While it now appears as if a "CARES 2" bill is the immediate priority for legislators, at some point,
The "once great infrastructure of our Country" was "great" because it planned for the economy of the future, not the technologies of the past. Today, this means more than just "rebuilding", but investing in projects that help mitigate climate change and adapt to its impacts. In particular, investing in public transit and electric vehicle charging networks, clean energy infrastructure, clean water systems, energy-efficient communities, and green spaces.
Despite his election promise to build a trillion dollars' worth of new infrastructure, the Trump administration has few projects to its name. The phrase "infrastructure week" has become something of a running joke on
Just over a month ago, reports circulated that the
The United States Can Easily Afford a Large Infrastructure Package
Trump is right to say there has never been a better time for the federal government to borrow money. The yield on 10-year
Not only is the burden on fiscal coffers lower in this environment, but if the economy's nominal growth rate remains above the average nominal interest rate, then that debt is sustainable. That is, the federal government should feel comfortable increasing its debt stock so long as it invests in the productive capacity of the economy. While such productive investments are by no means guaranteed, there is such a desperate need for modern, green infrastructure in this country such that identifying productive projects should not be a constraint. While some fear a sovereign-debt crisis, that risk is mitigated by the unique status of
An Infrastructure Package Is an Effective Stimulus Package
Then there is the question of whether infrastructure spending is the right kind of economic stimulus for the Covid-19 crisis. There are some concerns that large-scale infrastructure projects involving hundreds of workers could exacerbate the health crisis. To be clear, now is the time to start planning for projects that will be built when the health crisis has passed. Infrastructure projects in
With Goldman Sachs estimating that GDP could fall as much as 34 percent in the second quarter, and recent data out of
Infrastructure spending helps raise economic output in two ways. In the short term, it provides a boost to aggregate demand through what is known as the "short-term fiscal multiplier." That is, a dollar of fiscal spending will raise GDP by more than that dollar as it is spent and re-spent throughout the economy, particularly by those newly employed on these projects. The multiplier on infrastructure investment is likely lower than government consumption--such as the cash handouts included in the CARES Act--but infrastructure also increases the productive capacity of the economy by boosting potential growth through greater productivity in the future, as workers and capital are able to produce more output for less. Overall, the
These effects are averages, however, and could be much larger (or smaller) depending on three key factors. First, infrastructure spending is much more effective when economic growth is low, and monetary policy is accommodating. Assuming the Covid-19 pandemic continues to stall global and
Finally, the effects on output are more pronounced if executed through an efficient public investment regime. This is where
A large new infrastructure initiative may, therefore, require not only opening the purse strings to action appropriate infrastructure spending but also implementing crisis regulation to modify or even override zoning laws, federal insurance policies, and public input processes. This is often how it has worked in the past, with some of the largest infrastructure packages--such as Roosevelt's New Deal or Obama's 2009 stimulus bill--expediting the funding and building of ambitious projects.
A Coronavirus Crisis Stimulus Should Plan for the Climate Crisis
But what kind of infrastructure spending? This is where legislators are likely to encounter the largest stumbling blocks. Despite the dip in pollution, Covid-19 does not mean the climate crisis suddenly goes away, yet many will argue now is not the time to think about other issues. Any large infrastructure package made in response to Covid-19 may crowd out any future attempts at such spending, making it vital that any plan includes "green infrastructure" now. Already there are concerns that negotiations over an infrastructure package could become overwhelmed by "climate politics," a familiar sticking point from the
It's important to remember that the climate change issue, in many ways, is an infrastructure issue. Existing infrastructure globally has already locked in about half the emissions we can emit before 2100 and remain within the 1.5-degree target. Staying under 2 degrees will require huge investments in modern infrastructure that supports clean energy technology and reduces our overall energy use. Furthermore,
A forward-looking infrastructure plan that puts
* Transport infrastructure. We should dramatically increase investment in public transit, electrifying rail, and federal grants for local EV charging infrastructure. Transportation is the largest single contributor to climate pollution in
* Any plan should include funding to modernize the electricity grid and transmission infrastructure.
* Another important feature is clean water.
* A smart infrastructure plan would also promote affordable housing, public schools, and community development. Here, as Vox's
* Finally, we can make better use of public lands and green spaces, including forest and ecosystem restoration, as well as wildlife and marine conservation. These are some of the most efficient and cost-effective strategies for sequestering carbon emissions and potentially a huge opportunity for job creation in a country that could be facing historic levels of unemployment.
Infrastructure projects should be "shovel ready" as soon as this crisis is over if they are to be of much help to the economy. However, negotiations on an infrastructure package are likely to be more protracted than those concerning immediate relief efforts, and green infrastructure is likely to be the least prepared of proposed initiatives. That is why they need to start now. We know