Summers: A lesson on infrastructure from the Anderson Bridge fiasco [feedly]

A lesson on infrastructure from the Anderson Bridge fiasco
http://larrysummers.com/2016/05/31/a-lesson-on-infrastructure-from-the-anderson-bridge-fiasco/

Sometimes small stories capture large truths. So it is with the fiasco that is the repair of the Anderson Memorial Bridge, connecting Boston and Harvard Square. Rehabilitation of the 232-foot bridge began in 2012, at an estimated cost of about $20 million; four years later, there is no end date in sight and the cost of the project is mushrooming, to $26.5 million at last count.

This glacial pace of implementation does not reflect the intrinsic technical difficulty of the task. For comparison, the Anderson Bridge itself was originally completed in just 11 months in 1912. General George Patton constructed nearly 40 times as much bridging in six months as American soldiers crossed the Rhine to win World War II. And even modern-day examples abound; for instance, in 2011, 14 bridges in Medford were fixed in just 10 weekends. In contrast, the lapses exposed by the Anderson Bridge project hold key lessons for America's broader inability to solve its infrastructure problems.

Repairing the Anderson Memorial Bridge so slowly has had large direct costs. Approximately 21,000 vehicles cross the bridge each day, along with 15,000 bus riders and thousands of cyclists and pedestrians and riders of Harvard shuttle buses. All have been delayed by the repairs, many substantially. With missing sidewalks and bike lanes, cyclists and pedestrians are physically endangered as well. And then there are the backups on the roads that connect to the bridge. If we value time lost to congestion at $20 an hour and make no allowance for cyclists or delays on other arteries, the cost of delay so far has been $40 million, or almost 100 percent more than the budgeted cost of the repairs. Meanwhile, because of time lost from the Anderson delays, the structurally deficient Western Avenue and River Street bridges (originally scheduled for rehabilitation under the state's same $3 billion Accelerated Bridge program) have missed their window for funding.

How, we ask, could our society have regressed to the point where a bridge that could be built in less than a year one century ago takes five times as long to repair today? Here are some of the reasons that have contributed to the delay:

In order to adhere to strict historical requirements overseen by the Massachusetts Historical Commission, the Massachusetts Department of Transportation had to order special bricks, cast by a company in Maine, to meet special size and appearance specifications from the bridge's inception in 1912.

At the same time, extensive permitting and redesigns haven't helped. For instance, once construction had already started on the bridge, the contractor, Barletta Heavy Division, discovered that an existing water main would need to be relocated. With the subsequent change order and additional Massachusetts Water Resources Authority permitting processes, an additional 357 days were tacked on to the original contract completion date.

To cap it off, after resisting for years the inclusion of pedestrian underpasses in bridge rehabilitation, MassDOT changed course in 2014 and agreed to revise the design so as not to preclude the construction of an underpass in the future. The contractor then had to move a major utility pipe so that an underpass could fit underneath; meanwhile, another 256 days of delay were added to the project. The entire project is now 22 months behind schedule.

Delay, then, is at one level the result of bureaucratic ineptitude and the promiscuous distribution of the power to hold things up. At another level, it is the failure of leadership to insist on reasonable accountability to meet reasonable deadlines. Perhaps, at a deeper level, it is the failure of citizenry to hold government accountable for reasonable performance — a failure that may in part reflect a lowering of expectations as trust in government declines. These themes, unfortunately, are not unique to the Anderson Bridge; they help illuminate why, despite our vast needs, the country has struggled to generate the necessary momentum to respond to pressing infrastructure demands.

There is no reason to think the Anderson Bridge experience is extraordinary, locally or nationally. For evidence, just look at the $255 million Longfellow Bridge repairs, recently delayed another two years due to historical complications, or the $82 million effort to replace deteriorated and corroded steel beams on the Commonwealth Avenue Bridge, just pushed back one more year because of design errors. Massachusetts bridges are the oldest in the country, yet the Accelerated Bridge Program expires this year, with hundreds of structurally deficient bridges still remaining and future funding sources unclear.

