Infrastructure Spending for Dummies

I've spent most of the past few Mondays trying to convince you, my friendly readers, of a few truths that are unconventional in our current political/economic paradigm. First, our national economy -- which is based on the premise that we can have strong cities, neighborhoods and families by having prosperity trickle down from on high, through government programs or corporate success, depending on your political preference -- our national economy is a distorted mess. Worse, the people managing and influencing this craziness have a perverse view of reality, an understanding of what it means to be successful in America today that is completely divorced from the reality that you and I experience.

The one seeming point of consensus across all this insanity is that of the need for more infrastructure spending as a way to create growth. We share this national consensus despite the ridiculous nature of the math behind the theory -- "good investment" for an economist does not mean what you think it means -- and the obvious fact that fixing infrastructure does not create "growth" in the same way building it the first time supposedly did.

As we enter the last few weeks of what has been the most insane political season I've ever experienced, and as we prepare for the 2017 congressional session where some type of massive infrastructure stimulus bill is sure to be in the offing, we need Strong Towns advocates to be able to bring some common sense to this conversation. I need you to be the most informed informed people on these issues in your town. I also need you to share this information with your neighbors. We have to start having a grown up conversation about how to make our cities, towns and neighborhoods strong once again.

I want to review some basic facts so we're all grounded.

Fact #1: Growth is easy.

If there is one thing we should have learned from the 2008 banking crisis it is that growth is easy. As Tomas Sedlacek has taught us, we can experience growth if we're willing to give up stability. The insurance company AIG sold policies on subprime mortgages at extremely favorable rates, even after they suspected the underlying securities were bad. They did this because each sale was pure profit today while any payout they would need to make on a claim would happen in the future. Everyone got a bonus when the deals were made but, long term, the company is insolvent and lots of people who thought they were insured find out they are not (until the government steps in).

Our cities work the same way. We can do that new project -- add new lanes, build a new interchange, extend those utilities -- and experience growth right now. We won't have to go out and fix any of that stuff for decades. Everyone involved today looks good -- and many will get bonuses or be reelected -- but those long term liabilities are still there (even if accounting rules don't require cities to show them). 

Fact #2: Wealth creation is different than growth.

If I gave you a thousand dollars, you would feel wealthier. If I loaned you a thousand dollars, you would not. There is a huge difference there that we all intuitively understand. We get so seduced by the macroeconomic theories of those who would suggest the federal government can print and borrow with no apparent limit -- and perhaps they can, although I doubt it -- that we don't consider how these notions can't and don't apply to cities. Not at all.

Here's some vivid data we (Strong Towns along with Urban 3) put together for Lafayette, Louisiana. Note how, since World War II, they have experienced growth in terms of population. They have also experienced growth in terms of the length of pipe and number of hydrants, which corresponds to the growth in the land area within the city.

The typical family in Lafayette now has 10x the length of pipe their excess wealth must maintain and 21x the number of hydrants than their counterpart from seven decades ago. So has their family wealth increased by more than 21x? Not even close.

It's one thing to experience growth. It's another thing entirely to build wealth. Our cities don't need more growth, especially as we've been experiencing it. They desperately need to build wealth. We need to grow our incomes and our net worth faster than we grow our liabilities. Period. 

Fact #3: The liabilities your city takes on are yours.

We might think the state or federal government is going to be there to bail us out. They are not. There may be a little bit of money trickle down here or there, but if you want that pipe fixed, that money is almost certainly going to come from the wealth in your city. If you want that road repaired, you're going to have to pay for it. As my friend Joe Minicozzi says, there is no infrastructure fairy.

For cities, this makes all that state and federal infrastructure spending -- especially that which goes for new expansion -- a poison gift, a financial millstone long term around a community's neck.

It is very likely that, within the next 12 to 24 months, your community is going to get some money for infrastructure. What are you going to do with it?

Still, you're going to receive it anyway. Politicians want it. Economists want it. Voters want it. It is very likely that, within the next 12 to 24 months, your community is going to get some money for infrastructure.

What are you going to do with it?

We're currently asking that question of people from all over the country. We're going to start sharing those answers soon. We're also going to start looking at some of the great projects that you have submitted (it's not too late to enter the contest). Most cities, towns and neighborhoods are going to mess this up because they are locked into the current paradigm. We need to start preparing the groundwork so that enough of you take a different path, break through with something truly worthwhile, so that you can be an example for others to follow.

Where are those places that are choosing a Strong Towns path? Where are the Strong Citizens that are going to push and pull them there?

See more stories from our #InfrastructureCrisis series.

(Top image source: Public Domain Images.)

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