By F. William Egdahl and cross-posted from New Eastern Outlook
The catastrophic events around the California Oroville Dam in recent weeks underscores a far more urgent problem. The American Society of Civil Engineers has just released their quadrennial assessment of United States essential infrastructure–roads, clean water supplies, levees, ports, dams, bridges, electric grid. The report gives the nation a near-failing D+ grade. America is coming to resemble the economic infrastructure in the Soviet Union domestically at the collapse of communism during the late 1980’s. The recently-announced Donald Trump proposal to invest $1 trillion over ten years to address the problem, mainly building high-speed trains (to date the USA has not one) doesn’t even come close to the scope of the problem.
A Wall Street-driven agenda of globalization of US manufacturing and out-sourcing of production has left America a hollowed-out, crumbling Superpower. Since the 1980’s the United States has significantly under-invested in both new infrastructure and in renewing old. As US multinational corporations moved their factories overseas to cheap labor production in Mexico, then in Asia, especially China, and elsewhere, they found tax loopholes that allowed them to walk away from supporting the country that as recently as the 1960’s was the world industrial economic leading nation. Today US corporations hold $2.4 trillion in overseas profits that they keep abroad to avoid US taxes.
The result of all this neglect is that over the past three decades since the end of the 1980s, federal funding of major infrastructure projects such as dams has dropped by half, from 1 percent to 0.5 percent of GDP.
Infrastructure Report Card
On March 9, the American Society of Civil Engineers (ASCE) released its 2017 “Infrastructure Report Card.” They review the state of national infrastructure every four years. Since their 2013 report, despite four years of an alleged Obama economic recovery, the state of affairs is unchanged at a near-failing D+ with F being fail.
The US President just met with leading industry representatives to discuss his proposal for spending $1 trillion in a combination of public-private funds over 10 years, most apparently on roads and high-speed rail. The ASCE estimates that almost five times that, or $4.59 trillion, is urgently needed over the next 8 years only to bring the situation to a level of “adequate” or B grade by2025. The economic cost to the national economy of the crumbling infrastructure is calculated annually in the hundreds of billions of dollars in wasted economic inefficiency.
Yet even that modest Trump proposal to spend $1 trillion in infrastructure is likely to be “dead on arrival” according to Wall Street analyst Randall Forsyth in a report in Barrons. One effect of more than eight years of abnormally low Federal Reserve interest rates have left the various state pension funds seriously underfunded, requiring them to draw more from state general budget funds. States will not have the money to join with the Trump national plan even were that to be passed by Congress, which itself is not at all clear. Forsyth notes, “In the United States, state and local governments count infrastructure projects as current spending—as opposed to investments, capitalized over the life of the projects, as with private corporations—budget constraints hampered their ability to fund projects.”
In addition, Trump has promised another Federal tax cut at the same time. In short, The Donald’s economic team don’t even have their infrastructure ducks in the pond, let alone in a row with reality…