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Old 10-05-2010, 07:32 AM   #1
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Default Infrastructure: The best deal in the economy

Infrastructure: The best deal in the economy

People say that the government should be run more like a business. So imagine you are CEO of the government. Your bridges are crumbling. Your schools are falling apart. Your air traffic control system doesn't even use GPS. The Society of Civil Engineers gave your infrastructure a D grade and estimated that you need to make more than $2 trillion in repairs and upgrades.

Sorry, chief. No one said being CEO was easy.

But there's good news, too. Because of the recession, construction materials are cheap. So, too, is the labor. And your borrowing costs? They've never been lower. That means a dollar of investment today will go much further than it would have five years ago -- or is likely to go five years from now. So what do you do?

If you're thinking like a CEO, the answer is easy: You invest. You get it done. Happily, that's what the administration is proposing to do. But its plan is too modest. The $50 billion bump in infrastructure spending it has proposed is only for surface transportation. The infrastructure bank envisioned in the proposal is also likely to be limited to transportation. And as for our water systems, our schools, our levees? This is not a time for half-measures. It's a rare opportunity to do what we need to do and to save money doing it.

In 2009, Congress passed the American Recovery and Reinvestment Act, known to its friends (and enemies) as the stimulus. Billions of dollars went to the Transportation Department to improve our roads, rails and runways. That money was in turn given to the states, which quickly drew up lists of what they needed to do and how much it would cost.

When the feds checked in on the funds, what they found shocked them. The project costs were coming in at 18 to 20 percent less than estimated. The Transportation Department then looked at the share that went to the Federal Aviation Administration for runway repairs. The money that the FAA had thought would complete 300 projects was going to finish 367 projects -- about 20 percent more than projected. (We have seen the same thing here in Arizona on road projects. - mesa)

The stimulus, they realized, had blundered into an incredible bargain.
The recession was driven by the collapse of the construction sector. People who built things were now out of work. The materials used to build things were now on fire sale. The companies that organized the building of things were suddenly desperate for jobs. As a result, building things was suddenly dirt cheap.

And it still is.

Unemployment in the construction sector is at 17 percent -- and that doesn't even count the construction workers who've simply given up looking for new jobs. Steel, gas and lumber prices are all well below their pre-crisis highs.

"There's work that needs to be done,"
says Larry Summers, outgoing chairman of the National Economic Council. "There are people there to do it. It seems a crime for the two not to be brought together."

(There is not just work that needs to be done, there is work that is desperate to be done. It so desperate that if we don't fix bridges, levees, and damns that people will die when they fail. - mesa)

But what about the debt, you might ask? Well, what about it? Delaying a dollar of needed infrastructure repairs is no different than racking up a dollar of debt.

"You run a deficit both when you borrow money and when you defer maintenance that needs to be done," Summers says. "Either way, you're imposing a cost on future generations."

Plus, if America has to borrow money, now is the time. The interest rate on 10-year Treasuries is less than 3 percent - the lowest it's been since the 1950s. So a dollar of debt is cheap, and a dollar of infrastructure investment goes far.

"There's a 20-dollar bill laying on the ground here," says Michael Greenstone, an economist at MIT and director of the Hamilton Project at Brookings Institution. "We should pick it up."

We'll have to pay down that debt, of course. But part of paying down the debt is increasing economic growth. What worries the market is the size of our debt against the size of our GDP. If our economy grows faster than our debt, then in the eyes of the market our debt shrinks. But if our economy is going to grow fast enough to outpace our debt, we'll need an infrastructure that can support that kind of growth. Tomorrow's energy contracts won't be won by the country with yesterday's energy grid.

'Grand bargain' needed

The problem is that the way we choose our infrastructure projects is an embarrassment. About 10 percent of infrastructure spending comes from politicians securing earmarks. Most of the rest depends on a formula in which the government just hands money over to the states. There's no requirement for cost-benefit analysis or rate-of-return calculations. [B]The decisions are horribly politicized.[/B]

(Fine let local Civil Engineers like me pick what needs to be done instead of the stupid, ignorant, politicians. We know what needs to be done. I guarantee that your local DOT knows what roads need to be fixed or that your local water district knows what pipes and sewers need to be replaced. Just give Civil Engineers the money instead of wasting it on pie in the sky green jobs, twenty billion+/year in foreign aid, and endless foreign wars. We will rebuild THIS country for you and save the economy in the bargain. Lets fix up America first instead of some third world crap hole. - mesa)

If taxpayers are going to make a huge investment in our nation's infrastructure, then we're owed an assurance that policymakers are choosing the best projects. That suggests a grand bargain, in which more infrastructure money is tied to reforms ensuring a better process for spending that money.

The infrastructure bank takes a step in this direction, but making good decisions with taxpayer money should be the rule, not the exception.

There has never been a better moment for America to rebuild its infrastructure - and reform the way it makes infrastructure decisions going forward.
An unlikely and unwelcome array of forces have converged to match our needs and the economy's bargains almost perfectly.

The only question is whether we'll run our government like a business, alert to good opportunities, or whether we'll run it as we have done, squabbling among ourselves while things get worse.

How about it, chief?
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Old 10-05-2010, 09:11 AM   #2
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Default Re: Infrastructure: The best deal in the economy

They spent all the money on these nifty signs.


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Old 10-06-2010, 12:02 AM   #3
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Default Re: Infrastructure: The best deal in the economy

Originally Posted by MACH1 View Post
They spent all the money on these nifty signs.

That is the work of a politician and not an Engineer.

However signs like that are not terribly expensive compared to the cost of a construction project. As usual the idiot media had it wrong. They counted the cost of all the signs used on a project and tried to claim that those silly signs used up all the money. They didn't.

Signage on any roadway in this country is governed by the MUTCD. (Manual of Uniform Traffic Control Devices) which is written by a group known as AASHTO (American Association of State Highway and Transportation Officials). AASHTO is very important technical stands group and is why all signs on highway are the same.

If an Engineer does not follow the MUTCD on project signage and there is an accident then the lawyers will sue the Engineer,.his consultancy, the contractor, and whatever city/county/state is in charge of the project.

Just to give you some idea how much a major highway costs. In Phoenix a freeway currently costs about four million dollars per lane mile and that doesn't count land acquisition, bridges, or the cost of a system TI among other things. A small project for a state DOT such as twenty miles of a pavement preservation on a two lane road, could easily be five million or more depending on what has to be done. Infrastructure isn't cheap.

However as the article points building infrastructure is less expensive now than it has been for at least 15 years. Also due to lack of funding the infrastructure of this county is falling apart. Most of roads build after WW II had a fifty year design life span which is now up.

So not only does America's infrastructure desperately need to be fixed, it's also a great way to put Americans to work, stimulate the economy, and rebuild this country at the same time.
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