Friday, May 24, 2024

McHugh David: Federal investment in infrastructure would boost the whole economy – but requires a financial reboot

by BIZ Magazine

So the Democrats killed the most recent stimulus package in the senate.

That came as a surprise to… no one.

For months, the Democrat-dominated Congress and Republican-dominated Senate have been on very separate pages on what a second stimulus package contains. The difference is somewhere between $3 trillion and $500 billion, proposed by the Democrats and Republicans, respectively.

What’s fascinating is the answer to the question of – who’s right? Hard to say. Democrats definitely have parts of it wrong, there’s large portions of their expenditure plan that have very little or nothing to do with recovery from COVID-19. That makes it an easy political play for the Republicans to block, because as has been discussed in these very pages – the United States cannot afford the cost of recovery, such that it is.

A huge number, which continues to grow.

Part of the continually growing deficit comes from extremely hindered economic output for companies, large and small, for almost all of the second quarter of the year and part of the third. GDP was down 33% in the second quarter, and is expected to be down overall for the year.

GDP being down overall, for the year, is not a good sign for the country. The past 10 years, the country has been hugely reliant on steady growth in GDP to keep up with new debt and deficits – domestic product being down even just year, and a few percent could cause default on debt.

Or forcefully reduce the ability to borrow capital and deliver certain services.

Frankly, that’s what should have already been done, but no political party has been able to put together the gumption to actually try. President Donald Trump Tweeted, after signing his first omnibus bill, that congress needed to reduce spending on their next budget.

Never happened.

Instead, spending has continued to grow and the country flows farther into debt.

And that falls on the republicans, just as much as the democrats, for not trying to fix the budget at all. Now we get to a point where the country has, amid a global pandemic that the United States couldn’t afford to respond to in the first place, a hurricane that struck Lake Charles and was devastating, and now Sally is baring down on southeastern Louisiana.

People in Livingston Parish have breathed some early sighs of relief, as the track takes the storm east of us, and usually the western side of hurricanes receive the least damage and issue. However, there’s still plenty of worry due to the potential for large rains in the area.

Why? Because drainage hasn’t changed, and that’s because the money just isn’t there.

Now think to yourself, for just a second, how in a country like America we say a project, such as the Darlington Reservoir, could have wiped out 80% of the damage from the 2016 flood. And then, as if like clockwork, the government starts to nickel, dime, and argue about the entire project which could invest capital, create jobs, and increase land value.

Folks – broke countries don’t do that.

It’s one thing to be responsible with funds, especially taxpayer funds. But no one has argued the benefits of Darlington Reservoir and yet the only reason construction hasn’t begun is excuses.

That’s just one project, in one small area of this country. How many others face the same blowback from the federal and local governments? Again, infrastructure projects introduce capital, create jobs, and improve land values – it’s an economic driver of the best sort, and a perfect government investment.

Think back on what Congressman Garret Graves continues to harp on – the cost of recovery far outweighs the cost of prevention.

So return now, to COVID-19 – the Republican pushback against huge spending is understandable, but if they are going to invest $500 billion in the economy it needs to start with consumers, renters, and small businesses.

Senate republicans offered to invest more in the Paycheck Protection Program… just one issue, that was a one-time loan, businesses can’t apply for another. So why invest more money into a program that’s tapped out?

The federal government is going to have to learn how to cut back spending and use direct investment in infrastructure to spur jobs and capital increases.

Else you’re going to have people, like we here in Louisiana, dreading every storm that forms off the coast of Africa. It shouldn’t have to be that way in the United States.

McHugh David is publisher of the Livingston Parish News.

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