COMMENTARY | During the school year I teach Economics to high school seniors. This summer, I will begin teaching U.S. History to those who did not master it during their junior year. When you combine the two subjects, you get to see the history of boosting Aggregate Demand (GDP) through fiscal policy, or government taxing and spending. From the 1930s through the 1960s the federal government engaged in expansionary fiscal policy through the use of increased government spending, purchasing goods and services through the New Deal, World War II defense purchases, the post-war boom, and the War on Poverty and Great Society programs that expanded the use of programs like Medicare and Medicaid.
Critics allege that too much of our national infrastructure dates back to that era, especially the New Deal programs during the Great Depression and the interstate highway building spree of the 1950s. At the local level, old cities like New York City have been criticized for rarely updating pipes, tunnels, sewers, and other utilities that can date back to the late 1800s! On the surface we are smartphoning and touchscreening our way into the 21st century, but underneath we creak like the ’30s.
U.S. president Barack Obama has recently highlighted the need for more spending on infrastructure, bolstered by a report from the Brookings Institution that revealed the economic benefits of infrastructure-related jobs, which pay considerably more than most of the jobs created during the slow and unstable recovery from the Great Recession, reports CBS. Adding more of these “good jobs” in building new infrastructure is important, according to the American Society of Civil Engineers, which graded the U.S. national infrastructure at a D+.
But, in an era of federal budget deficit, will trying to add new “shovel-ready jobs,” a term from way back in 2009, become a political hot spot for 2016?
Economically speaking, we need to shift funds from higher education and defense, which are both bloated fields that use federal dollars inefficiently, to infrastructure-related jobs that will help boost the nation’s aggregate supply. Building new infrastructure adds to aggregate supply quickly by providing foundations for new firms and lowering the cost of production by reducing transportation and utility costs. Continuing to pour money into bloated colleges and universities has a less direct effect, with too many graduates having to take jobs that add little to either aggregate demand or aggregate supply. And pouring money into defense spending? That industry is notorious for misusing funds. F-35 is all I need to say.
Shifting funds from defense and higher education to infrastructure in the short run could produce helpful long-term results for all three industries by re-sparking an economic boom. Young people who take “shovel-ready” jobs in the short term can always go to college later, now graced with real-life experience, maturity, and some real money. The military could benefit from some “shovel-ready” infrastructure jobs as well and recruit skilled workers from among the ranks of young people who have infrastructure job experience. Young people who have worked “shovel-ready” jobs may be quicker and more efficient to train for many military specialties compared young people who have only been able to get part-time jobs in clerical, retail, or service fields.
In sum, real stuff gets built, which helps the private sector build more firms. Young people get “real jobs,” which provide real skills and help build real foundations for middle-class lifestyles. Later, they can use those real skills (and real money) to attend college and/or serve in our nation’s armed forces.
And hey – if it was good enough for the Greatest Generation, why not try it again? Version 2.0 certainly can’t work less well than the malaise we’ve gotten ourselves into…