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The Duty of David Dayen

By: tonywikrent Saturday December 22, 2012 11:39 pm

In September 1776, the Continental Army was pinned down on Manhattan, and its commander, George Washington, desperately needed to determine exactly where the British army was going to land. He simply did not have enough troops to guard every possible landing point and avenue of approach. Washington gathered his officers, and asked for a volunteer to don civilian garb and cross behind British lines to gather intelligence on just what the British planned to do, and where.

No one stepped forward. Soldiering was for gentlemen, but spying was for thieves, drunkards, brawlers, and riffraff. In desperation, Washington explained the urgency of his need to discern British intentions. If he selected a place to deploy the Army, and he was wrong in picking the location, and the British appeared somewhere else, the Americans would be easily outflanked, the Army crushed, the Revolution lost, the idea of a self-governing republic snuffed out before it had enjoyed a few infant breaths of birth. Was there not an officer present, familiar with the area, who would undertake the admittedly duplicitous and hazardous task of sneaking into enemy occupied territory and spy on the foeman?

With a heavy sigh, one man, a 21-year old lieutenant in the 7th Connecticut Regiment, stepped forward, and entered history. His name was Nathan Hale.

There are times when one individual is peculiarly fitted for a specific role in the great unfolding drama of human history. Hollywood mints money by depicting the lone hero, whose unique collection of skills, knowledge, and emotional quirks make him or her the “perfect” man or woman for “the job.”  In real life, such historical burdens most often remain unseen beneath the sheer drudgery and apparent conformity to the norms of day to day life. It looks great on screen, but almost all real life heroes never walk away from “the job” with a soaring orange fireball in the background.

The republic faces a shortage of heroes today, similar to what George Washington faced that fateful September day in 1776. Today, the republic is prostrate, battered, bleeding, and bruised, at the feet of a new aristocracy of filthy rich blood suckers who think it sport to try to “negotiate” a $150 taxi fare down to $50. There really are only a handful of people, among the 7.06 billion souls on this planet, who understand the complexities of modern finance, recognize how evil it has become, have the contacts to gather the intelligence, and the cajones needed to make that intelligence intelligible for all the rest of us. I not-at-all humbly submit that stilling the voice of David Dayen is a setback our faltering republic – and all the human aspirations, past, present, and future, for good government free of the predators and parasites that historically have corrupted republics from within – simply cannot afford  at this time.

Take a week or two if you must, Mr. Dayen. But you must return. It is your world historic duty.

 

Why the Obama administration hates labor

By: tonywikrent Wednesday June 9, 2010 6:51 am

The tubez this morning are filled with discussion of a "senior White House aide" attacking organized labor for labor’s support of Bill Halter, who nearly unseated incumbent Arkansas Senator Blanche Lincoln in the Democratic primary yesterday.

Two weeks ago, I explored the problem of why President Obama’s administration has so little concern for the problems of working Americans, in The Obama administration as “managed democracy". I used Thorstein Veblen’s insights into the Leisure Class to extend Sheldon Wolin’s analysis of "managed democracy" (a new form of authoritarianism developed in the past two or three decades, which most of us would also call corporatism). The fundamental point I was trying to make is that there is nothing in the education or life experiences of someone like Barack Obama or Larry Summers that would provide them an understanding of industrial economics or real (not politically expedient) empathy for the working class. (Let me qualify that, because I had hoped, and still cling to a hope, that Obama’s experience as a community organizer might have given him a reservoir, not yet drawn upon, of support for industrial economics, or at least enmity for, or the very least suspicion of, financial economics.)

Forthwith, my post in full:


In his important 2008 book, Democracy Inc.: Managed Democracy and the Specter of Inverted Totalitarianism, Princeton professor emeritus of politics Sheldon S. Wolin has identified and dissected the emergence of a new type of authoritarian political system in the United States.

The new constitution conceives politics and governance as a strategy based upon the powers that technology and science (including psychology and the social sciences) have made possible. Exploitation of those powers enables their owners to redefine the citizenry as respondents rather than actors, as objects of manipulation rather than as autonomous.

This new political type has arisen as the revolving door between government and the private sector as spun faster and faster, infusing the government with the morals and social customs of the American managerial class, while suffocating the older, more noble idea of civic virtue. In short, American politics has been “managerialized.” To fully understand this, Wolin first recounts the history of the concept of civic virtue and the emergence of the polis:

Over the centuries politicians and political theorists-starting with
Plato’s Republic have emphasized disinterestedness, not personal advantage, as the fundamental virtue required of those entrusted with state power. In recognition of the temptations of power and self-interest a variety of constraints — legal, religious, customary, and moral — were invoked or appealed to in the hope of limiting rulers or at least inhibiting them from doing harmful or evil acts. At the same time rulers were exhorted to protect and promote the common good of society and the well-being of all of their subjects. With the emergence of democratic ideas during the seventeenth and eighteenth centuries, it fell to the citizen to assume responsibility for taking care of political and social arrangements, not only operating institutions but "cultivating" them, caring for them, improving them, and, ultimately, defending them. Democracy presumed the presence of a "popular culture," not in the contemporary sense of packaged pleasures for a perpetually adolescent consumer, but culture in its original meaning: from the Latin cultus = tilling, cultivating, tending. The ideal of a democratic political culture was about cooperating in the care of common arrangements, of practices in which, potentially, all could share in deciding the uses of power while bearing responsibility for their consequences. The assumption was that if decision-making institutions of a community were left untended, all or most might suffer.

Wolin does not get into enough details to actually name names, but the basic trajectory of America’s descent is clear enough. In the era immediately after World War Two, the U.S. political establishment — or at least, the foreign policy arm of it — was dominated by an easily identfied group of patricians, beginning with Walter Isaacson’s The Wise Men (Dean Acheson, Averell Harriman, George Kennan, John McCloy Jr., Charles Bohlen, and Robert Lovett) who hand-crafted the post-war posture of the Cold War, and ending with David Halberstam’s The Best and the Brightest (Dean Rusk, Robert McNamara, Clark Clifford, George Ball, McGeorge Bundy, Walt Rostow, William Bundy and others), who muddied the U.S. political establishment in the rice paddies of Vietnam.

Of these latter, Ford Motor Co. CEO McNamara stands out, for bringing modern business management theories and practices, including cost-benefit analysis, into the Pentagon, and the government generally. However, Wolin does not mention McNamara and his Whiz Kids (including Charlie “Tex” Thornton, founder of Litton Industries, America’s first major corporate conglomerate since the Morgan trusts of the late 1800s and General Motors of the 1920s). Instead, Wolin fingers the Reagan administration as the first major example of business managers transforming American politics.