America desperately needs a major increase in infrastructure investment and, if carried out effectively, an investment program could come close to paying for itself by generating an expanding economy. With record low interest rates, low material costs, and high construction unemployment, there is no better time. When states defer maintenance and repair for decades — as was done with the Anderson Bridge — it places a huge burden on future generations.

However, to collectively tackle the nation's crumbling infrastructure, citizens need to believe that the government is up to the task. In an era when public trust in government remains near all-time lows, every public task is freighted with consequence. The relationship is cyclical — if government can start being more effective, it will win more trust, leading to more effectiveness. If, on the other hand, projects such as the Anderson Bridge repair project become the norm — then we are fated to increasing cynicism and distrust.

The Anderson Bridge is approximately one-sixth the length of the bridge Julius Caesar's men built across the Rhine in 10 days in 55 BC. Caesar's feat is admired not just for its technical mastery but also for its boldness. An allied tribe had offered boats to carry Caesar's troops across the river, to avoid the difficult task of bridge-building. Yet Caesar rejected this offer, on the grounds that it would not be "fitting for the prestige of Rome."

We should hold America's infrastructure to the same standard.

Lawrence H. Summers is the Charles W. Eliot University Professor and president emeritus of Harvard University. He was also secretary of the US Treasury. Rachel Lipson is a joint MBA-MPP student at Harvard.

 -- via my feedly newsfeed

AJared Bernstein: Angry economic undercurrents [feedly]

Notice how Bernstein handles some of the same questions raised by PK, but without the anti-Sanders horseshit. And, another recession -- which nearly every serious economist expects -- will vaporize choice "b".

Angry economic undercurrents
http://jaredbernsteinblog.com/angry-economic-undercurrents/

I think I know why people are upset, even while there's been job and income growth.

By Jared Bernstein June 1 at 6:00 AM 

Jared Bernstein, a former chief economist to Vice President Biden, is a senior fellow at the Center on Budget and Policy Priorities and author of the new book 'The Reconnection Agenda: Reuniting Growth and Prosperity.'

(Manuel Balce Ceneta/AP)

The electorate, we are told, is angry. They, or at least a significant subset of them, are upset about trade deals, immigration, feckless lawmakers, jobs, incomes and wages.

And yet, recent data show the following:

* Real median income is on the rise, and the steepest growth in real middle-class incomes has been occurring in recent years. What's wrong with that?!

The data, estimated by the group Sentier Research and shown in the figure below, isn't the government's official measure, and it leaves out various income sources, like the value of medical benefits, but it's a decent benchmark of market-based income for middle-class households. The measure is indexed to 100 in 2000 so the line tracks the percent change in real median income relative to that year.

Source: Sentier Research

* The percent of adults who say they're "doing okay" or "living comfortably" has been improving overall in the past few years, as you might expect in an improving economy. But as the next figure, from arecent survey by the Federal Reserve, shows, the biggest gains have been for the group with "high-school or less," the very people who are supposed to be most angry. Again, whussup?

Source: Federal Reserve

* Finally, consumer sentiment, as shown below, is back to where it was at the peak of the last business cycle. Was everybody so darned annoyed back then? I don't think so (at least until the housing bubble burst).

Source: Michigan University Consumer Sentiment Survey

The unemployment rate's at 5 percent (you can see its sharp decline in the first figure above), we're adding more than 2 million jobs a year, and the Federal Reserve is talking about having to hit the economic brakes out of fear that the economy is growing too quickly (for the record, I think that would be a mistake). Them's the facts, folks. Again, with all this going on, how is a negative vibe merchant like Trump gaining so much traction disparaging the current economy?

Well, let's start by looking back at those figures.

