Wednesday, October 27, 2010

Capital Investment

That's one thing about infrastructure. Sometimes the projects are big and costly, and you have to take out loans to pay for them.

While I understand the knee-jerk reaction to big ticket items, this is a mistake, and a big one. This isn't about total cost, it is about return on investment.

The worst thing this says about our nation isn't that we're spending too much money, but that we're incapable of getting Big Things done on time and on budget. Christie could have focused on implementation, and pushed through a major project. Instead, he just wants to cancel it. I can understand his reasoning, even as I disagree with it. His "solution" solves nothing.

Though I also have a problem with the way it is reported. Cancelling the project "cost" 6,000 jobs a year for a finite number of years. It "cost" a projected 45,000 jobs long-term.

Not one item, however, about the cost-effectiveness of tax dollars funding the creation and maintenance of those jobs. Not one item about how this process could be sped up or costs could be brought under control. Not one item about who the planners are or why this is taking so long or why there are expected cost overruns. Not a thing on the contractors and planners who have already collected $600 million with nothing to show for it.

(But I'd bet they all talk shit about Louisiana....)

And that's a problem. We don't have the will or budget to make major infrastructure improvements in this country because our infrastructure projects are used, politically, as temporary employment programs. There is no political incentive to get the jobs done efficiently and actually improve infrastructure even though doing so rewards you with more jobs and economic development in the long term.

Yet the GOP sees this guy as a rising star. Which tells me where they're at in this process: addressing problems uncreatively with lazy solutions that solve nothing. The problems this project was designed to solve will remain undone, the money will remain spent, and development will continue to be slowed by an unresponsive government.

Infuriating.

.

10 comments:

Dante said...

Then why don't you pay for it out of your own pocket and then just take a toll or something to get your money back? It's a great investment. Oh yeah, you can't afford it. Going into a little debt to get a return on your investment is sound business practice. Going insolvent to get a long term return is not. I don't know enough about New Jersey politics to know if they can really afford it or not, but if they can't then it doesn't really matter how much a return they could get.

Cousin Pat from Georgia said...

Oh yeah, you can't afford it.

Individually. Which is why the government is the most effective entity to make this sort of investment.

I could start a business to take advantage of new commuter patterns and demographic changes, or I could live and pay taxes in New Jersey while working in New York City. The economy becomes more dynamic in the long term, generating more revenue and returning the investment. That's how infrastructure like this works.

My problem isn't prioritizing what you can and cannot afford, it is not understanding why you can't afford it. And that problem infects infrastructure planning, development and maintenance all over this country.

Six. Hundred. Million. For planning and doing a little. Of course no one can afford that. The cost is ridiculous. That's why you have to look at implementation.

Because Americans in the several states were able, at one time, to afford the Brooklyn Bridge, the Golden Gate, the Hoover Dam, the Interstate System, the Apollo Project, the Tennessee Valley Authority, the Panama Canal and the Erie Canal.

Don't tell me they had more wealth and advanced technology back then than we have right now.

alli said...

Well, they did have more money - relatively speaking. Cost of raw materials was much, much less than it is today.

What *is* cheap today is money. Interest rates are incredibly low. We're going to need infrastructure improvements in 10 years, but by then, money will not be cheap, and so the projects will cost more.

Also, I don't think it's fair to demagogue planning costs for infrastructure projects without explanation or context.

alli said...

Also, infrastructure creates jobs, short-term and long-term. There's no need to fight over which one is more important.

With unemployment at catastrophic levels for over eighteen months now, the important thing is that the government spend a ton of money employing people right now. Whether they're swinging a hammer or crunching real estate data or sitting at a drafting table, I don't give a shit. They could be digging holes and filling them in again, but that obviously wouldn't be as productive for long-term gains (or jobs!). Neither would building planes and flying them into the ocean, but if we had taken all the planes we built in the 40s and done exactly that, it would have brought us out of the Depression just the same. (Meta point: there's nothing inherently stimulative about war. The stimulus is the government paying people to do things!)

