This
commentary is about setting up a government infrastructure bank. We will talk in a few weeks about the causes and consequences of government debt. This article is about one aspect of that - is government debt a bad thing if it funds productive investments?
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The Financial Times article, “Infrastructure is America’s best investment” reports that the government of the United States has played a pivotal role as America’s indispensable investor, supporting transport, infrastructure, and education. With the economy apparently entering a steep recession, the timing is perfect to improve the country’s crumbling infrastructure. A government back long term infrastructure program might provide some of the belief in our economy that has been under pressure as a result of the credit crisis. For every billion dollars we spend in our crumbling infrastructure, 47,000 high-paying jobs are created. The federal government can be an effective partner with cities and localities to improve infrastructure and local environments. A program to improve the country’s infrastructure would offer significant employment and a sense of confidence.
The Commission on Public Infrastructure explored new ways to address the infrastructure questions and is urging the establishment to fix the country’s aging infrastructure; roads, bridges, schools, water pipelines, ports, air control systems, dams and railroads. Congress would adopt a capital budget to care for the infrastructure financing. These improvements would be paid for with borrowed private capital rather than new government spending and the need for a $60bn national infrastructure bank. The bank would have any number of ways to finance itself, such as government guarantees and access to potential revenue streams as well as the sale of government assets. The bank should be able to issue bonds with maturities up to 50 years, matching the actual spending on the infrastructure with the benefits that spending creates, the pair recommend. Repayment of bonds should eventually make the bank self-financing. In terms of fighting off recession, the bank would ultimately produce hundreds of thousands of private sector jobs.
The National Infrastructure Bank Act authored by Senators Chris Dodd (D-Conn.) and Chuck Hagel (R-Neb.) proposed a bill last year. The bank would be modeled in part on the Federal Deposit Insurance Corp. (FDIC), keeping it free of congressional interference in the form of earmarks. The American people deserve railways as good as Europe’s, ports that work as efficiently as modern Asian port facilities and public schools that are not in ruins. China on the other hand spends billions for massive infrastructure improvement. Congested roads in 2005 alone cost $78 billion in lost productivity and higher freight charges. In order to compete in the global economy, improve the quality of life, and raise our standard of living, the United States must first rebuild the public infrastructure. While our budget deficits are far too large and our borrowing is too great delaying the process will cause losses in productivity and employment. Nevertheless, both sides of Congress have been called to help. They will pursue further avenues and explore new ways of adopting new perspectives on our national wealth and illustrate how to increase it.
Government debt is widely misunderstood. All borrowers, whether public or private, must either pay the contracted interest and principal when they come due, or default. Servicing a debt is costly for everyone however if the borrower opts for the alternative and defaults, some unpleasant consequences will arise, including a diminished ability to borrow again. The main difference between public and private debt is that the government has some options not available to private borrowers for affecting what amounts to default. Since the government can inflate the money stock, causing prices which tend to rise and thereby reducing the real value of all assets denominated in units of money, it can effectively default on its promises to repay lenders, to the extent that the lenders did not correctly anticipate the inflation when they made the loans, however the government can always defeat the anticipations of lenders. All it has to do is cause an unexpectedly rapid inflation. Because it has unlimited capacity to increase the money stock, it always holds the power to bring about this kind of surprise. Unfortunately, individual citizens acting on their own can do virtually nothing to remedy the debt. Since people rarely organize for political action no one is likely to create an effective political movement in opposition to continuing massive deficits. As such, the immediate future will be no different from the immediate past.
As a part of the economy, the government plays a major role in a country's output or net income. In economics, part of the equation for calculating the total income for an economy includes not only activities of the private sector, or consumption based output, but also government purchases. Many feel that the economy is on the verge of a recession. As a solution, it has been suggested that to help the struggling private sector, that the government should invest in projects to improve consumer confidence, such as the credit infrastructure.
The Commission on Public Infrastructure was concerned with results rather than rhetoric, which was part of the reasoning behind the change. Much of the change is what could be deemed brick and mortar operations, those essential to keep everyday activities running smoothly, such as transportation and plumbing needs. Congress has gone to such lengths as to adapt a capital infrastructure budget to monitor these concerns. The article argues that such a bank created would allow for thousands of private sector jobs and opportunities. Also, such a bank would be unaffected by political whims and would be setup much like the European Investment Bank, which was able to implement an advanced public rail system.