The first one shows that market-based, middle-class incomes have just regained the ground they lost during the recession. And that level is about the same as it was in 2000. This same dynamic can be observed for consumer confidence. It's back to where it was before the Great Recession, but below where it was in the late 1990s.

A closer look at the data from which the middle figure is derived also reveals of sources of economic discontent. Almost half of the adults responding to the survey (46 percent) said they'd have trouble coming up with $400 to cover an emergency expense. Almost a third (31 percent) of non-retirees report no retirement savings or pension. Among those who were having a hard time getting by in 2014, half say they were worse off in 2015.

In other words, for every statistic you can find, I can find one that tells if not a different story, a more nuanced one. Yes, the jobless rate is 5 percent, but theunderemployment rate, juiced by 6 million part-timers who want full-time jobs, is a considerably less comfortable 9.7 percent. No question, wages are rising, but the major source of real income growth over the past year has been low inflation. Paychecks aren't growing so fast as much as prices have been growing a lot more slowly.

Then there's the geographical dimension to all of this. According to recentresearch by the Economic Innovation Group (I co-chair their advisory board), business and job growth have been a lot more concentrated in big cities than in non-urban areas. L.A., Miami and Brooklyn have been crushing it, both in terms of business formation and job growth; counties with less than 100,000 people were actually losing businesses, at least through 2014.

And then there's a lot of stuff going on that doesn't relate to the numbers. For decades, both Democrats and Republicans told people who were unquestionably being hurt by trade that globalization was good for them. Unemployment is low now, but full employment — truly tight labor markets that give middle and low-wage workers the bargaining power they otherwise lack — has been the exception, not the rule, over the past 30 years. The economics establishment failed to see or stop the housing bubble, generating agreat movie and a horrible recession. Instead of doing real work, the House has voted over 60 times to repeal Obamacare. I might add, though it's foreign, not economic, policy, that there were no WMDs in Iraq.

So I think I get why some people are unsatisfied with the economy and beyond. Growth hasn't reached all corners by a long shot, and policymakers have too often been at best unresponsive to that reality and at worst, just plain awful.

You can go one of two directions with that insight. You can turn to a demagogue who exploits this disconnect without any coherent plans to do anything about it. Or you can get to work on the policy agenda that works to preserve what's been going well and addresses what's hurting us. I choose "b."

 -- via my feedly newsfeed

Are Tax Hikes on the Wealthy Bad for Growth? [feedly]

Are Tax Hikes on the Wealthy Bad for Growth?
http://economistsview.typepad.com/economistsview/2016/06/are-tax-hikes-on-the-wealthy-bad-for-growth.html

Tax hikes on the wealthy: Good or bad for growth?

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Conservatives have argued for decades that tax cuts are the key to economic prosperity. And the tax plan presumptive GOP nominee Donald Trump is pushing would cut taxes for the top 0.1 percent of earners by an average of approximately $1.3 million per year, embracing that conservative point of view.

On the other hand, Democrats such as front-runner Hillary Clinton take another approach. Clinton says she'll reform the U.S. tax code so that the wealthiest pay their fair share. The response from Republicans has been predictable: They argue that such a tax plan will lower growth and harm the economy.

Do the conservative arguments against tax increases have any merit? Or are they, as Democrats claim, a way to serve an ideological goal of smaller government and reward wealthy Republican donors? Let's take a closer look.

Increasing taxes on the wealthy will harm economic growth: This argument is made frequently, along with the claim that increasing growth will lift all boats, but the evidence doesn't support either claim. As Nobel Prize-winning economist Peter Diamond and John Bates Clark medalist Emmanuel Saez have noted, since the 1970s no clear correlation exists between economic growth and top tax-rate cuts across Organization for Economic Cooperation and Development countries.

As for the trickle-down argument, this claim falls apart when you examine what happened to the distribution of income after tax cuts for the wealthy enacted during the Bush administration. Income of those at the top went up substantially, with no corresponding gain for those lower in the income distribution.

