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January 30, 2017

We Need Infrastructure, Not Another Stimulus Bill

Democrats and President Trump seem to be in agreement that America needs another trillion-dollar stimulus program to build infrastructure. It’s ironic that this rare agreement is also wrong. It ignores the lessons of the last trillion-dollar stimulus package at the beginning of the Obama administration: it didn’t work.  If it had worked structurally, we wouldn’t still be looking at the same problems of decayed and inadequate infrastructure we have today. If it had worked economically, we would have had a much more robust recovery from the great recession.

Why didn’t it work to aim all that money at projects which desperately needed doing? I was Vermont stimulus czar, responsible for trying to make best use of the almost billion dollars of stimulus that came our way. Why isn’t Vermont infrastructure much better because of it? (there have been some improvements in telecom and electric metering because of stimulus dollars but minor compared to what could’ve been).

The problem isn’t lack of money for infrastructure; it’s a regulatory process which makes it take at least 20 years to a medium-sized project, whether that project is funded by the public or private sector.

I wrote the post below at the end of my stimulus career so you could take it as an excuse for not accomplishing more. But I think we need to learn these lessons from not very long ago to make America greatER.

Twenty years of major construction projects are bottled up in regulatory queues. If the time in queue were shortened to a maximum of two years, we'd have a flood of new construction AND much of the infrastructure we need to be competitive in the globalized years ahead. No subsidies from the deficit-ridden federal government are required. Conversely, tax revenue from those directly or indirectly employed on these projects and the economic value of the projects themselves will increase government revenue and help close the budget gap.

The majority of these projects have private sector funding lined up. American corporations are sitting on piles of money, waiting for a chance to invest it for future profit. In the short term, they're not going to hire more people to make more things until demand picks up [now demand has improved]. But, planning for the long term, they will invest in infrastructure for their future growth IFF given the opportunity. How do I know? Because all over America there are pipeline, power grid, oil drilling, gas extraction, broadband, wireless, factory-building, shopping center, and even a few nuclear power plants projects queued up waiting almost endlessly – and, what is worse, unpredictably – for the permits they need to proceed and then the long slog through decades of appeals. [I didn’t know then, of course, that Keystone would be rejected; Dakota Access halted when almost complete; or the Vermont Gas Pipeline expensively delayed after it was approved.]

State and local governments have transportation projects queued up in the same way. Even with a flood of stimulus money, all we could do was permitless repaving; the big projects are stuck in regulatory hell. Nothing in America is shovel ready. The stimulus dollars allocated to broadband and smart metering are just beginning to be spent; these projects may still forfeit their federal funding because of the time required to get permits. Another stimulus bill – besides being unaffordable – would run into the same roadblocks. But, if projects can be accelerated out of queue, credit-worthy states will be able to build them. More significantly, the huge stash of private dollars waiting for opportunity will come into play.

We don't need another "regulatory review". Ask regulators to review their regulations and they'll write some new ones. We need to set a goal that every project gets to yes or no within two years of initial application and remake the regulatory processes at the federal, state, and local levels to assure that the goal is met. Even a fast “no” is better than a twenty-year “maybe”; it frees up money for other projects which may get approved.

We have to redo the laws which allow virtually anyone (anyone who has access to lawyers, anyway) to impose a delay of almost any duration on any project at virtually no cost to themselves but huge cost to the project. BTW, it not just "environmentalists" or people protecting the view from their backyards who delay projects; business is very adept at using regulatory delay to stymie would-be competitors. The law should require anyone who appeals a granted permit to post a bond equal to the cost of delay, such bond to be forfeit if the appeal fails. Note that this does not discourage participation in the initial regulatory process by those opposed to a project.

Faster regulation is better regulation. During a twenty-year approval process, the world changes. Yesterday's projects finally get approved for today's world. Project benefits are delayed; and stop-gap measures have to substitute for larger projects.

A shovel-ready America will be an awesome competitor in a globalized world. We will build the infrastructure we need to link our mines, forests, fields, dams, power plants, and factories – just as we have done at least before with canals, railroads, pipelines, and highways. We'll build 21st century information infrastructure. The projects are already in queue; the money is in hand; but we're not shovel ready.

Related posts:

Energy for Jobs – Vermont Version

What Government CAN do to Create Jobs

Confessions of a Stimulator

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