The article proceeds to make comparisons to European and Asian infrastructure, and how delaying these upgrades will only put the U.S. further behind in its economic progression. The author argues that despite the high deficits are economy is running on, that the lack of private investment is even more disturbing and more critical to our economies needs. This would appear to make sense as private investment drives consumption, a basic economic fact. The article closes persuading congress to ratify the National Infrastructure Bank Act of 2007 so that American infrastructure may be improved.
Several key points to the article rely on measures other countries have taken, which I feel is a bit of a misnomer as geographic concerns and economic needs are different for each individual country and their culture. While improving public infrastructure would definitely improve current outlook, this may not be the best approach in the long run. America should look towards building infrastructure for the future rather than relying on improving older technologies of railways and roads. Technology and information security is the catalyst behind change in American society, and government efforts and money should be spent improving these aspects of the private and public sectors. An example of this would be modern transportation vehicles that can adapt to a changing society without oil. Building more roads will do little good when no current vehicle will be able to use them when the U.S. runs out of gasoline.
- Joseph Kelley
The main point of this article is to help spread and inform about a new infrastructure bill that is on the table in Congress at the moment. The bill proposes that the US government make a new infrastructure bank that would turn government public projects such as roads and railways from “expenditures to future investments.” The article argues that with a new infrastructure in place that addition would allow for more of a national and federal flow of money emphasis rather than a local one.
The article also brings up the idea of how the new infrastructure would be able to finance itself. It states that the new bank would be able to issue bonds. These bonds would allow for the bank to be self sustaining. These bonds would also cause for there to be an increase in the money supply. This increase would cause the exchange rate to go down and depreciate the value of money. That means that everything bought in the US would be more expensive, but exports would go up due to other countries getting more money for the dollar.
I think that this idea has a lot of merit if it does pass. Maybe if the government functions more with a business mentality, then there will be a change in how things are run. I like that the bonds would help cause for other investment and the fact that it would be able to self sustain itself if it is given the initial setup. I think that government debt can be a good thing as long as it is within a useful limit. If the government goes in debt some more so that when I get older and start a family, public schools will be better. That is a worthy cause for the increase. But on the other hand if it was to use the money so a Senator or some political figure can drive to appointments in a nicer car, then screw that.
This article begins by stating that since the start of American development, the United States’ government has taken on the responsibility of the leading “investor in America’s development, supporting transport, infrastructure and education.” The article then continues on to illustrate how important it is that the government take the initiative to improve the country’s deteriorating infrastructure as we move closer to an economic recession. By instituting a plan to rebuild the country’s roads, bridges, schools, ports, dams, railroads, and other key infrastructure during this time of economic downturn, it could offer citizens a chance to boast employment and pay during hard times. This plan could also illustrate to the American people that they should maintain their belief that the United States economy will rebound from the pressure applied to it from the credit crisis.
The way that many people believe that the government could actually follow through with this plan is by enacting The National Infrastructure Bank Act. This act would allow for the infrastructure bank to issue up to $60 billion in bonds and bring in billions more from outside investors. This amount is still much less than the $1,600 billion that the American Society of Civil Engineer estimates will be needed to update and maintain our infrastructure over the next five years. This money is necessary is insure that the United States remains competitive against the countries of Europe and Asia as far as the quality of the infrastructure goes.
Many people feel that the United States will be unable to afford our infrastructure needs because “our budget deficits are too large and our borrowing is too great.” However, other feel that the United States can also not afford to put off fulfilling our infrastructure needs. The more our country delays the work; we create more deficits and losses to productivity and employment. It is important that we improve our public infrastructure in order to compete against other countries and maintain or improve on our current quality of life.
In this case, I do not feel that government debt is a bad thing. We are in desperate need for renovating or current infrastructure and I feel that we should not procrastinate in doing so, even if we the United States must go into even greater economic debt to fix our problems. The longer this country puts off the inevitable, the greater the loss and the consequences. I feel that going into debt is not a bad idea as long as it funds productive investments and that the final product improves the quality of life for the United States’ citizens.