Increasing taxes on the wealthy won't solve the income inequality problem: Higher taxes for the highest earners may not solve the problem, but it would help. Again, consider the tax cuts on the wealthy enacted during the Bush years. In addition to not generating a positive trickle-down economic growth effect, those cuts contributed to the stunning increase in income inequality in recent decades. Raising taxes would have the opposite effect.

Tax increases will blunt the incentive to invest in new businesses: Decreasing taxes did not increase economic growth, so why would increasing taxes to levels they've been at in the past be harmful? In addition, it's hard to believe that a reduction in expected aftertax income of, say, 10 percent from $10 million to $9 million, or even from $300,000 to $270,000, would cause someone to pass on the investment opportunity.

The wealthy will move to other countries to avoid the tax increase: Arecent study examined the propensity of the rich to move between U.S. states in response to state tax increases. The lead author of the study, Cristobal Young of Stanford University, summarized the results by saying, "The most striking finding in our study is how little elites seem willing to move to exploit tax advantages across state lines."

If the wealthy aren't willing to move between states in response to tax differences, it seems even more unlikely that would undertake the far more difficult task of moving to another country.

Increasing taxes on the wealthy won't increase tax revenue: The Laffer curve argument that increasing taxes will cause the wealthy to pursue tax-avoidance strategies or forego profitable opportunities to the extent that tax revenues actually fall has been examined again and again, and the message is clear. Tax avoidance may increase somewhat, but nowhere near enough to cause tax revenues to fall.

Diamond and Saez have looked at this closely, and they found that the revenue-maximizing top federal marginal income tax rate would be in or near the range of 50 percent to 70 percent (taking into account that individuals face additional taxes from Medicare and state and local taxes).

Less will be donated to private charities: Would tax increases cause the wealthy to reduce their charitable giving? Research on this question suggests it'sthe other way around. Back in the 1970s, when the top rate of federal income tax was 70 percent, wealthier Americans (those with incomes of over $500,000 in 2007 dollars) gave around twice as much of their money to charity than they did in 2007, when the top rate had fallen to 35 percent.

Why does this happen? When taxes are higher, the benefit of the tax deduction for charitable giving is also higher, so people tend to increase the amount they give. In addition, the wealthy give their biggest donations almost exclusively to universities and colleges, hospitals and medical centers, and arts institutions. They rarely make large gifts to social-service groups, grass-roots organizations or nonprofit groups that focus on the poor or minorities.

So to the extent that the increased tax revenue is used to support these groups, social welfare could benefit.

The wealthy deserve what they earn: This argument assumes that they're paid according to their contribution to society. But in a world of monopoly power, regulatory capture and asymmetric power relationships in bargaining over the wage and profit shares of business earnings, the presumption that those at the top of the income distribution earned their income flies out the window.

If we assume that fairness is defined as keeping what you contribute to the social good (what economists would call the value of their marginal product), and no more than that, such fairness would compel us to take the income the wealthy earn in excess of their contribution to the social good.

Where should that income go? Substantial evidence shows that wage earners have earned less than their marginal products in recent decades. So under the principle that people should have an income equal to what they contribute, fairness would suggest that we redistribute to underpaid wage earners some of the income the wealthy earn in excess of their contribution, either through direct payments, tax adjustments or spending on social programs that benefit lower-income households.

It's a tax on small businesses: The number of small-business owners that would be affected by a tax increase on incomes over $250,000 is fairly small. For example, an analysis of President Obama's proposal in 2009 to increase the rates for those in the top two tax brackets would affect only 1.9 percent of small businesses.

Many of those who would be affected are investors in the businesses who play no role at all in day-to-day management. And they could always escape the tax completely by filing as corporations. You also have to wonder how many people would choose to give up their businesses if their incomes were only, say, $350,000 due to a tax increase.