The examples of McNamara and Lovett show there have always been businessmen present in top levels of the U.S. government. This particular point — of exactly when a business mentality gained ascendance in U.S. government — is more than an interesting academic question. It brings us to an subject that Wolin fails to consider: just how American capitalism itself has been transformed. Simply stated, there has been a fundamental shift from industrial capitalism to financial capitalism, and it has huge implications for cultural and political norms of behavior, not just in government, but in the entire society. Basically, while it has become the dominant type of culture in the United States, business culture, as foreseen and explained by Thorstein Veblen, has degenerated to lower forms of barbarism, dragging the rest of society down with it. Veblen’s understanding of the politico-sociological, as well as economic, differences between industrial producers, as distinct from financial predators, gives us a far more powerful means of socio-economic analysis than Marxism does, which fails to distinguish between productive and predatory economic and social behaviors. Marxism’s obsession with ownership of the means of production blinds Marxists to the crucial differences and deadly conflict between real industry and predatory financial and monetary systems.

According to Wolin,

Corporate culture might be defined as the norms and practices operative at various levels of the corporate hierarchy that shape or influence the beliefs and behavior of those who work in a particular institutional context. Today corporate culture is not confined to the corporation. Managed democracy depends upon managers, and managers are the product and creators of corporate culture. The question is this: what are the characteristics of the culture that corporate managers bring to government? How are the corporatists likely to approach power and governance, and how does that approach differ from political conceptions?

Wolin’s approach here is basically that of Veblen’s institutional analysis. Wolin compares corporate culture to the civic culture he discussed above.

In contrast, the ethos of the twenty-first-century corporation is an antipolitical culture of competition rather than cooperation, of aggrandizement, of besting rivals, and of leaving behind disrupted careers and damaged communities. It is a culture for increase that cannot rest (= "stagnation") but must continuously innovate and expand. It accepts as axiomatic that top executives have to be, first and foremost, competition-oriented and profit-driven: the profitability of the corporate entity is more important than any commonality with the larger society. "The competitor is our friend," according to an Archer Daniels Midland internal memo," and the customer is our enemy." Enron had "visions and values" cubes on display; its chief financial officer’s cube read, "When Enron says it will rip your face off, it will rip your face off."

The ADM internal memo exactly defines the political culture in the U.S. Congress, and its uneasy relationship with its citizen constituents. Remember how Joe Lieberman was welcomed back by his fellow Senators after running as an “independent” to beat back Ned Lamont’s challenge. And “the customer is our enemy" mentality goes a long way in explaining Rahm Emanuel’s notorious antipathy to political progressives.

A little later, Wolin writes,

The essential skill that a corporate executive brings to his firm and to a top-level governmental position is the skill of devising and implementing strategies of aggrandizement. . .

Here, Wolin’s work would be made vastly more powerful if he incorporated Veblen’s insight about the essential difference between “industry” and “business.” As economist Douglas W. MacKenzie explains in a November 2007 paper, Veblen examined the functional and cultural differences between financial and industrial institutions, contrasting the profit-driven process of financial capitalism, to the workmanship and science-driven machine process of industry. In general, once an industrial firm falls under the sway of “business managers” and financiers, its focus becomes one “of acquisition, not of production; of exploitation, not of serviceability”.

Moreover, unlike industrialists, business managers and financiers dislike the uncertainty and unpredictability created by technological innovation. American folklore is rife with stories and myths of breakthrough technologies that were suppressed by corporate behemoths. Rather than creating wealth through increased and less imperfect production (here, think of the Japanese concept of kaizen), business managers and financiers instead seek to acquire wealth “by a shrewd restriction of output,” causing privation and unemployment. This actually establishes and perpetuates a process of financial sabotage of industry. In the first chapter of Veblen’s 1921 book, The Engineers and the Price System, he writes:

Without some salutary restraint in the way of sabotage on the productive use of the available industrial plant and workmen it is altogether unlikely that prices could be maintained at a reasonably profitable figure for any appreciable time. A businesslike control of the rate and volume of output is indispensable for keeping up a profitable market and a profitable market is the first and unremitting condition of prosperity in any community whose industry is owned and managed by business men. And the ways and means of this necessary control of the output of industry are always and necessarily something in the nature of sabotage: something in the way of retardation, restriction, withdrawal, unemployment of plant and workmen, whereby production is kept short of productive capacity. The mechanical industry of the new order is inordinately productive. So the rate and volume of output have to be regulated with a view to what the traffic will bear; that is to say, what will yield the largest net return in terms of price to the business men who manage the country’s industrial system.

(To see how mainstream economics today veers far and violently away from Veblen’s ideas, pick up any introductory economics textbook and read the first two or three paragraphs, which invariably describe economics as the study of “how society allocates scarce resources.” Such a definition immediately launches the student away from any serious consideration of modern industry and its near-miraculous productive potentials, into pastures more congenial to the ever status-conscious “leisure class.”)

The reality and effects of industrial sabotage by financiers and business managers is all too familiar to anyone who has examined the effects of the leveraged buy-out binge and corporate raiding of the 1980s, which mainstream economists have strived to hide from public view behind academic arguments that these predatory financial practices actually represented a “more efficient use of capital” that “increased shareholder value” – a crime of active misinformation that the economics profession has yet to answer for. (Two excellent books that rip the economists’ pretty façade to shreds are the 1992 series of investigative reports by Philadelphia Inquirer Pulitzer Prize-winning reporters Donald L. Barlett and James B. Steele, America: What Went Wrong?; and the 1990 history by Max Holland of how one of America’s largest machine tool companies was destroyed in a series of buyouts, When the Machine Stopped : A Cautionary Tale from Industrial America, which has been republished under the new title, From Industry to Alchemy: Burgmaster, A Machine Tool Company.)

In short, Veblen saw finance as an acquisitive process similar to the barbaric practices of leisure classes in earlier civilizations. (For further discussion of Veblen’s views on this point, see this diary and its thread on EuroTrib: The Credit Bubble theory of the Business Cycle (I: Veblen) especially this comment.)

