<?xml version="1.0" encoding="UTF-8"?><rss version="2.0" xmlns:content="http://purl.org/rss/1.0/modules/content/" xmlns:wfw="http://wellformedweb.org/CommentAPI/" xmlns:dc="http://purl.org/dc/elements/1.1/" xmlns:atom="http://www.w3.org/2005/Atom" xmlns:sy="http://purl.org/rss/1.0/modules/syndication/" xmlns:slash="http://purl.org/rss/1.0/modules/slash/" > <channel> <title>Infrastructure – The Musings Of A Politics Junkie & Closet Economist</title> <atom:link href="https://kurtdavisjr.com/tag/infrastructure/feed/" rel="self" type="application/rss+xml" /> <link>https://kurtdavisjr.com</link> <description></description> <lastBuildDate>Tue, 31 May 2022 16:13:00 +0000</lastBuildDate> <language>en-US</language> <sy:updatePeriod> hourly </sy:updatePeriod> <sy:updateFrequency> 1 </sy:updateFrequency> <generator>https://wordpress.org/?v=6.7.2</generator> <item> <title>U.S. Infrastructure and Its Challenges…</title> <link>https://kurtdavisjr.com/u-s-infrastructure-and-its-challenges-republicans-democrats-roads-power-rail-electricity/?utm_source=rss&utm_medium=rss&utm_campaign=u-s-infrastructure-and-its-challenges-republicans-democrats-roads-power-rail-electricity</link> <dc:creator><![CDATA[Kurt L. Davis Jr.]]></dc:creator> <pubDate>Sun, 29 May 2022 16:11:51 +0000</pubDate> <category><![CDATA[United States]]></category> <category><![CDATA[Democrats]]></category> <category><![CDATA[Infrastructure]]></category> <category><![CDATA[Power]]></category> <category><![CDATA[Railways]]></category> <category><![CDATA[Republicans]]></category> <category><![CDATA[Roads]]></category> <guid isPermaLink="false">https://kurtdavisjr.com/?p=586</guid> <description><![CDATA[U.S. infrastructure is the never-ending problem that all administrations want to solve. Yet attempts to find a solution generally creates more questions and angst…]]></description> <content:encoded><![CDATA[<div class="wp-block-image"> <figure class="aligncenter size-full"><img fetchpriority="high" decoding="async" width="960" height="640" src="https://kurtdavisjr.com/wp-content/uploads/2022/05/US-Infra-Getty.jpg" alt="" class="wp-image-587" srcset="https://kurtdavisjr.com/wp-content/uploads/2022/05/US-Infra-Getty.jpg 960w, https://kurtdavisjr.com/wp-content/uploads/2022/05/US-Infra-Getty-300x200.jpg 300w, https://kurtdavisjr.com/wp-content/uploads/2022/05/US-Infra-Getty-768x512.jpg 768w, https://kurtdavisjr.com/wp-content/uploads/2022/05/US-Infra-Getty-750x500.jpg 750w" sizes="(max-width: 960px) 100vw, 960px" /><figcaption>Shade Lohmann Bridge – I474 Peoria Bypass – under construction for sandblasting, repair and painting of the eastbound steel span structure over the Illinois River (Photo Credit: Getty)</figcaption></figure></div> <hr class="wp-block-separator has-css-opacity"/> <h4 class="has-text-align-center wp-block-heading"><strong><em><em><em>Let’s take the necessary steps forward…</em></em></em></strong></h4> <hr class="wp-block-separator has-css-opacity"/> <p>U.S. infrastructure is the never-ending problem that all administrations want to solve.</p> <p>Yet attempts to find a solution generally creates more questions and angst.</p> <h2 class="wp-block-heading"><strong>First, what is infrastructure?</strong></h2> <p>There are the well-recognized physical infrastructure components—electricity, roads, bridges, and rail lines—and then there are the social infrastructure components—housing, social service facilities, and recreational facilities among others. Politicians are spread across the spectrum on how to address social infrastructure problems thus when the physical and social infrastructure become politically married together, the discussion on political viability for any infrastructure bill can go sideways. And the American public accordingly ponders why it is so hard to address the obvious problems in society.</p> <h2 class="wp-block-heading"><strong>Second, how did U.S. infrastructure become what it is today?</strong></h2> <p>Looking back at the last few decades of infrastructure investment in the U.S., the focus has largely been on ‘new capex’ project. That said, all infrastructure requires maintenance capex, or general upkeeping expenditures, as all physical infrastructure is designed to have a useful life span. If you consider that the Interstate Highway System began construction in the late 1950s under President Dwight Eisenhower, it should make sense that U.S. roads and bridges require additional investment today.</p> <p>The electricity investment boom came later in the 1980s and 1990s after the Federal Power Commission (FPC) was incorporated into the Federal Energy Regulatory Commission (FERC) in 1978 as part of congressional action to streamline energy regulations and a focus on energy security post-1970s energy crisis. The FERC focused efforts on encouraging private development of electricity generation with a big focus on gas and operators’ ability to tap wholesale market for input. Forty years later, gas (and other fossil fuels) unsurprisingly still accounts for nearly 40% of power production while the power transmission network requires greater investment.