Fox News figures have repeatedly decried any spending on infrastructure as a "union bailout" and have suggested that infrastructure spending only benefits organized labor. But economists agree that infrastructure spending helps the economy as a whole and that the country's infrastructure badly needs repair and replacing.
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Fox Claims Infrastructure Spending "Favors The Unions Entirely"
Varney Attacks Plan To Revitalize Infrastructure Because It "Favors The Unions Entirely." On the September 6 edition of Fox News' Fox & Friends, co-hosts Gretchen Carlson and Brian Kilmeade discussed the president's Labor Day speech in Detroit, MI, and his upcoming September 8 speech about jobs, with Fox Business host Stuart Varney. Suggesting the president would put forward "a big, new infrastructure program," Varney attacked such a plan because it "favors the unions entirely." From the show:
CARLSON: We've been talking about it for weeks now, and the president finally gearing up to deliver yet another big speech on the economy. It's going to happen Thursday night.
KILMEADE: But with the news of a global stock selloff this morning in an economy with the -- which added zero jobs in August, is anyone confident that what he has to say will make a difference? Stuart Varney is here. Stuart, something significant about that speech yesterday.
VARNEY: I think the president jumped into the union pool, right in, right in the middle of it. He is now committed to the unions as he -- as he's never been before. Yesterday, he did it in two ways. It was a big campaign-style speech to a union audience. And secondly, he offered a hint as to what he's going to say on Thursday night, and the hint was -- we're going to have a big, new infrastructure program. That favors the unions entirely. That's all about using union labor, union scale with public money. [Fox News, Fox & Friends, 9/6/11]
Doocy: "Rebuilding The Nation's Bridges and Tunnels And Roads And Stuff Like That, That's Great -- If You're In A Union." Later on the September 6 edition of Fox News' Fox & Friends, co-host Steve Doocy claimed that federal spending on "rebuilding the nation's bridges and tunnels and road and stuff" was "great -- if you're in a union." From the broadcast:
CARLSON: Listen, he's called for a special joint session of Congress. This is for a big-time event, folks. It better be something new, but he gave hints yesterday that it's going to be more about infrastructure spending. We've been hearing that for weeks. He also said, hey, let's continue to extend the payroll tax. That's done nothing to create jobs. If he doesn't have something else up his sleeve, those approval ratings, I believe, will continue to go down.
KILMEADE: Extend unemployment, he's going to have the Federal - the Fed hold down interest rates long term, perhaps, and he wants to renew the transportation bill.
KILMEADE: So that will be -- that will be a lot of money as well.
DOOCY: And in rebuilding the nation's bridges and tunnels and roads and stuff like that, that's great -- if you're in a union, and you're on a construction crew. [Fox News, Fox & Friends, 9/6/11]
Doocy Calls Infrastructure Spending, Stimulus "A Union Bailout For Teachers And First Responders." On the September 7 edition of Fox News' Fox & Friends, the co-hosts discussed details of the president's proposed jobs plan ahead of his speech. Responding to part of the proposal, Doocy referred to infrastructure spending as "a union bailout for teachers and first responders." From the show:
KILMEADE: I mean, you got $300 billion set aside for job creation, which could be code for, let's go build some tunnels, build some bridges, and rebuild some roads --
KILMEADE: -- and possibly some schools, [inaudible] for stimulus money. Extend payroll tax cuts. I think that will get both sides to join in. Infrastructure spending is what we just discussed, and direct aid to state and local governments, which was a lot like the first stimulus package, which kept people in jobs that were unsustainable without the money.
DOOCY: Yeah, but it's a union bailout for teachers and first responders. [Fox News, Fox & Friends, 9/7/11]
But Experts Agree That Infrastructure Spending Is Stimulative And Badly Needed ...
Economics Scholar Berman: "This Is The Time When We Should Be Engaged In All Sorts Of Public Works Projects." In a September 2 post on his Forbes.com blog, Len Berman, a public affairs professor and president of the National Tax Association, argued that Obama should call for a "massive public works program now" to stimulate the economy and lower unemployment. From the post:
Aside from the compassionate argument, there's a good-government argument for a massive public works program now. Labor is practically free. Yes, we have to pay workers--and indeed that's a major reason for the program--but the opportunity cost of such labor in areas with very high unemployment is really low. When government hires a worker during good economic times, there's a cost. That worker isn't available to produce private goods and services. The worker should be able to produce public services worth at least as much as his or her compensation (actually more when you consider that the taxes used to pay the salary entail an additional economic cost--the deadweight loss).
But when the government hires unemployed people with few economic prospects, the opportunity cost is nearly zero. If not employed in a public works project, the worker would be doing nothing. (Indeed, to the extent that long-term unemployment erodes job market skills and creates other social problems, unemployment itself is quite costly.) From the point of view of society, hiring a worker when there's high unemployment is essentially free.
So this is the time when we should be engaged in all sorts of public works projects. They don't even have to be especially high-value projects because the cost of producing them is so low. We should speed up every road maintenance and construction project we can. We should patch every pothole and resurface every road that needs it as long as unemployment stays high. We should repair bridges, dams, levees, and subways. We should hire unemployed college grads to work as teachers' aides especially in schools with larger class sizes. When the economy recovers, then government should shed its excess workers (who will then be able to find jobs in the private sector).
This is way better than wage subsidies. Encouraging private companies to produce more when demand is weak can push product prices down causing other less healthy competitors to shed jobs.