Arguments about the size of government and the taxes needed to support the many things that government does are certainly fair game for politicians. But the argument that tax increases on the wealthy will cause substantial harm to the economy does not withstand a close look at the evidence.

 -- via my feedly newsfeed

GOP-ers’ Health Plan Would Make Millions More Uninsured, Analysis Shows [feedly]

GOP-ers' Health Plan Would Make Millions More Uninsured, Analysis Shows
http://www.cbpp.org/blog/gop-ers-health-plan-would-make-millions-more-uninsured-analysis-shows

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Peter Dorman: Modernity and Capitalism

Case:

Who is a "paleo-socialist"? 

I think the author gets Naomi Klein right here (below). Dorman is a UMass type economist, having abandoned neo-Classicism, theoretically at least, in favor heterodox economics -- mixtures of Marx, MInsky, Robinson, behaviorists, and complexity theorists.

The Naomi Klein "socialism" fits the anti-modern monicker.  It is "looking backward" in a primitivist reaction to the excesses of modern capitalism. This kind of "socialism" will forever be an elitist one, since it is of very little use in the daily struggles of working families. However, its sway in the environmental movement is very strong. This does not mean the anti-modern socialism would have no appeal among working people. There are many workers who are environmentally conscious -- but they have little time or income or means to enjoy the privilege of dropping out of the corporate, commodity-based, global economy.

Why have many reincarnated "socialisms" -- not counting Bernie Sanders (Bernie is NOT a "paleo-socialist" -- but he has quite a few "paleo-socialist" supporters in Vermont) -- become anti-modern, anti-technological, anti-global in their critiques of "capitalism"?  Dorman argues this is in part a reaction to the retreats and/or collapse of "classical socialisms" associated with the Soviet, Cuban, and early Chinese experiments.

I think Dorman gets part of it right: I have heard, on my radio program, numerous spokespersons of sundry environmental campaigns deny (without any evidence) that combatting climate change, for example, will require MORE, not LESS, technology; and that, regardless what efficiencies in energy production and consumption we could achieve via public policy -- the future of human civilization will require every MORE, not LESS energy. Rivers of it, indeed.

Further, the anti-Modern critiques overlook the stunning AVERAGE performance of market-based development (ESPECIALLY in less developed societies), compared to the "classical" socialist, command-economy model. One can point to all kinds of contradictions, but "non-market" socialisms, at least in this era, are most definitely "paleo" -- long gone and not coming back. 

So what constitutes a "non-paleo" socialism?

First: I submit there is no economic escape from the production of commodities (items and services produced for exchange for money -- the "special" commodity) and their circulation (my definition of capitalism  -- borrowed from Marx) except the one Marx speculated: make them (through technology, automation, and science) so cheap and abundant, as close to "free" as possible. At that "point" -- not actually a "point" in time, but a rather lengthy and complex process -- "to that degree" is a better expression than "at that point" --  the satisfaction of new and emerging human wants will not be filled by commodities, and can be restructured to support different relations. 

Second, economic escape from capitalism, and socialist  politics, are NOT the same. Between here and an economic escape from capitalism lies any number of political upheavals and likely revolutions. When we talk about socialism today, in politics, we are talking direction, not some state of being. And the fundamental measures of progress are the reduction of inequality AND the expansion of public goods  to the extent scarcity in the material means of life can be alleviated. 

Third: class struggle is a common thread through all of capitalist development. INdeed, it is a KEY source of its development and revolutionizing of production and services. The definition of "classes" will also change with every shift in the division of labor and capital in society -- but any notion of socialism that seeks an end to class struggles, or an escape from technology, industrialization, globalization or capitalism through "looking backward" politics in this era will be disappointing to its supporters. 

As Jesus explained to the faithful Pharisee, a good man who consistently followed the Law, when the latter complained that Jesus paid more attention to a sinful slave girl who washed his feet and sought forgiveness than himself: "If I forgive two debtors of their debts, and one owes me little, but another a lot, who will love me more?". To Hillary Clinton, I say -- the last will be first: the enslaved are the future, not the well-intentioned rich. Choose well.

