governments don’t build bridges, they pay for bridges to be built by the private sector.  Not enough attention has been paid to the fact that a lot of government spending directly supports private sector jobs.  There is a lot of talk about the 3 million job openings and all the out of work job seekers that don’t have the skills to fill these jobs.  But for the most part there are people with the skills to fill almost all of these positions.  In an economy with almost 140 million jobs 3 million jobs is only 2% of the workforce and represents natural attrition.  There are 25 million people seeking full-time work.  The jobs issue is not a structural problem with workers without skills to compete on the global stage.  The jobs issue is a demand issue.  We need a lot more than 3 million job openings to put 25 million people to work.  Tripling infrastructure investments will create well over 1 million jobs and will make our nation safer and more productive.

The narrative about whether or not the debt and the deficit is a threat is critical because the urge is to cut infrastructure spending in Washington rather than increase infrastructure spending to create jobs.  No country that owes everyone in their own currency needs to worry about debts and deficits.  Japan has the highest debt to GDP ratio in the world, higher than Greece, and yet they enjoy the lowest interest rates in the world because they owe everyone yen.

Unfortunately, the President has bought into the structural unemployment story about job seekers not having the right skills rather than the country not having enough demand for 25 million people.  This week another economic adviser has abandoned the President when Austan Goolsbee resigned as the Chairman of the Council of Economic Advisers after only a few months on the job.  The reason is there is no policy that can effectively create jobs if the emphasis remains on cutting cutting cutting.