Weekend Reading

Paul Ryan Declares War Against Math
The Remarkable Impact Of The Deep Tunnel
Corporate Deadbeats: How Companies Get Rich Off Taxes
Return Of The Bums On Welfare
Skill Gaps, Skill Shortages, And Skill Mismatches: Evidence For The U.S.
Rep. Paul Ryan's Whopper About Competitive Districts
Why Public Investment Really Is A Free Lunch
Unlike Walmart, Costco Has No Plans To Cut Employee Health Benefits
The Koch Brothers' War On Transit
Wisconsin Supreme Court Vs John Doe

Tax Cuts Have Been Bad For The Middle Class

The Good & The Bad Of Our Infrastructure

There has been a lot of talk about infrastructure amongst politicians, pundits, economic developers, etc. as a needed path toward revitalization. Different groups analyzing America's infrastructure have given poor grades to the quality of our bridges, electricity and water infrastructure.

Yet, Evan Soltas recently opined about The Myth of The Failing Bridge:

Maybe it's going too far to say, "The U.S. is doing just fine, thank you very much." The nation would benefit from reordering its infrastructure priorities -- away from new highways, for example, where we are already overbuilt and usage is falling for the first extended period on record. And we'd do well to take advantage of low interest rates and idle construction resources to knock out all of our future infrastructure needs. 

But the idea that the U.S. has an infrastructure crisis? No. A broad, permanent increase in spending is unwarranted...

Between 2001 and 2011, annual public investment averaged 3.3 percent of gross domestic product, according to the Organization for Economic Cooperation and Development. The average OECD nation spent 3 percent of GDP over the same period...

Total public construction spending has varied between 1.7 percent and 2.3 percent of GDP for the last 20 years, according to the U.S. Census Bureau. By the Congressional Budget Office's slightly different measure, infrastructure spending has been between 2.3 percent and 3.1 percent of GDP since 1956...

Believe it or not, infrastructure has improved significantly over the last two decades. In its report for 2010, the Federal Highway Administration said that 57 percent of all vehicle-miles were traveled on federal highways with ratings of "good" or higher -- according to a measure of road quality pleasingly known as the International Roughness Index. That was up from 48 percent in 2000. The percentage of roads in bad condition has also declined: In 1989 6.6 percent of rural and urban interstates were rated "poor"; now only 1.9 percent of rural interstates and 5.4 percent of urban ones earn that grade.

Despite warnings from President Barack Obama, America's bridges have never been safer. The highway administration rated 21.9 percent of its bridges "deficient" in 2009, as compared to 37.8 percent in 1989. And contrary to Obama's implication, the word "deficient" does not mean unsafe, at least as the highway administration uses it. A bridge is "deficient" when it would benefit from expansion and renovation in line with usage.

Traffic congestion has diminished. In 1989, 52.6 percent of urban interstates were rated "congested" according to a comparison of peak volume to planned capacity. In 2009, the figure was 26.3 percent. 

So how can we have, as Soltas claims, steady infrastructure spending and improvements alongside others claiming failing grades for much of our infrastructure?

In 2010, 57 percent of all vehicle-miles may have been traveled on federal highways with ratings of good or higher, compared with 2000, but it could be that federal highways have been getting the bulk of infrastructure dollars. Regardless, a 9 percentage point improvement is still laudable. Yet, if this is where a majority of our infrastructure dollars were spent, we would expect to see an improvement.

Are population changes (primarily people moving), between 1989 to 2009, responsible for the decrease shown in traffic congestion? Because more people are living in certain mega-regions, does it follow that the areas which have lost population would have less congestion? Information concerning migration and commute times could help flesh this metric out.

Do we just need to re-prioritize how our infrastructure money is spent?

[source]

Jason Sattier has found that infrastructure spending is actually declining.

“In 2012, the Federal Highway Administration said 67,000 — 11 percent — of the nation’s 607,000 bridges were structurally deficient,” USA Today‘s Marisol Bello reports. “That means the bridges are not unsafe but must be closely monitored and inspected or repaired.” 

The chart above from Business Insider‘s Joe Weisenthal illustrates just how little money the federal government is spending on public construction. Despite this, proposals like an infrastructure bank can’t even get a vote in the House of Representatives.

The American Society of Civil Engineers 2013 Report Card gave our infrastructure a grade of D+. They estimate the U.S. needs $3.3 trillion in infrastructure investment by 2020. They estimate Wisconsin has 1,157 structurally deficient bridges, 71% of roads are of poor or mediocre quality, $6.2 billion is needed for drinking water and $6.4 billion is needed for wastewater. Almost 14% of Wisconsin bridges are either functionally obsolete or structurally deficient.

