What do yesterday's east coast earthquake, our infrastructure and antiquated Federal accounting systems have to do with jobs? A lot, it turns out.
The earthquake yesterday was the largest east coast trembler in 67 years. But earthquakes of moderate intensity are not rare. The U.S. Geological Survey counted an average of 1,300 earthquakes each year that range in magnitude from 5 to 5.9 on the Richter Scale. Yesterday's was on the high end, at 5.8. Earthquakes -- even in areas like the East Coast that is the middle of a tectonic plate -- happen regularly and should not come as a surprise. The same is true of floods, hurricanes, tornadoes and huge snow storms. Natural disasters don't happen every day or every year, but they are definitely going to happen. And when they do they test our infrastructure.
If, as a society, when we let our infrastructure deteriorate -- or cut corners to build things on the cheap -- it often turns out that the cost of our neglect is much greater than if we had taken a more responsible, prudent course and built roads, and high rises, and levies and nuclear plants that are designed to survive the natural disasters that are all but certain to happen some day.
Just six years ago during Hurricane Katrina, the United States almost lost the entire city of New Orleans because we had skimped on investment in the levies that would have protected it from flooding.
The Japanese have faced an economic and human calamity because the nuclear plants at Fukushima were not built to survive a massive earthquake and tsunami.
When natural disasters like these strike, it's too late to invest the relatively modest amounts of money necessary to prevent catastrophic failures in our infrastructure that end up costing society many, many times more than it would have cost to prevent them. And that's just the disasters -- not ordinary wear and tear -- or investment in basic needs for our growing population.
We've seen the warning signs everywhere.
A major bridge in the middle of Minneapolis collapses without warning, killing 13 people and causing massive economic disruption.
Ancient water lines in the nation's capital rupture.
This spring the 80-year-old levy system along the Mississippi was so overstressed by rains that the river had to be temporarily shut to commercial traffic, costing the economy millions of dollars.
Because of failure to invest in public transportation and road improvements highways are becoming more and more congested, costing more millions in lost productivity.
The Chinese have plans to complete a 10,000-mile high speed rail system in the next decade, yet American plans for high speed rail are sidetracked by Republicans in Congress.
China is spending nine percent of its GDP on new infrastructure -- compared to only three percent in the U.S., although we have far greater resources.
Yet the Republican Congress -- and much of America's political elite -- has become so mesmerized by the "deficit debate" that it is on the verge of making the foolish decision to "save money" today by failing to invest in our infrastructure for tomorrow.
Much of this deficit talk is cloaked in the language of "responsibility" and fiscal discipline. We are told that we cannot borrow money that will have to be repaid by our children. But shortchanging investment in our nation's infrastructure is not doing any favors for the next generation. In fact it is "cover" -- to allow the wealthiest people in America to gorge themselves on more and more of our nation's wealth and income -- without contributing their fair share in taxes to support our common need and our common future.
Republican House leaders have proposed cutting investment in transportation infrastructure by two thirds. The Association of State Highway and Transportation Officials estimates that this proposal would cost America another 500,000 jobs.
People who claim that is "fiscally responsible" are engaging in the worst kind of Orwellian "Double Speak." Proposals like these involve the ultimate in irresponsibility to the next generation -- allowing the millionaires to consume today and neglecting the entire society's infrastructure that is needed to compete for the future.
It is the height of irresponsibility to leave our kids a public infrastructure that is collapsing and dangerous -- all because the richest among us want to continue to gorge themselves in multi-million dollar bonuses, huge executive salaries, and private jets to fly them off to opulent parties, or to and from their many homes.
Former Governor Ed Rendell of Pennsylvania has proposed that the earthquake be the occasion for America to retrofit all of its nuclear power plants to bring them up to the standards necessary to withstand serious seismic events. That would generate hundreds of thousands of new construction jobs.
The same could be said of massive numbers of additional infrastructure projects from school repair to park improvements, to sewer and water projects, to levy upgrades, to public transportation projects and high speed rail.
In the past, America built big things -- from the Interstate Highway system to the great dams. We can do it again.
One of the reasons why we fail to make these critical investments is the archaic accounting system of the Federal Government.
If you are a business and make an investment in plant and equipment, you don't count the outlay as an expenditure. When you build a plant, the money is not gone; after all, you have a new plant that is an asset with which you can create future revenue. So the new plant is recognized on the books as an asset and it is expensed over its useful life (or for tax purposes according to IRS depreciation rules).
But when the Federal Government invests in a highway or a levy -- that have decades of useful life -- it immediately counts these outlays as an expense. It is accounted for the same way you would a salary or reimbursement for a meal. The Federal Government has no capital budget -- no way to account for assets that offset its investments.
That has two important implications.
First, even when the Federal Government makes investments that will massively improve the economic circumstances of future generations, these investments increase the "deficit" the same way current expenditures do. So even if the Federal Government had billions of dollars of new productive assets to show for its investments -- new buildings or schools or levies -- no one would know it. Those assets simply wouldn't count against the calculation of the "deficit." That creates a political disincentive to invest in the future.
Second, the lack of a capital budget does not provide us a way to measure the level of investment made by the Federal Government as compared with its level of consumption. That is a huge problem, since the relationship of investment to consumption is a critical element in creating long-term economic growth.
In economics there is a qualitative difference between the two. Consumption involves spending on goods and services we consume -- use up -- to satisfy our needs. Investment involves spending on assets -- on tools -- on plant and equipment or skills -- that will allow us to create more goods and services in the future.
Highways, public transportation, airports, water systems, sewer lines, levies and power plants, windmills, the Internet (which was originally created by the Federal Government), the GPS system -- all are assets that allow us to create goods and services in the future -- to create future wealth. The same is true of less tangible assets like education. Education is not consumption. It is investment in "human capital" that is the most important foundation of future economic growth.
We are being irresponsible to our kids if we do not invest in these things.
Finally, investing in infrastructure today is exactly what is needed to jumpstart our economy and put people back to work. By refusing to do so, we are wasting the talent and energy of 14 million Americans who could be doing productive work.
My wife, Congresswoman Jan Schakowsky, has proposed legislation that would create 2.3 million new jobs over each of the next two years, doing critical things that need to be done. Much of that work involves improving infrastructure -- especially our schools and parks.
Her bill would cost $237 billion over two years -- which could be paid for entirely by increasing the tax rates of millionaires and billionaires to levels slightly lower than they were early in the Reagan Administration. The bill would reduce the unemployment rate by 1.3%. It would be guaranteed to produce 2.3 million jobs because the money is metered out to states, local governments and other agencies only when it is tied to a job.
The proposed Infrastructure Bank is another approach that would substantially increase investment in infrastructure -- and generate millions of jobs over time -- by leveraging private investment with Federal infrastructure dollars.
Yesterday's earthquake should be nature's wake-up call to Washington. It's as if Mother Nature reached out and shook Washington and said, "Pay attention -- wake up from your near-hypnotic fixation on short-term 'deficit reduction.' Stop short-changing critical investments in your economy."