It is worth peering even deeper into the business manager’s mindset, since it has come, since the 1980s, to so completely dominate America’s political elites, and because it has absolutely crucial implications for the making and practice of national economic policies. James Crotty, a heterodox economist at the Political Economy Research Institute (PERI), has a July 2003 paper, The Neoliberal Paradox: The Impact of Destructive Product Market Competition and Impatient Finance on Nonfinancial Corporations in the Neoliberal Era in which he examines a number of negative effects on general economic performance by large U.S. non-financial corporations (NFCs) (not exactly industrial firms, but as close as we can hope to get, as we shall see as Crotty’s analysis unfolds). Crotty stresses

two aspects of the changing relation between financial markets and large NFCs. The first is a shift in the beliefs of financial agents, from an implicit acceptance of the Chandlerian view of the large NFC as an integrated combination of illiquid real assets – that is, physical and organizational assets that cannot be sold for cash quickly and without a major loss in value – assembled to pursue long-term growth and innovation, to a “financial” conception in which the NFC is seen as a ‘portfolio’ of liquid subunits that home-office management must continually restructure to maximize the stock price at every point in time. The second is a fundamental change in management’s reward structure, from one that linked pay to the long-term success of the firm, to one that links it to short-term stock price movements.

The 1960s conglomerate merger movement initiated a change in the perception of the proper role of top management, from one in which managers were expected to be experts in the main business of the firm, to an evolving view of top executives as generalists who knew how to buy and sell subsidiaries as business conditions changed. This shift remained incomplete, however, until the hostile takeover movement of the 1980s, which forced NFC insiders to either divest units whose stock price fell below the level demanded by Wall Street or yield control of the firm to corporate raiders. Raiders relied primarily on debt to finance takeovers, while managers of targeted firms often defended their turf by loading the firm with debt-financed stock buybacks and special cash dividends to deter potential raiders. These developments pushed NFC debt burdens to historic highs. They also forced a change in managerial goals, from concern with the long-term success of the firm to a short-term obsession with keeping the stock price high enough to deter a hostile takeover.

NFC payments to financial markets.jpg

Crotty’s phrase, “the Chandlerian view of the large NFC as an integrated combination of illiquid real assets” is extremely important because it points to something that very few economists ever consider: the immense difficulty and length of time required to assemble a well-functioning industrial enterprise. Consider that it takes at least ten years to train a competent tool-and-die maker. Or how long it takes to train a competent airline pilot. Why would any industrial enterprise want to invest in years of educating someone, if that industrial enterprise is likely to be sold off like a commodity in a few years?

In fact, as an industrial enterprise grows and matures, its trained and skilled employees make the surrounding community a pool of technical talent that is highly conducive to the creation of other industrial enterprises that use the same or similar skills. That’s why certain towns and cities become known as centers for specific industrial products. Sheffield in England was known for its highly specialized alloy irons and steels. Delft in Holland is known world-wide for its blue pottery. The Hocking River valley in southern Ohio became known in the 1800s as a center of brick manufacture. The Connecticut River valley was known for almost a century as “Precision Valley” because it was a center of designing and making high-precision metal-working machine tools. Detroit became known for making automobiles. Today, almost every high-speed, high-volume printing press in the world comes from Heidelberg, Germany. The southern part of the San Francisco Bay area became known as Silicon Valley.

How much is it worth to have a locale or city renowned for the technical excellence of its local enterprises and workers? What value can be assigned to having a few hundred wizened old men around who can train entire generations of new, highly-skilled workers? Or who have a few different ideas than their boss, and decide to start up their own company? The value must be very high, because thousands of national, regional, and local governments around the world have spent hundreds of billions of dollars over the past two decades trying to create “incubators” of new technologies, new companies, and new “employment opportunities.” Such a great irony: finance capitalism is unleashed and destroys the social organizations of industrial enterprises in which technical excellence is revered and rewarded, and the public worldwide has been forced to pay billions of dollars to fund a poor replacement.

How is it possible that political elites would allow financiers and business managers to pillage and destroy industry, and then spend billions trying to repair the damage that could have been prevented in the first place by simply preserving the regulatory legacy of Franklin Roosevelt’s New Deal? Why did the Democratic Party turn its back on organized labor in the 1970s and 1980s, and embrace instead Friedman / Thatcher / Reagan policies of “free trade” and “free markets” that have destroyed the American working class?

“Destroyed the American working class” is not hyperbole. It is now widely known that Americans’ earnings have stagnated for the past four decades. The December 2007 report Economic Mobility: Is the American Dream Alive and Well?, by the Economic Mobility Project of The Pew Charitable Trusts showed conclusively that American men now have less income than their fathers’ generation did at the same age. Even more troubling is that income mobility has been falling over the same period – meaning that it is less and less likely that a person born into a poor family will ever earn enough to also avoid being poor. (Trends in U.S. Family Income Mobility, 1967–2004, Federal Reserve Bank of Boston Working Paper No. 09-7, September 2009.) Why is it that American political elites, including President Obama and his economics team, seem so unresponsive to this national calamity?

Here again, we can turn to Veblen for answers. Political elites are members of the Leisure Class or Predatory Class, along with financiers and business managers, according to Veblen. The Leisure Class sets themselves apart from the unwashed masses with a refusal to get their hands dirty doing the actual work of procuring and producing the necessities of everyday life.

The institution of a leisure class is found in its best development at the higher stages of the barbarian  culture; as, for instance, in feudal Europe or feudal Japan. In such communities the distinction between classes is very rigorously observed; and the feature of most striking economic significance in these class differences is the distinction maintained between the employments proper to the several classes. The upper classes are by custom exempt or excluded from industrial occupations. . . .

. . . . A distinction is still habitually made between industrial and non-industrial occupations; and this modern distinction is a transmuted form of the barbarian distinction between exploit and drudgery. . . .

During the predatory culture labour comes to be associated in men’s habits of thought with weakness and subjection to a master. It is therefore a mark of inferiority, and therefore comes to be accounted unworthy of man in his best estate. By virtue of this tradition labour is felt to be debasing, and this tradition has never died out. On the contrary, with the advance of social differentiation it has acquired the axiomatic force due to ancient and unquestioned prescription.

The Theory of the Leisure Class, Chapter One – "Introductory." (The text of the book in full has been made available online by Project Gutenberg at www.gutenberg.org.)

What makes Veblen far superior to Marx is that Veblen recognizes that the essential characteristic of modern industrial societies is a culture of tools, workmanship, and machine processes.

In more than one respect the industrial system of today is notably different from anything that has gone before. It is eminently a system, self balanced and comprehensive; and it is a system of interlocking mechanical processes, rather than of skilful manipulation. It is mechanical rather than manual. It is an organization of mechanical powers and material resources, rather than of skilled craftsmen and tools; although the skilled workmen and tools, are also an indispensable part of its comprehensive mechanism. It is of an impersonal nature, after the fashion of the material sciences, on which it constantly draws. It runs to "quantity production" of specialized and standardized goods and services. For all these reasons it lends itself to systematic control under the direction of industrial experts, skilled technologists, who may be called " production engineers," for want of a better term.