Of course, a side benefit of public works programs is that the income they produce boosts overall demand which can create a virtuous cycle of more demand increasing employment, which further increases demand, etc. This is the Keynesian argument (which is well supported by evidence). But even if you don't buy Keynes, this is a terrific time for government to be producing stuff. [The Impertinent Economist, Forbes.com, 9/2/11, emphasis added]
NYT: Senators Say "Creating An Infrastructure Bank With $10 Billion Now ... Could Spur Up To $640 Billion Worth Of Infrastructure Spending Over The Next Decade." From a March 15 New York Times article about proposals to create an infrastructure bank:
Amid growing concerns that the nation's infrastructure is deteriorating, a group of Democrats, Republicans, and labor and business leaders called Tuesday for the creation of a national infrastructure bank to help finance the construction of things like roads, bridges, water systems and power grids.
The proposal -- sponsored by Senator John Kerry, Democrat of Massachusetts, and Senator Kay Bailey Hutchison, Republican of Texas -- would establish an independent bank to provide loans and loan guarantees for projects of regional or national significance. The idea is to attract more infrastructure investment from the private sector: by creating an infrastructure bank with $10 billion now, they say, they could spur up to $640 billion worth of infrastructure spending over the next decade. [The New York Times, 3/15/11]
EPI: "Infrastructure Spending Provides About 20-50% More Stimulative Benefit Than Tax Cuts ... [And] The Country's Infrastructure Is Dangerously Inadequate." In a January 2009 post about infrastructure spending as part of the stimulus package, Ethan Pollack, policy analyst for the Economic Policy Institute (EPI), noted:
As we have previously written (see Pollack 2008), infrastructure spending provides about 20-50% more stimulative benefit than tax cuts, mainly because households are likely to save the extra money rather than spend it back into the economy.
But even assuming that infrastructure spending will be too slow to provide an effective short-term stimulus and that the recession will be so short-lived that we won't need fiscal stimulation in a year and a half (highly unlikely), large-scale infrastructure investments would still be justified. According to the American Society of Civil Engineers, the country's infrastructure is dangerously inadequate and needs $2.2 trillion in new investments over the next five years. These investments have to be made at some point. Now-while the labor market is slack and construction inputs and government debt are cheap-is the perfect time to make them. If anything, the recovery package should include an even a larger down-payment on our infrastructure needs. [EPI, 1/29/09]
... Including Conservative Politicians, Chamber Of Commerce, And Business And Finance Leaders
WSJ: Latest Infrastructure Bank Bill Was "Unveiled This Year, By Sens. John Kerry (D., Mass), Kay Bailey Hutchison (R., Texas) and Lindsey Graham (R., S.C.), And [Is] Backed By The Chamber [Of Commerce]." An August 15 Wall Street Journal article noted that the most recent proposal to create an infrastructure bank is a "bill unveiled this year, by Sens. John Kerry (D., Mass), Kay Bailey Hutchison (R., Texas) and Lindsey Graham (R., S.C.)." The article also noted that Kerry, Hutchison, and Graham's bill is "backed by the Chamber [of Commerce]." [The Wall Street Journal, 8/15/11]
Hedge Fund Manager Biggs: "What The U.S. Really Needs Is A Massive Infrastructure Program ... Similar To The WPA Back In the 1930s." From a July 1 Wall Street Journal article:
The U.S. and Europe are set to grow at an anemic pace for the foreseeable future unless the government can step in with an enormous fiscal stimulus, according to a veteran investor.
Speaking exclusively with The Wall Street Journal, Barton Biggs, managing partner at multibillion dollar hedge fund Traxis Partners, painted a bleak outlook for the developed world with only huge government intervention likely to improve things.
Instead, Mr. Biggs, former chief global strategist for U.S. investment banking powerhouse Morgan Stanley, demanded the U.S. government temporarily return to ideas used in the Great Depression as a way to get the country back to higher growth.
"What the U.S. really needs is a massive infrastructure program ... similar to the WPA back in the 1930s," he says.
The plan would be to employ some of the many unemployed people, jump start the economy, as well as help catch up with Asia, which is building state-of-the-art infrastructure from new mechanized port facilities to high-speed trains.
He suggested financing such building through the sale of U.S. Treasuries. [The Wall Street Journal, 7/1/11, emphasis added]
CEOs From Caterpillar, Google, Wachovia Supported Infrastructure Spending. In a November 18, 2008, article about discussions of government stimulus, The Wall Street Journal reported, "Almost all the discussions of government stimulus at the Journal's CEO Council included support for infrastructure spending." The article continued:
"There are a lot plans in place that I think a fiscal stimulus could get traction early," said James Owens, CEO of Caterpillar. "That kind of focus could have an immediate and lasting impact because generally these projects are three or four years in duration." He also noted that improving infrastructure makes the U.S. more competitive in the global marketplace.
At a later energy panel Google CEO Eric Schmidt said that there are many infrastructure projects tied up at the state and local level. "Utilities are ready and prepared to build infrastructure, but without funding and legislation can't do it," he said. That panel also suggested that transmission lines are ready to start moving forward, but just need to overcome regulatory and cash-flow issues. CEOs suggested using eminent domain to push projects forward.
Earlier, Robert Steel of Wachovia suggested that some infrastructure be spent on building new facilities for education, another top priority outlined by the CEOs.
"Our infrastructure is crumbling," Owens said. "If we can make an investment in infrastructure, that will serve to make our economy long-term more globally efficient and competitive. Remember, it does create a lot of jobs." [The Wall Street Journal, 11/8/08, emphasis original]