Felix Rohatyn and Warren Rudmam address several national problems and a possible solution to them in their article “Infrastructure is America’s Best Investment.” The article exposes some of the faults in our country’s ability to fund development and repair of important societal facets of productivity, and how this is causing other countries to surpass us in these areas. They tell us that the United States government is the vital source of investment in the country’s development, including the creation and renovation of the transport, infrastructure, and education systems, but at the large budget deficits that the government operates at it is difficult to generate enough funds to undergo many necessary improvements.
Many large cities are plagued with terrible traffic, out of date water and waste systems, and disintegrating schools. Repair of these structures would greatly improve the productivity of our society. Decongesting the roadways in large cities would save millions of people countless hours of time in transport, and would also cut back on gasoline usage. Better and more equipped schools would give students a greater chance of fulfilling their potential and competing in the global job market. These, along with other enhancements in public infrastructure, would increase our nation’s productivity, standard of living, and quality of life.
In order to carry out these infrastructure upgrades much funding is needed. The government would have to spend even more of their already overextended budget, but government spending on infrastructure investment is not the same as government expenditures. When government invests in things of this nature the liabilities are backed by the assets. When a new school, a road, an airport, etc. is built it is not just expenditure or cost of operation, but an investment in something that could be sold if needed. In order for these assets to be of any worth, since their value depreciates over time, they must be repaired, expanded, or replaced if they are in poor condition or if better technology is available. By increasing investments in assets at a higher rate than their depreciation, growth and improvements in these areas will be achieved.
The United States is the wealthiest nation in the world, yet many other countries are surpassing it in their quest for improving the state of their country and their citizens. The improvements addressed in the article are great ways to progress our country to the same level that other countries have achieved or are trying to achieve. Compared to many other developed nations, our transportation, infrastructure, and education systems are in disarray, but the obstacles in the way of successfully carrying out massive reconstruction projects is funding and organization.
The article discusses remedies to these problems. It involves the adoption of a capital budget for infrastructure financing by congress, a budgeting practice where government borrowing to pay for a capital good (an asset) would not raise the debt, and furthermore, the adoption of the National Infrastructure Bank Act that senators Chris Dodd and Chuck Hagel have authored. This legislature would create a bank that is an independent entity of the government. The National Infrastructure Bank would have the ability to finance itself by many methods including issuing bonds, public, private, and international investments, and selling government assets. Since this bank would be a separate entity from the government, it would have the ability to organize and complete projects without political interference.
It is clear that the government “has played a leading role as the indispensable investor in America’s development, supporting transport, infrastructure and education.” Furthermore, in the event of economic problems, the government has a “long term infrastructure investment programme” which could offer some sort of relief. It is evident that the government it very important in improving the country’s economic situation, especially the current one, as we may be nearing a recession. A plan must be set in place to help build infrastructure (i.e. roads, schools, bridges, etc.) and aid in employment (the Commission on Public Infrastructure examined these possibilities). The article points out that for every billion dollars spent on infrastructure, 47,000 high paying jobs are created. This further shows just how valuable an affective government can be.
Congress has done a few things to help out the situation as well. They have adopted a capital infrastructure budget which will help to monitor problems. Borrowed capital will be used for these improvements instead of government spending which will be beneficial to the economy in a few ways. For one, it eliminates the need for a 60 billion dollar national infrastructure bank. On the other hand, the bank could finance itself with a few government guarantees (such as the sale of assets). Also, the bank may be able to issues bonds which could pair benefits and actual spending. It is the repayment process that could actually help the bank to finance itself. The creation of the bank would also create new jobs and help the economic situation.
