There Is Still Low Hanging Fruit

Last October I posted about the opportunities to improve our national infrastructure.  That opportunity still exists.  In fact, as Ezra Klein points out it has gotten even better.  It's better because the government has access to ALL THE FREE MONEY IT WANTS.

Usually, the U.S. government has to pay quite a bit to borrow money. In January 2003, for instance, the interest rate on a seven-year Treasury was about 3.6 percent, which gave investors a yield of more than two percent after accounting for inflation. Right now, the interest rate is 1.52 percent, or minus-0.34 percent after accounting for inflation.

Here’s what this means: If we can think of any investments we can make over the next seven years that have a return of zero percent — yes, you read that right — or more, it would be foolish not to borrow this money and make them.

The case is even stronger with investments we know we will need to make over the next decade. The economy will get better, and as it gets better, the cost of borrowing will rise. The longer we wait, in other words, the more expensive those investments will become.

Mother Nature may force us to take advantage of some of this money.  This summer she showed her wrath across the Midwest with Joplin, MO, being the poster child.

She just sent her child Irene to do a number on the east coast.

Not that there aren't other projects that need to be done.  OK, maybe a bad example as this shows a place where government spent money poorly.  But really, the money is free.  Actually, it is better than free.  Investors are willing to take a negative return on the money to allow the US Government to have it.  They're willing to pay for the privilege of loaning the money to the federal government.  It would be productive to borrow the money and just hand it out on street corners.

Still, useful projects are out there. 

On a small scale, ever since the city of Chicago had all the parking meters removed cyclists have had a hard time finding secure places to lock up their bikes.  New bike racks would be useful.

  

In my neighborhood there are many streets that look like a rogue group of jack hammer operators came through.

On a large scale the national infrastructure still needs several hundred billion dollars in upgrades.  It will be dramatically cheaper to perform these upgrades now when money is better than free than in the future when it will cost more to borrow.

Of course to take advantage of this we would rational and non-hypocritical leaders in charge.  Instead we have this.