On today's Fox & Friends, Fox Business host Stuart Varney called Senate candidate Elizabeth Warren (D-MA) a “collectivist” and “anti-private enterprise” because she recently proposed spending more on infrastructure projects like roads and bridges. In attacking Warren, Varney falsely claimed that additional infrastructure spending would fail to stimulate the economy and that the U.S. could not afford this spending.
In summarizing the ad, Fox & Friends and co-hosts Brian Kilmeade and Steve Doocy suggested that Warren believes the country should be more, as on-screen text put it, “like China.” However, Warren is not advocating that the U.S. adopt what Fox would deem as the policies of China. Rather she is calling for getting Americans back to work by repairing infrastructure that needs it. From the broadcast:
VARNEY: Would you like to do the math for a second? If we were to commit 9 percent of our GDP to infrastructure projects that would be a new stimulus program in excess of $1 trillion.
DOOCY: How'd the last one work?
VARNEY: Is that what she wants? A, we don't have the money. But Elizabeth Warren is going to play a very significant role in the presidential campaign. Not just the senate campaign in Massachusetts. She's been given a prominent role at the Democrat convention, a keynote speech right there in prime time. She's going to backup President Obama's left of center policies, calling for a new stimulus program. She's a collectivist just like the president. She is anti-private enterprise just like the president. She is going to have a very significant role.
In her ad, of which Fox & Friends only played a part, Warren said:
WARREN: We've got bridges and roads in need of repair, and thousands of people in need of work. Why aren't we rebuilding America? Our competitors are putting people to work, building the future. China invests 9 percent of its GDP in infrastructure. America, we're at just 2.4 percent. We can do better. We can build a foundation for a strong new economy and get people in Massachusetts to work right now.
Warren correctly observed that US infrastructure needs attention, and attending to it, via government investment, would help the economy. A May 2011 Urban Land Institute study found that much of the nation's infrastructure is “operating beyond their planned life cycles.” The American Society of Civil Engineers in January 2009 gave US infrastructure a D rating, explaining that the cost of infrastructure repairs have “grown to a daunting $2.2 trillion over the next five years.”
The spending Warren has proposed, like the stimulus, would also help the economy, particularly when compared to additional tax cuts for the wealthiest Americans, a measure Varney, Fox guests,and hosts frequently treat as a panacea. A January 29, 2009 Economic Policy Institute post explained that “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.”
Similarly, in June 2010 Moody's Analytics also found that in the 2009 stimulus, every dollar spent on infrastructure returned $1.57 to the economy, a significantly higher ratio than tax cuts.
Finally, contrary to Varney's claim, America can afford to spend money on infrastructure right now. In a July 26 New York Times op-ed Nobel winning economist Paul Krugman explained that “U.S. borrowing costs have fallen to their lowest level in the nation's history” and “investors are, in a sense, offering governments free money for the next 10 years; in fact, they're willing to pay governments a modest fee for keeping their wealth safe.” Krugman concluded:
[W]hen money is cheap, that's a good time to invest. And both education and infrastructure are investments in America's future; we'll eventually pay a large and completely gratuitous price for the way they're being savaged.
Likewise, in a January 3 Financial Times column former Treasury Secretary Larry Summers explained:
Rather than focusing on lowering already epically low rates, governments that enjoy such low borrowing costs can improve their creditworthiness by borrowing more not less. They can also invest in improving their future fiscal position, even assuming that no positive demand stimulus effects are likely to materialise. At a time of negative real rates, accelerating any necessary maintenance project and issuing debt leave the state richer not poorer; this assumes that maintenance costs rise at or above the general inflation rate.
Consider a $1 project that yielded even a permanent 4 cents a year in real terms increment to GDP by expanding the economy's capacity or its ability to innovate. Depending on where it was undertaken, this project would yield at least 1 cent a year in government revenue. At any real interest rate below 1 per cent, the project pays for itself even before taking into account any Keynesian effects.