Some feel that because of budget deficits the United States would not be about to afford all of the infrastructure improvements. Let’s hope this is not the case because the necessary improvements may need to be made quicker than expected. Delays only create more problems, especially those associated with employment and productivity. Public infrastructure is pivotal to our success and can always use improvements. The National Infrastructure Bank Act proposed a bill last year, which would prevent congressional interference. This could be positive because it would allow more emphasis on public infrastructure improvements. The rebuilding process is the first step in creating a better economy and standard of living. Now there is a drawback of complete focus on public infrastructure. How much will benefit will come out of improvements? The answer is most likely not much. Improved railroad tracks are useless without new trains or vehicles to ride on them. The long run is more important so maybe spending time and money on creating new technologies could serve a better purpose.
I think this article has a lot of good ideas and valid points. Change is crucial and necessary for a prosperous economy. Worry and stress on government debt is pointless because a useful amount can be beneficial. Fixing the problems is the goal and all that really matters, even if we have to go into more debt to do so.
The idea of government debt has long been a taboo concept for the American people. We don’t like how debt sounds and we don’t want our government going into it for any reason. Unfortunately we some times have to depend on spending by the Government to make up for the lack of spending by consumers or investors. It was massive government spending that led the United States out of the great depression. All the spending our government did on the on FDR’s New Deal led to government debt. This debt was necessary for our economy to recover. Our economy now faces what appears to be another recession, for the last several months we have the economic indicators in most sectors have been bad. This article’s idea, to jump start our economy, is to have out Government go further into debt and invest the money in our crumbling infrastructure. The author’s of this article what to set up an infrastructure bank to manage this whole concept. The bank will borrow money from foreign and domestic sources spend on our roads, and pipes, and schools and such. Because the government will be borrowing more money to finance this plan the interest rate will increase. This theoretically could mead to inflation. The government would have to find ways to continue to finance this project which could lead to many serious future, rather then solving our current dilemma.
It appears to me that there is a lot of over reaction right now going on in the United States. Now, I can support the idea that our infrastructure needs work, but I am not sure this is the best time for that. With the money the government is spending in the Iraq War and even the recently passed taxed rebate. Certainly things look gloomy as of now but, it has only been a few months, and more then likely this dilemma will solve itself. What the United States is going through right now is not the Great Depression Part Two, so it is a little early to demand that the government spend over one trillion dollars on infrastructure projects.
James Walsh T-Th 1 to 2:30
Infrastructure Is America’s Best Investment
Many people believe that because the United States is entering a steep economic downturn it is not the time to invest. The author of the article thinks differently and states Infrastructure is America’s best investment. As we learned in class that Government debt is the total amount government owns and that Government deficit is this years difference in revenue minus expenditure. The bigger the government deficit and debt the slower the growth in income on the long run. An investment in infrastructure would create more jobs and a sense of confidence to the people.
Another good point the author explains is that the “Dodd/Hagel bill proposes a bank whose financial governance and project selection and delivery would not be compromised by political interference.” (Rohatyn and Rudman) This is because many people believe that with the money they pay in taxes does not go to renewing roads, bridges, schools, etc. Instead it is going to Iraq.
Another good point is that the European Investment Bank can serve us as an example because they have created a superb and efficient infrastructure like the high-speed rail network. We can not afford not to meet our infrastructure needs because we are staying behind from countries like China that are investing so much money in their infrastructure. Every year that goes by we are losing productivity and employment. It seems that our operating deficit is excessive and out of control because of all the billions of dollars spent in Iraq. If we would use all that money and inject it into the US economy we wouldn’t have to be relying on billion dollar tax cuts as a way to stimulating the economy. “ Some people will say that our budget deficits are too large and our borrowing is too great;” (Rohatyn and Rudman) but rebuilding public infrastructure will improve our quality of life, raise our standard of living and be able to compete in the global economy. We need to approve the National Bank Infrastructure Act of 2007 because we need to increase our national wealth.
I would argue that any debt that in the future would prove to be a productive investment is not bad. Governments have to think in the long term. If that is the case then governments should go into debt, if they have to, to improve infrastructures, build schools, hospitals, and subsidize healthcare. These are all examples of productive investments. They will all benefit the country in the long run and make it a more productive state. Increasing humans and both labor and capital. Productive investments in general improve the standard of living for all citizens. Since they are government funded programs it cost taxpayers nothing extra then what they regularly pay. Simultaneously they get to enjoy so many extra benefits that the outcome proves to be fair.