Talk about making things more efficient is great, but it misses the point. The point is that people need money so they can spend money. They need money for bills, food, phones, cars, bicycles, tuition, gadgets, services. They just need income. (This is called aggregate demand.) Cries of "make projects more efficient" are fine when we have budget surpluses and 3% unemployment. But now? People just need to get paid.

Also, Dante, a household budget does not equal a state budget does not equal a federal budget. They are not the same. Rules of personal finance do not apply to states and the federal government!

alli said...

OK, one more point. We would have money for this kind of investment, except it's being used to blow people up in Afghanistan and Iraq.

For example. an extension of the LA Subway would cost less than one month in Afghanistan.

Similarly, Governor Jindal famously (to me) refused to submit an application for federal high speed rail dollars between New Orleans and Baton Rouge, because the state would be expected to shoulder an operating cost of $18 million (million, with an M) per year. That same year, Jindal gave $85 million to keep a chicken plant open in North Louisiana.

Cousin Pat from Georgia said...

I don't think it's fair to demagogue planning costs for infrastructure projects without explanation or context.

$600Million. To plan the thing. Surely there is some explanation for a cost overage of that magnitude, but the article doesn't report one. Which is a problem in and of itself.

RE: Short term & Long term jobs: There's no need to fight over which one is more important.

There is if long term jobs are sacrificed for the political gain of the short term. If something costs too much in the short term, it sacrifices both short and long term jobs when it gets shut down (like this one).

[The money]'s being used to blow people up in Afghanistan and Iraq.

Yep. Because in free and fair elections, this nation voted to go to war and stay at war indefinitely. War is a higher priority than infrastructure, and that matters in a representative republic.

DADvocate said...

Jeez, a liberal talking points thread, i.e. lets spend ourselves into oblivion. It's not like a real budget with real money.

The false equivalency between this project and those such as TVA doesn't hold water. (God, I love those puns.) TVA brought electricity where there was NONE. It brought flood control to an area frequently ravaged by flooding. This was real progress.

The tunnel makes it easier to get from New Jersey to New York. Yippee.

We've got to stop spending somewhere, no matter how unpleasant. Only if you believe it's real money, of course.

Dante said...

RE: Alli
"What *is* cheap today is money. Interest rates are incredibly low. We're going to need infrastructure improvements in 10 years, but by then, money will not be cheap, and so the projects will cost more."

2004 called. They want their road map to financial prosperity back. You can keep the junk derivatives though.

"Also, Dante, a household budget does not equal a state budget does not equal a federal budget. They are not the same. Rules of personal finance do not apply to states and the federal government!"

No but even governments have their limits. Just ask Greece. Besides, if the government keeps spending like it does, it will become a household budget... MY household budget.

Re:Pat
If the government wants us to believe they can come in on time and on budget, then they need to start small and work their way back up. And they need to start with projects already on their plate instead of new ones.

Cousin Pat from Georgia said...

DADV: The equivalency of this project with the TVA has little to do with purpose, as they aren't reported as questioning the purpose of the project, just the cost.

And apparently folks thought this was worthy of a $600M investment at some point. (Though government pushing through Big Projects against the wishes of locals is another thread entirely.)

Purpose aside, it is a Big Project that stands as both an example of how government is failing to complete important tasks regardless of cost and how such failures are inadequately reported in the media.

Because I'll be quite happy to accept "expecting to see results for money already spent" is a liberal talking point.

Cousin Pat from Georgia said...

Dante: they need to start small and work their way back up.

That would be a fine way to regain credibility politically speaking, but there are a lot of Big Projects already on the drawing board, already recieving money, and already underway. They can all be affected positively by reformers in government on both sides. That's one of the metrics I use in determining who is a good leader in government.

As cathartic as it may be to say "screw you guys, I'm going home" and cancel all of the projects to start afresh, that may be more expensive in the long run.

Thing is, the inefficiencies affecting so many of our projects can be addressed right now. My problem with what Christie did is that he ingores these fixable problems and cancels the project altogether. This solves nothing, because the next Big Project will face the same inefficiencies. If we can't fix this now, when will we?

Because I do not believe that what ails government project construction is intractable.