All politicians sing the obligatory praises of capitalism. Its guiding hand of prices, markets and incentives that impel effort and creativity are forces that make the system work. But too often neglected is the national physical and institutional foundation necessary for individual and business effort to be productive.
For individuals and businesses to succeed under capitalism, or any economic system for that matter, a nation needs roads, bridges, electric grids, airports, sea ports, water and sewer systems, and other physical structures, referred to by economists as “public goods.” The common feature of these essential items is that they are not produced in adequate amount by individuals, or even large businesses, but must be produced through collective action.
In addition to these physical structures are institutional needs including health care, education, and much more.
The specific items characterized as infrastructure change over time. In the early 1800s, non-native Americans were concentrated in the northeast, with its infertile farm land. The Erie Canal connected the infertile East with rich farmlands of the Midwest, changing food shortages into chronic agricultural surpluses.
The Transcontinental Railroad, completed in 1869, connected the East with the West. The Morill Act of 1862, commonly known as the Land Grant Act, provided for a public university in every state and laid the foundation for America’s public college and university system that is the envy of the world. The Rural Electrification Act of 1936 brought electricity to rural areas. Publicly funded physical infrastructure along with publicly funded institutional infrastructure was essential to economic progress.
Just as the concept of physical infrastructure has evolved, so has the concept of institutional infrastructure. The pandemic has starkly illustrated the importance of broadband, enabling working from home, and for students studying from home. The current “internet divide” needs to be eliminated, making broadband available in every corner of the land.
Our changing economy and society has required further expansion of our concept of infrastructure. A barrier to, especially female, employment is lack of affordable child care, even as child care workers are among the nation’s lowest paid workers. As the nation ages and a larger portion of the population will require care, an affordable system of elder care is needed, with adequate compensation to care givers.
This brings us to the Biden Administration’s two trillion dollar infrastructure bill intended to address these needs. A majority of Americans recognize these needs. But Senate Minority Leader, Mitch McConnell, has already stated that he will fight this bill “tooth and nail,” and there will be no Republican votes for the bill.
Congressional Republicans oppose the bill on the grounds that it is more than conventional infrastructure, and includes “social welfare, and, “we can’t afford it.” Republicans oppose any increase in corporate taxes to pay for it.
These reasons for opposing the bill are patently ridiculous, intended for political theater and short run political gain.
McConnell and his Republicans object to money for ridding lead pipes in water systems, improved arrangements for child care and elder care, pre-school education for low-income children, improving school buildings, and much more in our changing and evolving society.
What these critics neglect is that it is essential for every family, business, and nation to utilize to the max the energy, talent, and creativity of every last citizen. This means making sure women can get back to work with the assurance that their children are cared for while they are at work. It means that every child, including those of minority and low-income families, has adequate pre-school education and is raised in homes free of toxic lead water pipes. It means that essential child care and elder care workers must be adequately rewarded for their work. If this means that we need to create new government-assisted institutional arrangements, then it’s time to get to work and do it.
Which brings us to the argument that, “we can’t afford it?” That’s absolute nonsense. A nation’s wealth consists of its natural resources, its physical capital, and its human resources, including its labor, technology, and stock of knowledge that economists refer to as “human capital.” Does this nation possess the labor and materials to build and repair the physical facilities needed? Does this nation possess the labor that is willing and able to care for children and elders if paid sufficiently to make a living doing it?” Of course it does.
The real, i.e., non-financial, resources are there, and can be put to work. The more intractable problem is to agree on the financial arrangements with which to employ these real resources. This can be achieved by a combination of taxing and borrowing. About the proposal to raise the corporate tax rate from 21 to 28%: Republican critics scream that “this penalizes the ‘job creators.’” That’s pure nonsense on two counts. First, corporations will benefit hugely, including from more efficient transportation, talented women getting back to the work force, and much more. Second, corporations did fine under the pre-Trump corporate tax rate of 35%. They will continue to do well under the Biden-proposed rate of 28%, a low rate by historical standards.
How about government borrowing? There is “good debt,” and “bad debt.” Money raised from government borrowing would be good debt, putting millions of people to work, including with union jobs, and raising pay for typically low-paid but essential child care and elder care workers. The vast majority of these jobs will be for non-college educated workers and would be at least a step toward reducing income inequality.
Above all, new and improved physical and institutional infrastructure would increase individual income and opportunity along with the productive capacity of the entire nation. The U.S., the world’s wealthiest nation, ranks number thirteen in quality of its infrastructure. We have for too long neglected making the national investment in these job-creating public goods that are necessary to make capitalism more equitable and efficient.
It is imperative that we look to our present and future needs to move this country forward.
— John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Saturdays in the Monroe Times.