This industrial system runs on as an inclusive organization of many and diverse interlocking mechanical processes, interdependent and balanced among themselves in such a way that the due working of any part of it is conditioned on the due working of all the rest. Therefore it will work at its best only on condition that these industrial experts, production engineers, will work together on a common understanding; and more particularly on condition that they must not work at cross purposes. These technological specialists whose constant supervision is indispensable to the due working of the industrial system constitute the general staff of industry, whose work it is to control the strategy of production at large and to keep an oversight of the tactics of production in detail.

Such is the nature of this industrial system on whose due working depends the material welfare of all the civilized peoples.

The Engineers and the Price System, pp 52-53.

In his 1993 book Elegant Technology: Economic Prosperity from an Environmental Blueprint, Veblen scholar Jonathan Larson zeros in on the exact point of interface between human beings and the modern industrial system of mechanical processes:

Nothing can be manufactured without the use of tools. Hand-made is only a term to describe goods that are made with primitive tools. Some items, like sweaters and furniture, can be made with primitive tooling and still compete in the marketplace.

Most items can only be manufactured with advanced tooling. There are no primitive options for making a color picture tube . . . Understanding the levels of sophistication in tools is to comprehend a very great deal about industrialization.

. . . . Sophisticated products can only be made with sophisticated tools. A computer cannot be made with a stone axe. The primary producer motivation for increased sophistication in tools is to permit the production of sophisticated products. Peoples who can fabricate sophisticated tools usually dominate peoples who cannot.

. . . . The most interesting fact about tools is that it takes tools to make tools. Making primitive tools with sophisticated tools is a simple proposition. Making a pair of pliers is easy if there is a steel mill and a drop forge. Making sophisticated tools with simple tools is an extremely difficult proposition. The ability to go up the ladder of tool sophistication is the essential story of industrial development.

As we noted earlier, Veblen draws a distinct line between business and industry. So, a curious thing happens as societies progess industrially. In his 1904 book, The Theory of the Business Enterprise, Veblen observes

Conversely as regards the men in the pecuniary occupations, the business men. Their exemption from taking thought of mechanical facts and processes is likewise only relative. Even those business men whose business is in a peculiar degree remote from the handling of tools or goods and from the oversight of mechanical processes as for example bankers, lawyers, brokers, and the like have still at the best to take some cognizance of the mechanical apparatus of everyday life they are at least compelled to take some thought of what may be called the mechanics of consumption. . . Their exemption from mechanical thinking from thinking in terms of cause and effect is therefore materially qualified. But after all qualifications have been made the fact still is apparent that the everyday life of those classes which are engaged in business differs materially in the respect cited from the life of the classes engaged in industry proper. There is an appreciable and widening difference between the habits of life of the two classes and this carries with it a widening difference in the discipline to which the two classes are subjected. It induces a difference in the habits of thought and the habitual grounds and methods of reasoning resorted to by each class. There results a difference in the point of view in the facts dwelt upon in the methods of argument, in the grounds of validity appealed to, and this difference gains in magnitude and consistency as the differentiation of occupations goes on. So that the two classes come to have an increasing difficulty in understanding one another and appreciating one another’s convictions ideals capacities and shortcomings. (pp 316-18)

Now, if Veblen is correct about 1) how the Predator Class abhors actually having to do real work, and in fact does not even like to think about it, and 2) political elites are part of the Predator Class and embody that class’s ways of thinking and understanding the world, what would be the results as manifested in national economic policies? Would we expect to find any sympathy for the plea of industrialists to prevent Wall Street from forcing them to focus on quarterly and annual earnings gains? Would we expect to find any understanding of the opposition of industrialists to short selling of stocks or floating exchange rates and currency futures trading? Would we expect to find any consideration for industrialists’ desire for low, fixed interest rates below the natural usury point? Would we expect to find any serious consideration of a coherent national industrial plan that would revive the nation’s manufacturing base? How much weight would we expect political elites to actually give to the views and concerns of trade unions of machinists, steelworkers, assembly line workers, maids, and bus drivers? Would we expect to find any real concern for a national employment picture where the unemployment rate in the working class is five times higher than in the Leisure Class?
unemployment by income

Earlier, I quoted Veblen on the origins of the Leisure Class. Veblen’s reference to "barbarian" is crucial, because the more advanced a society becomes industrially, the more removed from real industry the elites become. In a very real sense, the elites become more barbaric. This devolution of business culture is clearly seen in how the meme of "ripping their faces off" has spread from the trading floors of Wall Street in the 1980s (as captured in Michael Lewis’s first book, Liar’s Poker: Rising Through the Wreckage on Wall Street), to the rest of the business world. As the elites drive the culture downward into ever more primitive barbarism (think of what modern art and modern architecture have become), the very idea of civic virtue comes under explicit attack. We see this in the assaults by "conservatives" on the idea of the common good being a "liberal codeword" for nazism or socialism, i.e., Glen Beck’s recent warning to his followers about the dangers of their churches preaching the gospel of social justice.

Which brings us back to the theme Sheldon Wolin develops in Democracy Inc.: Managed Democracy and the Specter of Inverted Totalitarianism. Whether or not President Obama is a sell-out is not the real question we must face. The real question is: what are we going to do about the corporate culture that has come to dominate our politics?

Cross posted from Real Economics.

Banksters plot at Davos

By: tonywikrent Thursday January 28, 2010 2:14 pm

Most of us are worried about job security, stagnant incomes, loss of pensions and benefits, lack of health insurance, home foreclosures. But the banksters are not most of us, and their worries are, well, on a different level. The big annual Versailles confab in Davos, Switzerland began this week, and some top banksters have told Bloomberg, "they think the biggest challenge for the industry is overcoming public anger about bonuses and compensation." Read more.

19 million new jobs

By: tonywikrent Tuesday December 1, 2009 11:02 am

Some men see things as they are and say why. I dream things that never were and say why not. —Robert F. Kennedy

According to figures compiled by the America Society of Civil Engineers, a multi-year program of just repairing all existing U.S. infrastructure requires an additional $1.134 trillion dollars than already planned funding.

At 27,000 jobs created for every $1 billion, such a program spread over five years would directly create 6.124 million jobs.

I have further identified a greatly expanded infrastructure program, to bring the United States economy into the 21st century. Building the infrastructure required to end our dependence on burning fossil fuels and shift the United States entirely to renewable energy, and also ensuring all drinking water and waste water management needs for future Americans, requires another $4.686 trillion.

As a ten year program, this would directly create another 12.7 million jobs.