</p> <p>Lastly, as much of the U.S. infrastructure is controlled by the government, its maintenance costs are dependent on taxpayer money which is increasingly limited by the growing number of causes it must be shared across and by the shrinking appetite of Americans to pay more taxes (even if targeted at specific issues or projects).</p> <h2 class="wp-block-heading"><strong>Third, what is the cost?</strong></h2> <p>Pricing the cost of infrastructure, according to most advocates, is not hard. Poor infrastructure creates significant costs for the U.S. economy. Various studies, such a INRIX Global Traffic Scorecard, suggest that traffic congestion can cost the U.S. economy more than $80 billion per year. The deteriorating state of air travel infrastructure can cost the U.S. economy more than $30 billion per year. And, yet while Americans can physically see the state of transport infrastructure, it is not exactly easy to translate that number into actionable public spending initiatives and, if required, tax increases.</p> <p>According to the World Economic Forum’s Global Competitiveness Report, in 2019, the United States ranked 13<sup>th</sup> globally for infrastructure quality, which is down from 5<sup>th</sup> in 2002. Thirteenth places the U.S. behind countries such as France, Germany, Spain, the UAE, and the U.K. The cost of moving up that ladder and effectively strengthening the U.S. economy is in the trillions with no clear path to <em>fully</em> funding the transformation.</p> <p>Only 25% of U.S. infrastructure funding comes from the federal government…down from a peak of 38% in 1977. For comparison, most European countries fund most infrastructure development at the national level. As a result, state and local governments struggle to cobble together more cash to cover increasing cost. The infrastructure bill signed into law by President Biden in late 2021 does help by putting more than $550 billion towards broadband, transportation, and utilities but clearly there is more required to solve the problem.</p> <h2 class="wp-block-heading"><strong>Fourth, who will pay for the infrastructure</strong>?</h2> <p>Democrats have backed more federal financing with some Republican support. Critics argue that more private sector development and competitiveness would achieve better results, especially for cash-strapped governments.</p> <p>User fees and tolls as well as specific taxes, such as the gas tax, can be used to underwrite either publicly or privately funded infrastructure projects. And users paying fees to use something seemingly makes political sense. But are Americans willing to pay increased taxes to the U.S. government? Americans are clearly willing to pay a base level of taxes…that base level number, however, is not exactly known.</p> <p>On the other hand, private investors are happy to fund infrastructure projects that provide good yields (let us ignore what is a good yield for now). This is the same argument for governments except there is more distrust by Americans on the federal government’s ability to avoid wasteful spending (or, in other words, avoid investing in projects with bad returns) more than local governments (who are closed to the issues) let alone private investors.</p> <p>Still, under an infrastructure investment program driven completely by private investors, projects will low financial returns and significantly high (non-financial) value to the greater economy would be losers. Thus, the solution has always been a combination of public and private investors. Yet the balance is agreeing how to split the bill between government funds and private investment. It seems circular and simple all-in-one: Agree on necessary projects at a local level and let the private sector fund those projects that provide the attractive returns and have the government fund the remaining projects. But then again, we fall right back into the trap of whether we trust either side to manage spending and work for the greater good. But it should be easier taking a chance on finding the necessary balance between government and private sector compared to taking a chance on infrastructure surviving beyond its useful life span…the latter option of which is proving to be a bad (and, in some cases, dangerous) idea.</p> <hr class="wp-block-separator has-css-opacity"/> <p></p> ]]></content:encoded> </item> <item> <title>Five Things To Watch As The U.S. Economy Recovers</title> <link>https://kurtdavisjr.com/five-things-to-watch-as-the-u-s-economy-recovers/?utm_source=rss&utm_medium=rss&utm_campaign=five-things-to-watch-as-the-u-s-economy-recovers</link> <dc:creator><![CDATA[Kurt L. Davis Jr.]]