My personal reaction is that people are not believing in the US economy anymore but I believe that a country as powerful and great as the US will overcome the governments debt and deficit and will invest in infrastructure.
The article, "Infrastructure is America's best investment" talks about how government should invest money in infrastructure to fix the economy. For instance, the commission of public infrastructure came up with initiatives to improve railroads, highways, schools, etc. Although, the article comments that banks have issued $60 billion bond to help start this infrastructure, but engineers estimate it will cost a total of 1600 billion for the next five years. Also the article speaks how funds could be raised by bringing in investors and that issuing bonds with a maturity of fifty years. Also the Dodge/Hagel Bill proposed banks that would only focus on infrastructure bills and stay away from "political interference." This bill also proposes bank to be similar to the European banks. The article also talks about how America should be like other countries that are improving their highways and schools and railroads etc. For instance, China is investing $200 billion on their railways and this has not been done since the nineteenth century. It also gives examples of how China has also invested money on rural roads, airport, and expressways. This article also comments how many people will oppose this idea since it will cost too much but this article suggests that this investment should be done.
A factor that would affect this investment is how much will government debt rise. Since it is estimated that it will cost about 1600 billion for the next five years to invest there will be many effects on what will happen to the economy. If government spending goes over its revenue then there will be a budget deficit which will affect interest rate. The budget deficit will cause the interest rate to increase and make investment decrease. Also budget deficit will also contribute to national debt to rise in the future. Also with the contribution to debt, capital stock will also decrease.
In my opinion I believe the economy should invest in infrastructure. Many schools need to be renovated as well as the highways. Larger cities also need more airports so the government should invest in these ideas proposed by the Dodge/Hagel Bill. If engineers have estimated that it will take 1600 billion for five years to invest in this project then how long will it take to improve these issues? I believe that this investment is not a bad government debt because these plans are to improve the economy.
This article is describing a new proposition to help boost the US economy. The proposition is to issue a long term infrastructure program back by the government that will help improve highway systems, ports, schools and other public structures. If passed, Congress will enact an entity that will finance the project using public, privet, and international capital. The infrastructure investment is said to cost 1600 billion dollars, and this will be met by different forms. The infrastructure bank will be issuing bonds totaling 60 billion dollars, and billions of dollars more will come from privet investors. Then the article describes the infrastructure investment that is taking place in China. The Chinese are investing a lot of money into their railroads and ports, why shouldn’t the United States do the same? Some people think that the budget is way too high and impossible to meet. However, the longer the US waits to repair the damaged roads and structures, the more that is lost in productivity and employment. It is true that this will cost a great deal and add to the nation’s deficit, but the deficit is mainly due to the war in Iraq. The article ends by stating that in order to improve Americans standards of living, public infrastructures need to be rebuild.
The investment in this infrastructure will add to the nation’s budget deficit. A budget deficit occurs when government spending is greater than taxes. When this occurs the government begins to borrow from the financial markets. If government spending goes up then national savings goes down and interest rates rise. If this proposition was to go through it will boost the economy because it will create jobs and the opportunity to invest. By creating more jobs the unemployment rate may go down. By reducing unemployment there will be more people to contribute to the national income therefore bringing up the economy.
In response to this article, I believe that it will be a good investment for the government to approve. This will improve the public infrastructures and improve the lives of many Americans, by providing them with new schools and new forms of transportation. If countries in Europe and China are doing it then I don’t see why the United States, being one of the main developed countries, should stay behind. Not only would it improve the lives of many people, but it will also help provide jobs for many which in turn will boost the economy.
“Infrastructure is America’s best investment” by Felix Rohatyn and Warren Rudman is about the United States government supporting education, transportation and a new infrastructure. With the recession at hand many feel now is the best time to put forth this new plan. There needs to be a new way for us to build roads and bridges as we are losing an estimated “$78 billion dollars in lost productivity and freight charges.” The bill put before congress now would allow banks to take on this responsibility with a $60 billion dollar budget. This would bring in many investors as banks would be able to sell bonds to fund this with backing from the government. Thousands of new jobs would be created to fill these needs. This would result in higher output for the country. The idea for this bill came from the European bank which has done well in creating railways and more roads to increase production.