There are only two obstacles between the grim reality of gradual economic decline we now face, and the alluring picture of a United States busily and noisily rebuilding itself back into prosperity: one, the financial system, with its insistence on quick returns and profit rates well above single digits; and two, a cowardly political leadership which is terrified that doing what is needed to re-impose the idea of the national good in economic policies would cause panic in the financial markets.

There’s more downstairs.

This diary draws upon two major sources. First, the 2009 Report Card on America’s Infrastructure, by the American Society of Civil Engineers. At the beginning of this year, the ASCE hurriedly updated its 2005 Report Card in an attempt to influence the design and debate of the stimulus program. Since then, the ASCE has greatly expanded its 2009 Report Card web site, with additional commentary, and sourced footnotes. ASCE collects a number of sources to tally the funding shortfall for maintaining America’s roads, bridges, schools, waterways, airports, railroads, electricity systems, and other infrastructure. This rapidly growing funding shortfall is a huge hidden cost of our infatuation with Ronald Reagan and “free market” economics, especially the supply-side theory that cutting taxes will lead to a boom in economic growth. (The economy did not grow – only asset prices did.)

Second, a February 2009 report by the National Governors Association: Strengthening Our Infrastructure For a Sustainable Future, which is a treasure trove of sourced footnotes.

A National Inventory of Infrastructure

The National Governors Association report notes that

. . . the nation’s infrastructure currently includes approximately 4 million miles of roads, 117,000 miles of rail, 600,000 bridges, 79,000 dams, 26,000 miles of commercially navigable waterways, 11,000 miles of transit (including more than 5,000 miles of rail transit), more than 3,000 transit rail stations, 300 ports, 19,000 airports, 160,000 miles of high-voltage transmission lines, 55,000 community drinking water systems, and 30,000 wastewater treatment and collection facilities.”

Much of this infrastructure was designed and built a full half century ago, and to make matters worse, it has not been properly maintained. Or, to be more precise, the funding needed for proper maintenance has not been forthcoming. It is no exaggeration to assert that crumbling infrastructure, and the fatalities it causes, is one of the most damaging legacies of the 1980s wrong-wing tide and the Reagan Revolution it washed up on our shores.

The National Governors Association report references a May 2007 report by the American Association of State Highway and Transportation Officials, America’s Freight Challenge:

Tons shipped in the United States are expected to rise from 16 billion today to 31.4 billion by 2035.48 The nation’s previous infrastructure investments in the 20th century have continued to pay dividends as economic productivity has risen and U.S. businesses benefited from logistics (procurement, storage, shipment, and delivery of products) gains.

However, underinvestment is now leading to negative consequences, including congestion which reduces the efficiency of the transportation system. Logistics costs had been steadily declining for decades until recently. In 2003, logistics costs were 8.6 percent of GDP but rose to 9.5 percent in 2005, the largest such increase in 30 years. A full one-third of the increase in cost was attributable to inefficiencies in the transportation system. (Emphasis mine.)

A spike in logistics costs is only one artifact of our under-funded physical infrastructure, as the following quick review makes plain. Please note that the money figures you find below may not always jibe with what is in the table summarizing the American Society of Civil Engineers’ 2009 Report Card on America’s Infrastructure. Many of the numbers will be larger, because of sources I found in the National Governors Association report which appear to have more current numbers, or a better understanding of what is required to meet future population growth. In fact, I should note here that the Civil Engineers’ report presents funding requirements only for repairing existing infrastructure. The much higher figures for building new infrastructure are tallied in another table at the end.

 

American Society of Civil Engineers 2009 Infrastructure Report Card (in billions)
 
5-Year Needs
Spending
Shortfall
Aviation
$87.0
$46.3
$40.7
Roads and Bridges
$930.0
$380.5
$549.5
Dams
$12.5
$5.05
$7.45
Drinking Water & Wastewater
$255.0
$146.4
$108.6
Energy
$75.0
$45.5
$29.5
Solid & Hazardous Waste
$77.0
$33.6
$43.4
Inland Waterways
$50.0
$29.5
$20.5
Levees
$50.0
$1.13
$48.87
Public Parks and Recreation
$85.0
$36.84
$48.17
Rail
$63.0
$51.30
$11.70
Schools
$160.0
$125.0
$35.0
Transit
$265.0
$74.9
$190.1
Total
$2,109.5
$976.0
$1,133.5

(Unless otherwise noted, most of the numbers and excerpts below come from the Civil Engineers’ Report Card.)

Aviation
The Airports Council International calculates that U.S. airports need $17.5 billion per year in maintenance and improvements. But since 1990, capital funding for airports in the U.S. has never exceeded $7.3 billion annually.

Roads
The current spending level of $70.3 billion per year for highway capital improvements is well below the estimated $186 billion needed annually to substantially improve the nation’s highways.

Bridges
Bridges in the United States are usually designed and built to last 50 years. By the beginning of 2009, the average age of the 600,905 bridges in the U.S. was 43 years. The U.S. Department of Transportation categorize over a quarter of those bridges as either structurally deficient or functionally obsolete. The situation is worse in urban areas, where the Department of Transportation finds that one in three bridges require immediate attention.

The American Association of State Highway and Transportation Officials (AASHTO), calculates that all levels of government spend an annual total of $10.5 billion on bridge improvements. But, AASHTO believes that $17.0 billion a year is required.

Dams
Under the Bush administration, the number of dams in the U.S. rated “high hazard potential dams” by the U.S. Army Corps of Engineers jumped nearly four fold, from 488 in 2001 to 1,826 in 2007. But the number of these “high hazard potential dams” that were repaired fell from 124 in 2001 to 83 in 2007.

In 2009, the Association of State Dam Safety Officials (ASDSO) estimated that the total cost to repair the nation’s dams totaled $50 billion and the needed investment to repair high hazard potential dams totaled $16 billion. These estimates have increased significantly since ASDSO’s 2003 report, when the needed investment for all dams was $36 billion and the needed investment for high hazard potential dams was $10.1 billion.4

The 2009 report noted an additional investment of $12 billion over 10 years will be needed to eliminate the existing backlog of 4,095 deficient dams. That means the number of high hazard potential dams repaired must be increased by 270 dams per year above the number now being repaired, at an additional annual cost of $850 million a year. To address the additional 2,276 deficient—but not high hazard—dams, an additional $335 million per year is required, totaling $3.4 billion over the next 10 years.