 

Dorman

Modernity and Capitalism

Peter Dorman(Econospeak)

Well, that's a heavy title.  I'm not going to say the last word about it in a blog post, but I would like to make a fairly simple observation: for at least a century, defenders of capitalism have argued that the two are inextricably connected.  If you like modernity you have to like capitalism, and if you get rid of capitalism you will lose modernity with it.  By modernity I mean a way of life that is science-based, rational and skeptical, technologically innovative, liberal, cosmopolitan and adapted to markets.

The traditional response of the left was to argue that modernity under capitalism is flawed and that a better, socialist modernity is possible.  In other words, it rejected the identity and saw modernity as bigger than any particular version of it.

That position has been complicated by the collapse of traditional models of socialism that do seem to fail the modernization test: they were clunky and inefficient, closed to the outside instead of open, stultifying instead of dynamic.  Now, I can already hear the cries of paleo-socialists in my ear: No!  Socialism didn't fail in Russia/China/Cuba/wherever; it was encircled by the forces of capital and betrayed from within.  I don't agree, but I won't debate it here; my only point is that most of the left is not paleo-socialist, so they've had to figure out what it means to be left wing and anti-capitalist in a world in which capitalism and modernity (in their eyes) largely coincide.

The result that seems to be unfolding is a widespread rejection of modernity on the activist/committed left.  This is obvious in a book like Naomi Klein's This Changes Everything: Capitalism versus the Climate.  She denounces "western science" and the industrial revolution.  She is against globalization and wants each of us to stay put and cultivate our relationship to the soil—to native plants and local, stable communities.  She has rediscovered spirituality and finds it answers life's questions better than rational skepticism.  She thinks traditional societies lived better and possessed more wisdom than those swept up in modernity.  And of course, any use of markets (other than carbon taxes) is to be denounced as the sin of greed.

What Klein writes wouldn't matter so much if they were only her personal thoughts (just like mine don't matter very much), but the reception her book has received shows she has distilled a worldview shared by much if not most of the left.  Her anti-modernist stance is not even mentioned; it is taken for granted.  Or more precisely, it is how we understand her to be radical and left-wing: that's what it means to oppose capitalism in the Anthropocene.  (My spell-checker doesn't recognize Anthropocene yet.  Give it time.)

So that's how we've come full circle.  The identity between modernity and capitalism is no longer offered in defense of the existing order but (or also) as the basis for its rejection.  My prediction is that the benefits of modernity are so obvious and compelling for the vast majority of humanity that anti-modernist leftism will be an evanescent cult, something future generations will look back upon with curiosity.

And I still think we need to consider what form a non- or post-capitalist modernity might take.

(Postscript: If you want to think about how this conceptual turn of events began, you might look at the emergence of postmodernism, which transferred the critique of capitalism to the critique of modernity and arose at about the same time classical socialism/communism lost its intellectual luster.)

(Postscript ^2: This is not about anarchism vs Marxism.  Anarchists used to be modernists.  Read Kropotkin's Fields, Factories and Workshops or, for cultural modernism, Emma Goldman's Living My Life.)

John Case
Harpers Ferry, WV

The Winners and Losers Radio Show

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Universal basic income WILL solve poverty

http://www.vox.com/2016/5/31/11819024/universal-basic-income-works

Commentary: Universal Basic Income May Sound Attractive But, If It Occurred, Would Likelier Increase Poverty Than Reduce It [feedly]

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Commentary: Universal Basic Income May Sound Attractive But, If It Occurred, Would Likelier Increase Poverty Than Reduce It
// Center on Budget: Comprehensive News Feed

At first blush, universal basic income (UBI) seems a very attractive idea, especially to a progressive.  Yet it suffers from two serious problems.

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