Infrastructure Spending at Historically Lowest Level

Speaking to a packed room at the National Press Club on Monday, Senator Bernie Sanders (I-Vermont) detailed a $1 trillion plan to rebuild the country’s crumbling infrastructure, and in the process, create 13 million good-paying jobs. [VIDEO]

Larry Summers at the Wall Street Journal: Spending on Our Crumbling Infrastructure (March 10, 2015)

Larry Summers recently said something startling: “At this moment the share of public investment in GDP, adjusting for depreciation, so that’s net share, is zero. Zero. We’re not net investing at all, nor is Western Europe,” he told a Princeton University audience ... Net federal public investment spending, both defense and non-defense, in 2013 (the latest year for which data are available) works out to zero as a percentage of gross domestic product, according to the Bureau of Economic Analysis’s National Income and Product Accounts tables. Non-defense investment spending, which was nearly 1% of GDP in the mid-1960s–and hasn’t come close to that since–was about $9.8 billion in 2013, or a paltry 0.06% of GDP.

Mr. Summers wasn’t exaggerating.

Why is this? Can't we afford to fix our roads and bridges? Let's first follow the money...

January 22, 2015 --- Wall Street Journal: Qualcomm Gives Top Executives $95 Million in Stock Grants
March 9, 2015 --- Forbes: Qualcomm Plans $15 Billion Stock Buyback, Hikes Dividend

Hewlett-Packard is doing the same thing. The L.A. Times reports, "Hewlett-Packard shows how to fatten shareholders while firing workers". Shareholders of Hewlett-Packard have pocketed $2.7 billion through share repurchases and $1.2 billion in dividends. Now HP will acquire the networking company Aruba Networks in a deal valued at $2.7 billion. Meanwhile HP has cut about 44,000 jobs since 2012 and plans to bring the total toll to 55,000 by the end of this fiscal year.

Qualcomm and HP are but two of many examples where worker productivity has been going — and where tax revenues have NOT been going. A CEO's real "fiduciary duty" is to pay themselves first.

Washington Post: "Lately, companies have even been borrowing money to make those shareholder payouts, because with interest rates so low, it’s a relatively cheap way to push stock prices higher."

These corporations have spending billions of dollars every year on mergers and acquisitions — and stock buybacks to increase the value of their executive stock-options. But yet, very little (if any) of their profits are invested in employees’ wages — because (the CEOs say) raising wages would slow hiring, reduce worker hours, cause layoffs, raise consumer prices, destroy the economy, and end life as we know it on Earth.

But what the "job creators" never tell us is, if they did raise workers’ wages, these CEOs might also have to buy one less beachfront mansion, a smaller private jet or a shorter luxury yacht.

Maybe if we tax the capital gains these corporate execs make off their stock-options (boosted with stock buybacks) as regular wages, we can pay for infrastructure. Otherwise, all that cash is going to be sitting idle in the Cayman Islands.

The Daily Tribune: The president’s budget proposed a one-time 14 percent tax on the almost $2 trillion in foreign earnings that U.S. companies hold overseas. Obama would use those proceeds for infrastructure. Additionally, he proposed a 19 percent tax on future foreign earnings as part of a reform of corporate taxes ... But with interest rates so low it’s much cheaper to borrow at home than it is to bring back assets and pay a 14 percent tax.

Barbara Boxer (D-Calif.) and Rand Paul (R-Ky.) have jointly proposed a “tax holiday” that would allow companies to pay a tax of just 6.5 percent on money they bring home, with five years to complete the transfer. That money would all be funneled into the Highway Trust Fund.

U.S. News: Rep. Earl Blumenauer (D-Ore.) introduced legislation to nearly double the gas tax, saying that while he doesn’t like the gas tax as a way to fund infrastructure, it has been proven to work, and an increase is long overdue ... Chairman of the House Ways and Means Committee Re. Paul Ryan (R-Wis) has said he will not support a raise.

In an op-ed for the Hill, Blumenauer says, "The need is compelling for a significant infusion in the Highway Trust Fund, and the benefits are obvious. Although nothing is free, according to an S&P 500 research report, each $1.3 billion invested in infrastructure generates $2 billion of economic growth, creates 29,000 jobs and reduces the deficit by $200 million."

Fiscal Times: Paul Ryan said that if Congress fails to approve corporate tax reform this year, he will be forced to find the funding for highways and bridges from some other source. “If [tax reform] doesn’t happen and for one reason or another we’re incapable of finding an agreement, then we’re going to have to go to finding other ways of bridging the shortfall.” [Social Security?]

Although some want to raise the tax on gasoline, especially with the current low oil prices, that would mostly impact low-wage earners (of whom 50 percent make $28,031 a year or less.)

As the billionaire-investor Nick Hanauer noted in a speech: "Somebody like me makes hundreds or thousands as times much as the median American, but I don't buy hundreds or thousands of times as much stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and shirts a year like most American men."

The Heritage Foundation, a conservative think tank, is a strong proponent of leaving infrastructure funding to the states. (Maybe John Oliver’s stand on U.S. infrastructure do for highway funding what “Last Week Tonight” did for net neutrality.)

Congress should remove corporate tax loopholes and use the added revenues to invest in infrastructure, which has been falling behind other countries. Because of America's skewed tax code (favoring the very wealthy and large corporations), it has allowed U.S. infrastructure spending to fall far behind China's.

Chart below: Net federal government non-defense investment and net state and local government investment (as a share of Gross Domestic Product from 1947 to 2013) is at it's lowest level since the 1940s. (Source: St. Louis Fed)

According to a U.S. government report, just 2 percent of the U.S. gross domestic product (GDP) goes to infrastructure construction, whereas, Europe spends 5 percent and China 9 percent. Developing countries, led by China, have devoted billions of dollars to the biggest dams, highways, railways, bridges, canals and energy projects. Increasingly, this group of rising economies have been building showcase projects that once were mainly the pride of the U.S., Western Europe and Japan.

China already has the world’s largest building (the New Century Global Center) and soon will have the world's tallest building (Sky City, at 2,749 feet in the southern Chinese city of Changsha, which was set to be completed last year) and the country’s tallest skyscraper (Shanghai Tower, which has just been topped out and will be completed in 2015). China also has the world's tallest dams and the world’s fastest bullet train (the Shanghai Maglev). Now the country also has the world’s longest cable-stayed bridge (the Jiashao Bridge, which just opened recently).

Shanghai, China - 1987 and 2013

Robert Reich: 

"Big American corporations have no particular allegiance to America. They don’t want Americans to have better wages. Their only allegiance and responsibility is to their shareholders — which often requires lower wages to fuel larger profits and higher share prices."

That's one reason why they're called "multi-national" corporations. They are money generators without borders, with people from different countries sitting on each others board of directors, and often sitting on multiple boards of directors — owning stock in one company that usually benefits other companies. The global corporate web has no patriotic duty to any one country, their executives' only duty is to themselves and each other. They are more like collaborators than they are competitors. It's really one huge global corporate machine -- but the Supreme Court says they are "people" — but real people (CEOs and other corporate execs) come and go, whereas "The Machine" (the corporation) lives on in immortality in one form or another.

When people say neoliberalism is good for growth, they tend to be looking at the stock market and executive pay packages, not GDP or workers’ wages. And they certainly aren't talking about infrastructure.