Drinking Water
Drinking water systems in the United States face an annual shortfall of at least $11 billion to replace aging facilities that are near the end of their useful life and to comply with existing and future federal water regulations. Taking into consideration future improvements in water standards, the EPA has estimated that the U.S. requires one trillion dollars over the next 20 years for drinking water systems . This is nearly five times more than the $110 billion per year figure given by ASCE

A February 2002 report by researchers at Harvard School of Public Health, Harvard Medical School, Resources for the Future, Natural Resources Defense Council, and U.S. Geological Survey, U.S. Drinking Water Challenges in the Twenty-First Century, states that

Investment by the United States in maintenance and repair of public water infrastructure has generally been inadequate over the past half century. The 1996 amendments to the Safe Drinking Water Act required the U.S. Environmental Protection Agency (U.S. EPA) to regularly conduct a survey of the infrastructure needs of public water supplies. In its recent survey on these needs, the U.S. EPA estimated that the nation’s water utilities must increase investments at least $151 billion over the next two decades to maintain our public water infrastructure and to ensure safe and healthful community water supplies. Of this total, about $38 billion is for water treatment, $83 billion to repair and/or replace components of the distribution system, and $28 billion to protect watersheds and maintain storage reservoirs. Only a small part of the total–20.7%–is for investments required by the SDWA.

Two other studies support these estimates. The Water Information Network (WIN), a coalition of engineering and construction firms, an environmental group, and water utilities, recently estimated that total annual spending for capital investments and operations by U.S. community water supply systems, currently about $36 billion, must increase by $15 billion. The estimated needs for wastewater infrastructure are even larger: an increase of $19 billion over the current annual expenditure of $25 billion.

Wastewater
The Environmental Protection Agency estimates that the nation must invest $390 billion over the next 20 years to update or replace existing systems and build new ones to meet increasing demand.

Inland Waterways
The present system of locks is now near or beyond the end of their design life and have become a serious constraint to increased river traffic, which is even more fuel efficient than rail. Replacement cost is estimated at more than $125 billion.

Levees
A preliminary estimate by the National Committee on Levee Safety, established after Katrina, put the cost at more than $100 billion to repair and rehabilitate the nation’s levees.

National Parks
For its 2016 centennial, the National Park Service estimates the agency’s facilities will face a $7 billion maintenance backlog. Further studies to identify needed improvements and their cost have not yet been undertaken.

Public Parks and Recreation
According to ASCE, states in fiscal 2007 “spent more than $463 million on new construction of state park improvements to accommodate growing populations. States and territories received nearly $28 million in federal funds in 2007 through the Land and Water Conservation Fund Program. However, they reported more than $15 billion in unmet needs, a significant increase over the amount reported in 2006.”

Freight Rail
More than $200 billion is needed through 2035 to accommodate anticipated growth. The ASCE figure of only $63 billion is for immediate maintenance and repair needs.

Transit (repair only)
The Federal Transit Administration estimates $15.8 billion is needed annually to maintain conditions and $21.6 billion is needed to improve to good conditions. In 2008, federal capital outlays for transit were only $9.8 billion.

Energy
Projected electric utility investment needs could be as much as $1.5 trillion by 2030. The ASCE report card notes:

The U.S. generation and transmission system is at a critical point requiring substantial investment in new generation, investment to improve efficiencies in existing generation, and investment in transmission and distribution systems. The transmission and distribution system has become congested because growth in electricity demand and investment in new generation facilities have not been matched by investment in new transmission facilities. This congestion virtually prohibits outages required for proper maintenance and can lead to system wide failures in the event of unplanned outages. Electricity demand has increased by about 25% since 1990 while construction of transmission facilities decreased by about 30 percent. While annual investment in new transmission facilities has generally declined or been stagnant during the last 30 years, there has been an increase in investment during the past 5 years. Substantial investment in generation, transmission, and distribution are expected over the next two decades and it has been projected that electric utility investment needs could be as much as $1.5 to $2 trillion by 2030. Some progress in grid reinforcement has been made since 2005, but public and government opposition, difficult permitting processes, and environmental requirements are often restricting the much-needed modernization.

 

In September 2008, a report by NextGen Energy Council and Management Information Services, Inc. warned that

Electricity baseload generation capacity reserve margins have declined to 17 percent as of 2007, down from 30 to 40 percent in the early 1990s, and near the 12 to 15 percent that is considered the minimum for a reliable electricity system.

 

Schools (repair only)
The funding needs just to repair schools was assessed in 1999 at $127 billion, ASCE now estimates $268 billion. The National Education Association’s best estimate to bring the nation’s schools into good repair is $322 billion.

In September 2008, the Economic Policy Institute reported that

School infrastructure spending, after being adjusted for increased construction costs, has decreased dramatically since 2001. While student enrollment has increased 3% since 2001, adjusted spending on school maintenance and construction has dropped by 42%, from $34.9 billion in 2001 to $20.3 billion in 2007. Inadequate facilities can have a negative effect on academic achievement and student health.

One thing I learned that surprised me is that America’s school buildings are in such bad shape, especially in major cities, that groups of parents have filed lawsuits in 31 states, with the physical conditions of their local schools a major part of the complaint. This flood of lawsuits has forced local and state governments to significantly increase capital spending on schools, but a quarter trillion dollar gap still remains.

Hazardous Waste and "Brownfields"
ASCE estimates total funding needs are $77 billion, more than double the $33.6 billion actually spent. In 2006, the National Solid Wastes Management Association estimated that states have disposal capacity for only another 20 years.

Infrastructure for the Future
Thus far, we have reviewed only the areas of infrastructure identified in the Civil Engineers’ report as requiring more funding just to achieve an acceptable level of repair and maintenance. Next, we will look at other areas of infrastructure where a national commitment is required to move our economy off its dependence on fossil fuels, or in which the Civil Engineers’ were simply unable to account for future needs.

Infrastructure for America’s Future (in billions)
Drinking Water (EPA)
$300.0
Freight Rail
$200.0
Urban Rail Transit
$3,195.0
Hi Speed Passenger Rail
$450.0
Wind Energy
$350.0
Electricity Transmission Grid
$66.0
Energy Efficiency of Buildings
$125.0
Ports
unknown
Infrastructure Security
unknown
Communications
unknown
Total
$4,686.0

Urban Rail Transit
$3.195 trillion is my own estimate, which is fully explained in a diary I wrote last year. Basically, this is for building rail mass transit in the 38 largest urban areas in the U.S. to the same density of route miles and stations as is found in New York City. My estimate is only for costs of actual construction, and does not include equipment such as train sets, and communications and signaling systems.