Many believe “that we cannot afford to meet our infrastructure needs that our budget deficits are too large and our borrowing is too great”. In reality we need to do this. The banks would not be bogged down with political ties and would do what is best of investment purposes. We are already losing a great deal of money with inefficiency and high shipping costs.
This will help reduce the national debt. More money will come private investors. Having the government spend less money will also raise GDP. Government purchase will be reduced as well as taxes. They will not need to tax as much as they do not have to buy as much. Overall I think this is a good plan and will greatly benefit society.
This article talks about the governments role in an economy driven by the private sector. It talks about the governments involvement in infrastructure which in my opinion, questions the idea of capitalism. Is any economy in the world really capitalistic? That is another arguement for another time. The article urges congress the pass a bill that would turn the government's spendins on infrastructure to investment. This is a very brilliant idea proposed by Chris Dodd and Chuck Hagel.
This proposal will really boulster the economy if it is passed. It will enable the government to surpass it's price ceiling of
$60 billion by including more and more outside investors. It will provide more jobs for both the private sector and the public sector. Most importantly, it is a step towards absolute capitalism.
The current state of American infrastructure according to leading civil engineers is at insufficient levels. The article presented here outlines the challenge that poses to America and the proposed Bill by senators Dodd and Hagel to create a centralized infrastructure bank to stimulate home economy and correct the national issue is a more organized and timely manner. The Dodd-Hagel National Infrastructure Bank Act of 2007 proposes legislation that allows government financed regional and national issues to be funded by both public and private capital.
The problem in the current highway situation is apparent as most bridges and roadways average about 40 years old, and need to be repaired at a grandiose total of 131.7 billion dollars in the initial some, and then consequently a 9.4 billion must be invested every year for the next 20 years.
The concept is that the building projects will stimulate the economy during the current downturn, and it isn’t a new concept as this band aid has been put into place before in American history to bolster spirits and bring the industry back ‘home’ again, as well as create thousands of new jobs and effectively take a stab at our unemployment numbers.
The idea is to borrow from the private sect and to not create a new government spending. The bank itself, in turn, also levies the power to issue bonds. Realistically, though it would create government debt, the creditors are the American people, and if the bank issues bonds with up to 50 year maturations, the idea leads to a self sustaining system with potential for growth.
Really I feel the ‘debt’ is irrelevant. In either case, whether levied without help from the private sector not, the roadways will have to face repair, and the concept of ‘borrowing’ to stimulate repair and the economy is an idea as old as dirt. America was born on the idea of credit, so instinctually I don’t find the idea to be either outlandish or horribly impressive.
The current state of American infrastructure according to leading civil engineers is at insufficient levels. The article presented here outlines the challenge that poses to America and the proposed Bill by senators Dodd and Hagel to create a centralized infrastructure bank to stimulate home economy and correct the national issue is a more organized and timely manner. The Dodd-Hagel National Infrastructure Bank Act of 2007 proposes legislation that allows government financed regional and national issues to be funded by both public and private capital.
The problem in the current highway situation is apparent as most bridges and roadways average about 40 years old, and need to be repaired at a grandiose total of 131.7 billion dollars in the initial some, and then consequently a 9.4 billion must be invested every year for the next 20 years.
The concept is that the building projects will stimulate the economy during the current downturn, and it isn’t a new concept as this band aid has been put into place before in American history to bolster spirits and bring the industry back ‘home’ again, as well as create thousands of new jobs and effectively take a stab at our unemployment numbers.
The idea is to borrow from the private sect and to not create a new government spending. The bank itself, in turn, also levies the power to issue bonds. Realistically, though it would create government debt, the creditors are the American people, and if the bank issues bonds with up to 50 year maturations, the idea leads to a self sustaining system with potential for growth.
Really I feel the ‘debt’ is irrelevant. In either case, whether levied without help from the private sector not, the roadways will have to face repair, and the concept of ‘borrowing’ to stimulate repair and the economy is an idea as old as dirt. America was born on the idea of credit, so instinctually I don’t find the idea to be either outlandish or horribly impressive.
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