Infrastructure News

Advice for Biden on American infrastructure: Push it like Ike


President Joe Biden has rolled out a sweeping, $2.25 trillion infrastructure plan. It now becomes a political football, with Biden’s allies promoting its virtues and Republicans savaging it as a big-government boondoggle that needlessly raises taxes and public debt. There’s a playbook that might help Democrats navigate some of this, one introduced by a Republican, President Dwight D. Eisenhower, in 1956.

Back then, when Eisenhower put his considerable reputation and political heft behind federal funding of a national highway system, paranoia over a Russian nuclear attack on the US was at full throttle. So he pitched the Federal Aid Highway Act as a national security measure, a way to evacuate cities more easily. The US wasn’t just building a sprawling, 41,000-mile network of speedways; it was launching the National System of Interstate and Defense Highways.

But Ike knew where the real value of the highway system resided. “Its impact on the American economy—the jobs it would produce in manufacturing and construction, the rural areas it would open up—was beyond calculation,” he later wrote.

Ike was also practical. As a young army officer travelling in a military convoy across the US in 1919, he saw first-hand how poor the nation’s roadways were. While leading US forces in Europe during World War II, he was impressed by the German autobahns and wanted America to catch up. Franklin D. Roosevelt felt the same way and sponsored a federal highway act during his presidency, though funding for it was anaemic.

Ike and his allies in Congress rammed their highway act past its many critics, one of whom described it as “another ascent into the stratosphere of New Deal jitterbug economics.” Senator Harry Byrd opposed using federally guaranteed bonds to fund highways because of what his biographer called “an almost pathological abhorrence for borrowing.” But bipartisan support ruled the day. Both George H.W. Bush’s Republican father and Al Gore’s Democratic father were backers. In fact, Al Gore Sr. played a key role in crafting financial facets of the legislation. The 1956 bill authorized an initial outlay of $25 billion (about $242 billion in today’s dollars) against estimates of about $101 billion in total spending ($977 billion today). The entire effort ultimately cost closer to $114 billion over more than three decades (which, adjusted for inflation, was much less than anticipated). The federal government agreed to foot 90% of the bill, with states assuming the balance. The Highway Trust Fund, financed with a gasoline tax, paid for the government’s share.

While it’s difficult to tally its precise economic impact, the American highway system obviously had many positives. It boosted the industries and workers that built it, and allowed goods to be shipped more quickly, cheaply and profitably to more places. Those gains contributed to a surge in productivity from the late 1950s to the early 1970s, alongside earnings jumps among S&P 500 companies.

In addition, highways helped close economic gaps among the states, particularly in the country’s southern belt, where they fuelled the growth of new businesses such as Walmart Inc, Home Depot and FedEx Corp, while also raising workers’ incomes.

The highway system also had its downsides, no doubt. A greater reliance on cars and trucks has harmed the environment. Suburban sprawl, traffic jams, longer commutes, underinvestment in public transportation and the hollowing out of many American cities are other scars. These problems don’t argue against infrastructure investment, however; they reinforce the need to anticipate unexpected fallout from ambitious public works spending.

More than a quarter of Biden’s American Jobs Plan, about $621 billion, is designated for classic infrastructure basics: the repair and construction of bridges, roads, transit, rail, ports and airline services. If its economic impact traces Eisenhower’s highway act, it will be money well spent.

Biden will also confront some of the same legislative roadblocks that Eisenhower faced. Stoking fears of a Russian nuclear strike no longer packs the same public relations punch, clearly, but the US now has a very real economic competitor in the People’s Republic of China. The Chinese government has embraced infrastructure spending on an epic scale, which has contributed to an expansion that puts China on track to surpass the US and become the world’s largest economy by the end of the current decade.

Republicans may resist supporting bold government initiatives that make America more competitive at home and abroad. But Biden and the Democrats can follow an effective playbook, one that is authentically populist and has a strong track record. Eisenhower’s. The US has built big things before—and can build big things again.

Timothy L. O’Brien & Nir Kaissar are, respectively, senior columnist for Bloomberg Opinion and a Bloomberg Opinion columnist covering the markets

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