></dc:creator> <pubDate>Mon, 02 Aug 2021 18:03:15 +0000</pubDate> <category><![CDATA[United States]]></category> <category><![CDATA[Debt Ceiling]]></category> <category><![CDATA[Fiscal Relief]]></category> <category><![CDATA[Infrastructure]]></category> <category><![CDATA[Tax]]></category> <category><![CDATA[Unemployment Insurance]]></category> <category><![CDATA[Vaccination]]></category> <category><![CDATA[Vaccines]]></category> <guid isPermaLink="false">https://kurtdavisjr.com/?p=484</guid> <description><![CDATA[U.S. GDP has reached its pre-covid 19 level…should we be celebrating? The answer is yes. But the economy continues to provide mix signals to the market. And, as it continues to recover, there are five things to watch…]]></description> <content:encoded><![CDATA[ <div class="wp-block-image"><figure class="aligncenter size-large"><img decoding="async" width="1024" height="683" src="https://kurtdavisjr.com/wp-content/uploads/2021/08/US-Economy.jpg" alt="" class="wp-image-485" srcset="https://kurtdavisjr.com/wp-content/uploads/2021/08/US-Economy.jpg 1024w, https://kurtdavisjr.com/wp-content/uploads/2021/08/US-Economy-300x200.jpg 300w, https://kurtdavisjr.com/wp-content/uploads/2021/08/US-Economy-768x512.jpg 768w, https://kurtdavisjr.com/wp-content/uploads/2021/08/US-Economy-750x500.jpg 750w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>(Photo Credit: AP Photo/Mary Altaffer, File)</figcaption></figure></div> <hr class="wp-block-separator"/> <h4 class="has-text-align-center wp-block-heading"><strong><em><em>2021 is the year of vaccines and government spending…maybe?</em></em></strong></h4> <hr class="wp-block-separator"/> <div style="height:20px" aria-hidden="true" class="wp-block-spacer"></div> <p>U.S. GDP has reached its pre-covid 19 level…should we be celebrating? The answer is yes.</p> <p>But the economy continues to provide mix signals to the market. Quarterly earnings from tech companies suggest strong demand and economic recovery. However, consumers accumulated an estimated $1.5 trillion in excess saving during the past year…are these earnings capturing a bump from that pent-up demand that could ultimately wane?</p> <p>Unemployment is significantly down, but the economy also has 6 million less jobs than it did in February 2020 (prior to covid lockdowns). Yet consumer confidence is at its highest since the start of the pandemic. Equity investors are conveying similar optimism that the negative economic effects of covid-19 and associated disruptions will soon be behind us.</p> <p>In short, there is an ongoing pandemic, and the recovery remains vulnerable.</p> <p>Below are the five things to watch as the U.S. economy continues with its recovery.</p> <h3 class="wp-block-heading"><br><strong>Unemployment Insurance and Benefits</strong></h3> <p>The media reports of labor shortages can feel overstated. But a drive through small town American cities, such as Syracuse (New York), or large American cities, such as Miami (Florida), demonstrate that there are many job openings (with hiring signs posted alongside the road and in stores) and that people are not filling them. Restaurants are short-staffed and factories struggle to find laborers. Is that a labor shortage or a problem of policy?</p> <p>The answer to that question is quite complex. The fiscal relief approved in January provided a $300 weekly top-up to unemployment insurance in addition to other covid-related unemployment benefits. The simplistic math suggests the extra $300 on top of the basic unemployment payment makes unemployment more lucrative than working 40 hours at $15 per hour (though many jobs are not paying $15 per hour). Numerous states have done the math and ended the $300 weekly top-up…the August job reports will be telling and either disavow or validate that approach to policy and the intuition of state policymakers.</p> <p>On the other hand, there is the reality of an ongoing pandemic, and many Americans fear returning to work until covid ‘feels more under control’…thus why vaccination rates will be a factor to watch. Others may be waiting for the right opportunity…career trajectory and ownership is a thing not solely for the rich. And others may have their spouse’s income to bridge them to a more opportune time. It is not clear headline numbers capture the underlying nuances.</p> <p></p> <h3 class="wp-block-heading"><strong>Vaccination Rates</strong></h3> <p>Slowing vaccination rates and increasing covid infection numbers in some states will continue to be a factor. Some states, particularly in the South, are seeing covid infection rates at 3 to 5 times the national average with vaccination rates below the national average. For example, less than 50% are vaccinated in the state of Florida yet the city of Miami gives the impression that covid is done. Many private businesses have requirements that the unvaccinated wear a mask, but little will be done to enforce the rule.