John Diehm and Katy Hall provide a graphic of bridge collapses across the country:

As Dave Jamieson notes, Washington Bridge Collapse: 759 Bridges In State Have Worse Sufficiency Scores.

The Times reports that, according to federal records, the bridge in question has a sufficiency rating of 57.4 out of 100, which is well below the state average of 80. Yet 759 other bridges have even worse marks.

Lydia Mulvany reported, "Seven Wisconsin highways built in the last 20 years are underused, raising questions about the more than a billion dollars they cost taxpayers, according to a report the WISPIRG Foundation released Thursday...The state still is spending billions on highways while cutting funding for local roads and other forms of transportation, the report said. The 2011-2013 biennial budget appropriated $1.2 billion for highway construction projects, and Gov. Scott Walker's current budget proposal includes more than $3 billion in highway spending."

It appears, across the country, certain infrastructure is getting the bulk of spending (highways and more recently rail), whilst the neediest infrastructure goes without.

Total federal clean-technology spending, by year (billions), 2009–2014

[source]

Not all is bad, as Brad Plumer details:

Our infrastructure is actually getting better in some areas. For the first time in 15 years, the grade for U.S. infrastructure rose, from a D to a D+. And six areas have seen improvement since 2009, including roads, bridges, rail, drinking water, solid waste disposal and wastewater treatment. Two big examples: 

1) U.S. rail is getting better: Rail in particular has seen some big upgrades in the past few years, partly thanks to stimulus money but largely due to private investment: “In 2010 alone,” the report notes, “freight railroads renewed the rails on more than 3,100 miles of railroad track, equivalent to going coast to coast. Since 2009, capital investment from both freight and passenger railroads has exceeded $75 billion.” 

2) So are our roads: America’s roads have also become sturdier in recent years, thanks to an uptick in federal stimulus spending as well as increased investments from states and the rise of private-public partnerships — overall investments have now increased to $91 billion per year.

We are taking care of certain infrastructure (highways), it seems. Yet we are obviously neglecting other areas (water, electricity). The findings appear to indicate that merely diverting some of the funding for new/repaired highways and roads toward other infrastructure needs could go along way in helping address some of our most pressing infrastructure projects.

For Further Reading:

Impact Of Infrastructure Investment On America's Future

Infrastructure Readings

Investing In Infrastructure

More Extraordinary Returns: Public Investments Outside Of "Core" Infrastructure

Public Investment & Private Sector Growth

Whatever The Cause, Washington State Bridge Collapse Points To Bigger Problems

Read more here: http://www.mcclatchydc.com/2013/05/24/192217/whatever-cause-washington-state.html#storylink=cpy

A Steaming Pile Of Boldness

The Journal Sentinel is back pushing Walker's venture capital slush fund, Legislature Should Establish A Fund For Venture Capital.

Wisconsin politicians continue to argue about how many jobs have been created on Gov. Scott Walker's watch - and even how to count those jobs. This was inevitable, of course, given the governor's promise that 250,000 jobs would be created during his first term.

But rather than argue over numbers, how about focusing on policies that might make a difference?

Yes, just forget about Walker's (completely ridiculous) promise of 250,000 jobs, which undoubtedly helped win him the election. We don't want to actually evaluate politicians on the things they've said.

The whole article is a well-worn regurgitation of cliches regarding the magic that is venture capital.

With job growth and income sluggish in the state, we continue to believe the best answer is unleashing good ideas that could be turned into young companies that will employ people. Research by the Ewing and Marion Kauffman Foundation a couple of years ago found that between 1977 and 2005, existing companies lost about 1 million jobs a year while new companies added an average of 3 million jobs. Since 2008, the pace of hiring is stronger in companies that are two years or younger, Kauffman found. 

Simply put, we need more entrepreneurs, and we need to figure out how to mentor them and invest in their ideas.

Yes, we need more entrepreneurs. We need more jobs. Bold insight.

The pace of hiring may be strong in young companies, but what they also fail to mention is that the pace of firing is also higher amongst younger companies.

The article then (to supposedly support a venture capital fund) points to UW-Madison's Research Park, and UW-Milwaukee's and the Medical College's increased research, which has created jobs. Yet, this seems like more of a substantiation for investment in our universities. Is the Journal implying we should spend public dollars for private benefit? Should we continue the process whereby our public sector provides tax credits, other funding, university R&D, and a host of other giveaways, in which private entities get to reap the majority of the rewards? Here's a novel idea, how about public investment with public rewards.