Robert Pollin, co-director of the Political Economy Research Institute (PERI) at the University of Massachusetts, wrote in his January 2009 article in The Nation, Doing the Recovery Right

Public transportation accounts for an abysmally low share of travel in the United States, even though ridership rose over the past two years, following the oil price spike. As of 2007, automobile travel accounted for 99 percent of transportation spending even for the least well-off 20 percent of households, despite the fact that public transportation is about 60 percent cheaper per mile. The reasons most Americans, including those with less money, do not use public transportation are straightforward: access is bad, off-peak service is limited and transferring is difficult. If the average lower-income household were to increase its public transportation use to just 25 percent of its transportation budget, it would save nearly $500 a year, raising its living standard about 2.4 percent.

Hi Speed Passenger Rail
According to blogs by Bruce McF I reviewed, $250 billion would build a national network supporting 79 mph rail traffic. That is miserable performance, compared to what Europe, Japan, and China have already achieved. To support 110 mph rail in the United States is going to require $450 billion.

Wind Energy
In May 2008, the Department of Energy released a report, 20 Percent Wind Energy by 2030, which is one of the best, industrially detailed economic reports any government agfency has put out in a very long time. Approximately 100,000 turbines will be required to produce 20% of the nation’s electricity in 2030. Most of the commercial-scale turbines installed today are 2 MW in size and cost roughly $3.5 million each installed. Hence, $350 billion for 20% Wind Energy by 2030. Scaling up this program to, say, 50% by wind energy by 2020, would of course increase the funding needed accordingly.

One of the pioneers, and leading expert, of wind energy in the United States is Paul Gipe. In a presentation to Al Gore’s January, 2008 Solutions Summit, Gipe unveiled One Million Megawatts of Wind Capacity for the USA: A Target Worthy of a Great Nation.

Gipe’s website point out that Spain has already achieved wind energy providing a full one half of national electricity consumption on very windy days. A November 2009 London Times article Gipe links to notes:

High winds across Spain on Sunday meant that for over five hours, over 53 per cent of the country’s power came from wind energy. . .

Most of the wind power was used immediately, 6 per cent was stored and 7.7 per cent was exported to France, Portugal and Morocco. . . .

Spain began its wind power push in 1997, but five years ago critics believed it could not produce more than 14 per cent of the country’s electricity.

Wind farms have produced 17,700 megawatt-hours (mWh) of electricity so far this year, but renewable energy industry figures believe this figure could rise to 40,000mWh by 2020.

Spain’s Socialist Government invested €991 million (£890 million) in wind power in 2007. Already it has reaped a return on its investment; in 2007 it saved €1 billion on fossil fuels, according to the Spanish Environment Ministry.

Electricity Transmission Grid
The Department of Energy report, 20 Percent Wind Energy by 2030, found that in order to transmit electricity from the wind-rich central plain states (the Dakotas and Iowa down to Texas) to urban areas in other regions of the country, "An investment of approximately $60 billion (in undiscounted terms) in transmission between now and 2030, as suggested by the NREL analysis, amounts to an expenditure of approximately $3 billion per year over the next 22 years." (See also the American Electric Power report.)

Energy efficiency of buildings
Robert Pollin, co-director of the Political Economy Research Institute (PERI) at the University of Massachusetts, wrote in his January 2009 article in The Nation, Doing the Recovery Right

In terms of residential energy efficiency, for the average individual family residence, a one-time $2,500 investment in retrofitting–caulking air leaks and windows, improving insulation and buying more efficient appliances–can reduce annual energy consumption by 30 percent. This would produce an average saving in home energy costs of about $900 a year. Of course, low-income families are much more likely to be renters than homeowners.

Figure around half the housing stock, or 50 million units, being retrofitted, and you need $125 billion. This is a good figure to use by which to judge any proposed “cash for caulkers” program,.

Ports
I could not find much on funding requirements for the nation’s seaports. However, a January 2009 report from the U.S. Maritime Commission notes,

Almost every one of the Nation’s top 50 ports handling foreign commerce requires regular maintenance dredging. Together, these ports move nearly 99 percent of U.S. overseas trade by weight and 61 percent by value.11 Without routine dredging, sections of the navigation channels can quickly become shallow, reducing the draft and size of vessels accessing these ports. In addition, as the size of ships continues to grow, approach and alongside depths in several key ports must be increased to as much as 45 to 50 feet. If we do nothing more than merely maintain existing channels at project depth, the Nation’s competitive edge ultimately will erode. The Nation has to do more than maintain, it must deepen channel depths to accommodate the largest vessel sizes. But meeting this challenge requires a significant investment by both the Federal government and private industry.

The Army Corps of Engineers is responsible for maintaining 300 commercial harbors and more than 600 smaller ones. Each port area is made up of a number of different channels all of which have different depths and their own set of dredging needs. For example, there are 31 different channels alone that make up the Baltimore port area, with depths ranging from 22 to 50 feet. A recent Army Corps of Engineers Study reports that almost 30 percent of vessel calls at U.S. ports are constrained due to inadequate channel depths. If ignored, America’s waterways will be unable to support future growth in trade.

Where do the job numbers come from?

The Alliance for American Manufacturing funded a team of researchers at the University of Massachusetts-Amherst’s Political Economy Research Institute (PERI), who found that every one billion dollars in new infrastructure spending produces 18,000 jobs. A February 2009 news release by the Democratic Senate Caucus, intended to promote passage of the stimulus package, cited a number of experts and studies, with a range of 27,000 to 37,000 jobs created for every one billion in transportation infrastructure; about 10,000 jobs for every one billion dollars in new energy infrastructure; and 22,500 jobs for every one billion dollars in new information technology infrastructure. For the sake of making calculations as easy as possible, I used 27,000 jobs for every one billion dollars in infrastructure spending.

The key idea here is that if we were doing what we are supposed to be doing – taking care of our infrastructure properly and building what is required for our children and their children to be safe and prosperous, we would have a massive shortage of labor in this country. The 15.7 million unemployed and the approximately 13 million underemployed would have multiple job opportunities. Bidding wars for labor would break out, rapidly driving up earnings and wages, and obliterating the income and wealth gaps in much less than a generation. Illegal immigration would become a non-problem, as the nation’s employers scrambled to find the workers they needed. The collapse of retail and income tax revenues would end, and the coffers of state and local government would be brimming with revenues, making it easy to fund and even expand social programs. In short, the country would look much, much different than it does now.

How do we pay for it?
Unfortunately, economic neo-liberalism has become such an overwhelmingly dominant ideology that many readers are dismayed at the prospect of spending $5.820 trillion on building new infrastructure. But the $1.134 trillion of needed infrastructure repairs identified in the Civil Engineers’ Report Card is for a five-year program, or $227 billion per annum. The $4.686 trillion program for new infrastructure I propose is for a ten-year program, or $467 billion per annum. The total of annual spending proposed is $694 billion, much less than the $841.2 billion stimulus program passed earlier this year (of which 34.8% went to tax cuts, which have a nearly negligible stimulative effect when compared to direct spending on infrastructure).