</p> <p>Vaccine passports and documentation have little chance of becoming normalized in Florida or across most U.S. states. Thus Americans still must interact with the public at their own risk. The consequence of that reality will become clear over the next several months. For example, many Americans remain fearful of eating at a restaurant or stepping into an office. Part of that is due to a developed appreciation for more ‘home life’ and remote work but it is also a true fear of the risk of catching covid. The U.S. additionally has not faced the big test, i.e. when it opens its borders to travelers from all countries at a level comparable to pre-covid times. Americans traveling abroad and tourists visiting the U.S. will likely introduce more exposure to a growing list of covid-19 variants, including the Delta variant. That opening of borders may coincide with fall and winter seasons when the risk of spread would increase.</p> <p></p> <h3 class="wp-block-heading"><strong>Infrastructure Bill (or Agreement)</strong> </h3> <p>The Senate’s overwhelming bipartisan decision to advance a $1.2 trillion infrastructure framework feels positive. President Joe Biden signaled the agreement as evidence that U.S. democratic institutions “can function, deliver and do big things.” Support for the bill included the 50 Senate Democrats, Senate Minority Leader Mitch McConnell and 16 other Republicans, which, as a procedural requirement, helped to avoid a filibuster. But sufficient Republican support for passing a complete bill will be dependent on the details. The current agreement includes $110bn for roads, bridges, and related projects, $73bn for the electric grid, $65bn for universal broadband access, $55bn for clean drinking water, $42bn for ports and airports, and $7.5bn for a national network of charging stations for electric vehicles. Even so, the current agreement requires policymakers writing the full piece of legislation for passage. Getting from ideas to drafted legislation to passage of that legislation will be not be easy. Perspectives on big spending and what is required to sustain the recovery and growth may rightfully change in the meantime as the fact patterns and economic climate continue to change.</p> <p></p> <h3 class="wp-block-heading"><strong>Debt Ceiling</strong></h3> <p>Are there any remaining deficit hawks? If there are some, the upcoming debt ceiling discussion will expose and /or rejuvenate those remaining ‘true’ hawks. A two-year suspension of the debt ceiling expired at the end of July and now the bipartisanship that underwrote an infrastructure agreement must find a way to prevent a possible default. The debt ceiling had been set at $22 trillion since 2019 with borrowing rising to $28.5 trillion, which became the new limit on August 1<sup>st</sup>. The bickering and posturing of ten years ago lasted too long and became too rancorous with Standard & Poor’s stripping the U.S. of its AAA rating. Amid an ongoing global pandemic and many Americans still reeling from the pandemic, both parties can expect to feel some voter anger if the political dance hurts American financial standing.</p> <p></p> <h3 class="wp-block-heading"><strong>Tax Policy</strong></h3> <p>Let’s be honest…someone will have to pay for all the spending. Tax policy will be the lever to be pulled by policymakers. President Biden wants to raise corporate taxes from 21% to 28% He may have achieved a coup with the finance ministers of the G7 countries agreeing on a deal to reform taxation of multinational companies by curbing tax avoidance and imposing a minimum tax of, at least, 15% to reduce the economic incentive of recognizing revenue in low tax jurisdictions. Like any revolution, the coup requires official recognition in policy and by public institutions…this will take some time as finance ministers will have to convince their local legislatures to approve such changes in tax policy. The agreement will need to include other countries beyond the G7 to be truly effective…and other countries will push back. President Biden also wants to raise the federal capital gains and dividend tax rate. Conventional thinking suggests these raises will undercut business and the recovery. However, some economists argue that the money supply and excess capital in consumer hands will likely offset any negative effects of tax increases on capital investment. That said, tax policy and the economic recovery both feel partially uncertain today.</p> <hr class="wp-block-separator"/> <p></p> ]]></content:encoded> </item> </channel> </rss>