But young companies need a continuum of support - from the early going when the entrepreneur mortgages her house to get started to the first "angel" investors who take notice to the point where larger infusions of money are needed from venture capitalists. And in Wisconsin, there long has been a gulf between the typical angel investor round and the venture capital round.

What did companies do before venture capital?

Despite a good fourth quarter, Wisconsin attracted only $95 million last year, according to the MoneyTree Report by PricewaterhouseCoopers LLP and the National Venture Capital Association. Nationwide, venture capitalists invested $26.5 billion.

What is the average amount states attract? Where does Wisconsin rank among the states in attracting capital?

Another article from the Journal notes, "State companies pulled in more than $95 million during the full year, up 31% from 2011, when they raised about $73 million of venture capital...Nationally, venture capital investment declined for the first time in three years. Venture capitalists invested $26.5 billion in 3,698 deals in 2012, a 10% decrease in dollars from a year earlier."

So, nationally venture capital is declining, yet over the past year it increased 31% in Wisconsin. Seems like money has already decided Wisconsin is a decent investment, even without the State providing additional funding.

The Journal continued, "But while $25 million is a start, it's probably only a down payment. The state needs something closer to $150 million, perhaps funded over several budget cycles, to attract the interest of top venture capital funds. "If the state really wants to get to critical mass, then we're going to need more than $25 million," said Tom Still, president of the Wisconsin Technology Council and the Wisconsin Innovation Network. The "Be Bold Wisconsin Prosperity Strategy" report, which grew out of a series of economic summits around the state in 2010, called for an even larger commitment."

We need to put up at least $25 million and also some type of continuing commitment? If we applied the same amount to public works - infrastructure, green buildings, energy grid, sewage and water systems, etc. - wouldn't that just as efficiently and effectively ignite the economy and put people back to work? And, we wouldn't have to worry about the speculative nature and the whims of the private sector. Not to mention, we could actually ensure these were good paying jobs.

Finally, it seems rather odd that the Journal Sentinel and the Republican class-war criminals were so quick to talk about a Wisconsin's (phony) budget crisis, how we were broke, how public workers had bankrupted us and caused the recession. Yet, in their next breath, they cackle about spending on sport stadiums, venture capital, and numerous other ways of funneling public dollars to obscure private sector schemes. Yes, we're broke, until the power-brokers whom are already garnering most of society's gains decide they want more.

For Further Reading:
Casino Capitalism
Cut Out The (Private Sector) Middle Man
Deja Vu
Fund Fail
Haplessly Venturing
Risky Business
Something Venture, (Virtually) Nothing Gained
Venturing Aimlessly
Venturing Wisconsin's Money

There Is No Alternative

Should we just go ahead and pencil in the Republicans (again) as being against aid for New Englanders, which will most assuredly be needed after the most recent storm?

'Behemoth' Storm Leaves 650K Without Power In New England

And, I'm sure this is one of those times where a certain "thing," which is happening as we speak, isn't the most opportune time to discuss said topic. Climate changing, not the time to talk about climate change. Rash of gun violence, not the time to talk about guns. Natural occurrences shutting down whole regions of a supposedly advanced nation, not the time to talk about those utilities, transportation systems, and other basic infrastructure.

It would be too easy, and simple, to just employ a large public works program to alleviate our unnecessarily high unemployment whilst simultaneously upgrading infrastructure, modernizing utilities, greening public buildings, improving public transportation entities and options, burying power lines, implementing more sustainable energy sources, and numerous other upgrades, long overdue in the U.S.  

Sadly though, no. Not going to happen.

Tax cuts to the rescue! 

Sigh.

Crumbling Roads, Crumbling Democracy

Why is the economy continuing to only plod along? [But, yes, it is indeed better than it was 4 years ago.]

Why is unemployment looming stubbornly near 8 percent?

Paul Krugman explains:

"For future reference. In a depressed economy, with the government able to borrow at very low interest rates, we should be increasing public investment — the true cost of the resources is negligible, so the rate of return is very high, not to mention the desirability of creating jobs.

Here’s what has actually happened, as measured by the sum of state, local, and federal nondefense investment:

Doing it wrong."

And, yes, Republican obstruction of all Obama's and the Democrat's jobs legislation has a lot to do with this.

According to Republicans, borrowing is bad, even though the cost of money is about as cheap as it gets. There isn't a better time to invest our infrastructure - mass transportation, water and sewer ways, the electric grid, the greening of public buildings, repairing bridges and roads, etc.

Also, according to Republicans, government-induced demand is a bad thing, although no one else (I'm looking at you, private sector) is willing to spend any money at the moment. Yes, for those of you being foreclosed upon, losing your job, already out of work, behind on your bills, you're just going to have to tough it out until the market decides you're worthy of saving.