Not all this funding need come from government spending. However, a number of federal laws and regulations need to be changed so that the financial system no longer finds it profitable to engage in speculation, usury, and economic rent, but instead finds profitable investment opportunities in funding these new infrastructure programs. Jerome A Paris’ November 9, 2009 diary, The stimulus and green jobs, explains an excellent example of how government incentives work: in the case of wind power, production tax credits have been the key to attracting large amounts of private capital for the building of new wind turbines. When the production tax credits were allowed to lapse by Congress, the private funding stopped, and the construction of new wind energy capacity collapsed as a result.

There is, in fact, a huge amount of private capital out there, sloshing around the hot money centers of the world, desperately seeking for the highest return. In fact, the dollar equivalent of the entire annual U.S. Gross Domestic Product, about $15 trillion, is traded on the various financial markets in the U.S. – stocks, government bonds, corporate bonds, corporate paper, futures markets, and foreign exchange markets – about once every three days. (Back in the 1960s, it took almost nine months for the financial markets to trade the dollar equivalent of U.S. GDP.)

The great economic theory of the past four decades has been that this massive flow of funds would generate the greatest wealth for society if left to its own devices, with minimum interference and oversight by governments. In other words, that the rich know better how to invest society’s wealth than anyone else. The result has been the creation of a financial oligarchy, the slow collapse of the real economy under the burden of supporting the speculation, usury, and economic rent imposed by that oligarchy, and the “regulatory capture” of government by that oligarchy. In a perverse sense, the rich did know how best to invest those funds; what was not admitted was that the rich would invest almost solely for their own benefit, and not that of society at large. In other words, the great economic theory of the past four decades has been proven wrong. Not just by the financial crises that erupted with the collapse of Bear Sterns in April 2008, but more importantly by the increasing inability of the society to ensure its own survival, as evidenced by the difficulty in funding just proper maintenance of existing infrastructure, not to mention a nearly complete lack of effective response to the approaching environmental disasters of climate change caused by a dependence on burning fossil fuels. Proper laws and regulations, such a financial markets transactions tax, most recently endorsed by economist Paul Krugman would penalize and discourage much of the speculation, usury, and economic rent, that makes up so much of financial trading today, and force investment flows back into the real economy, rebuilding and retooling factories and entire industries to supply the goods, materials, and services needed to build – and maintain – the infrastructure American needs to move into the future.

Higher taxes are simply part and parcel of this, but not merely for the reason of “make the rich pay.” The fact is that high marginal tax rates strongly correlate with economic growth. If you look under the hood of the industrial economy, you easily see why. With high taxes, the only way to retain the bulk of the wealth created by a business is by reinvesting it in the business — in plants, equipment, staff, research and development, new products and all the rest. But if tax rates are low, then there is more incentive to pull the wealth created out, by declaring it as profits that are taxed at what turns out to be too low a rate. In other words, low taxes create so strong an incentive for profit taking, it devolves into asset stripping. Essentially, the low tax rates of the past three to four decades allowed a bunch of financiers and banksters to literally asset-strip most of the U.S. industrial base, one company, one labor contract, and one pension fund at a time.

Tariffs are also needed to prevent the massive daily flow of capital moving to countries with “lower costs” resulting from inadequate workplace safety and environmental safeguards, as well as countries that maintain artificially low currencies. Part of the answer is to re-impose cross-border capital controls. After all, if we’re going to be creating a policy regime that favors investment in the building of new infrastructure over the next decade or two, why does anyone need to transfer huge flows of capitals overseas? In short, we need to return to the type of strictly managed international monetary system that characterized the post-war quarter century, before Nixon – on the advice of an Undersecretary of the Treasury named Paul Volcker – destroyed the Bretton Woods agreements by abandoning managed exchange rates for the dollar.

Of course, the political power of the financial oligarchy makes it difficult to envision actually achieving the types far-reaching financial reforms required to force financial flows back in alignment with the needs of the real economy. Does that mean that we will be forced to borrow, on the banksters’ terms, the trillions of dollars needed to build tomorrow’s infrastructure?

This is almost the same problem Abraham Lincoln faced in financing the Civil War. Confronted with the immediate need to arm, equip, feed, and transport new armies tens of times larger than the pre-war U.S. Army, Lincoln sent emissaries to the big financial centers of Boston, Philadelphia, and New York, and was disturbed to be offered loans with staggering interest rates of 24 to 36 percent. What Lincoln finally did was to direct the Treasury to issue its own notes, usable as legal tender, in direct payment to soldiers and military contractors. These Treasury notes became known as “Lincoln greenbacks,” and the banksters absolutely hated them.

The same can be done today. Say a construction company gets a $10 million contract to help build a high speed rail line. The Treasury simply issues $10 million in new notes directly to that company, to pay its workers and vendors. Since the Treasury Notes are legal tender, workers and vendors can use the Notes to buy food, clothing, pay bills, and so on.

Because these new Treasury notes issued as legal tender would be directly linked to the building of new infrastructure, there is no danger of creating hyper-inflation. The new infrastructure is new national wealth, and as long as new wealth is being created, there is no problem with an increase of new money.

This is the big secret the banksters fear you will learn – there is no need to borrow from them, ever, at all, for anything that the national government does. (Special plea – there was a website that had some useful quotes from a handful of central bankers who marveled that people just don’t realize how simple banking really is. Now I can’t find it. Does anyone have it?)

Conclusion
A massive program of building new infrastructure would not be all that different from what Franklin Roosevelt and the New Deal — and the industrial mobilization for World War Two — did. Very simply, we would have to put people back to work producing real goods again. Building infrastructure requires a lot of steel, concrete, wood, fasteners, insulation, pipes, valves, gaskets, wiring, electronic controls and all types of other material, not to mention lots of construction equipment And the money to do it will come from forcing the financial system to stop gambling and arbitraging. The issue is to create and implement policies, regulations, and laws that discourage and penalize financial speculation, usury, and economic rent, thereby forcing the flow of credit back into big construction projects and the industries that support them. In other words, we need to change the rules of the game, so that nation building is the order of the day, not speculation, gambling, greed, and big bonuses.

We can create 20 million new jobs if we want to. So, I want to end with this quote again,

Some men see things as they are and say why. I dream things that never were and say why not. —Robert F. Kennedy

Are you asking why? Or why not?