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A New New Deal | The Nation

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Katrina vanden Heuvel

Katrina vanden Heuvel

Politics, current affairs and riffs and reflections on the news.

A New New Deal

When the levees broke in New Orleans, I wrote about the desperate need for a New Deal for the 21st Century – one which would rebuild a crumbling infrastructure, help address glaring income inequality, and repair the damage done by a Bush administration fiercely hostile to the notion that government can serve the public good.

The collapse of the I-35W bridge in Minneapolis is yet another alarm, alerting us to our skewed priorities and need for a public investment agenda.

As The Nation argues in its forthcoming lead editorial, the neglect of our infrastructure is seen in collapsing bridges and exploding steam pipes, flooded subways, traffic-choked streets and clogged-up ports, electrical power brownouts, corroding drinking water systems, uneven broadband access, and an antiquated air traffic system.

The US Department of Transportation estimated that freight bottlenecks cost the economy $200 billion a year--nearly 1.6 percent of GDP. The Environmental Protection Agency estimated that it would cost $151 billion and $390 billion every year over the next 20 years to repair obsolete drinking water and wastewater systems, respectively -- systems that average 50 to 100 years of age. According to the Federal Highway Administration, $131.7 billion and $9.4 billion is needed every year over the next 20 years to repair deficient roads and bridges, respectively. Moreover, the American Society of Civil Engineers estimated that $1.6 trillion over the next five years would be required to alleviate problems with the nation's infrastructure. As John Nichols wrote, "That $1.6 trillion figure sounds like a lot of money, unless it is compared with the anticipated cost of $1 trillion or more for completing George Bush's mission in Iraq."

This is eminently doable, it's a question of political will.

Following the bridge collapse, Senators Christopher Dodd and Chuck Hagel introduced legislation to establish a National Infrastructure Bank that would enable the federal government to help finance infrastructure projects – partly through federal guarantees to state and local governments. Projects would include publicly-owned mass transit systems, roads, bridges, drinking water and wastewater systems, and housing properties. In the House, Congressmen Dennis Kucinich and Steven LaTourette introduced The Rebuilding America's Infrastructure Act which would create a low-cost federal financing mechanism to administer zero-interest loans to localities. States choose which projects to fund with the loans according to their specific needs.

The problem is that the Dodd bill, as well-intentioned as it is, would still invest only $60 billion a year – which pales in comparison to the scope of the problem. Similarly, Senator Bernie Sanders good bill to foster green collar jobs – which passed in the House too – also allots only $100 million. A much bolder undertaking is needed.

In a forthcoming paper for the New America Foundation economist (and sometime Nation contributor) James K. Galbraith writes, "Contrary to considerable myth, economic development in America has never been a purely private matter." Galbraith cites the Congress of 1862 and its authorization of land grant universities, homesteading, and the transcontinental railroads. And the New Deal which "laid down much of the public architectural legacy with which we live today."

Galbraith describes attempts in the 1980's to foster higher infrastructure investment on a systematic basis – such as Representatives Lee Hamilton and James Howard's effort to create a Federal Infrastructure Bank "which would have provided funds on a revolving basis to states and cities to support local and regional infrastructure." And late in the Clinton administration similar ideas were discussed "but of course died with the arrival of the Bush government."

In order to address the infrastructure needs – and the transition to a low-carbon emissions society that is required to meet the challenge of global warming – Galbraith calls for a Federal Infrastructure Bank to assist state and local governments with financial resources; and investments in universities and research centers to develop the needed specialists in urban design, environmental engineering, energy economics, transportation systems, carbon sequestration, the management of carbon trading markets and other fields. Galbraith estimates that a new large scale public investment initiative could be undertaken that amounts to new expenditures rising to two percent of GDP over a period of a few years – approximately 290 billion dollars per year in present dollars. (Roughly one-half of the current national security budget.)

In Hometown America, a report based on two years of research by a group of progressive thinkers, the authors write that "for the past 20 to 30 years, major parts of our economy and society have been short-changed – trillions of dollars of investment needed but not made in healthcare, education, energy independence, and a broad range of other essentials. We conclude that serious reforms are needed to make up for these shortfalls and to build a new generation of growth and middle class prosperity."

The report argues that the last great American middle class – created on rising wages, a strong industrial economy, and government programs that expanded public education, increased home ownership and eliminated poverty in old age – has eroded over the last three decades due to globalization, financial liberalization at the expense of middle class prosperity, an increased tax burden on the middle class, and military adventures abroad over public investments at home. The authors call for using "government much like an earlier generation did to create a high-wage and technologically advanced economy with a broad base of middle class jobs."

The report outlines "a new federal revenue sharing and regional decision-making process…."; a National Capital Budget and Development Bank "to finance and oversee the substantial resources that federal, state, and local governments will need to accomplish major reforms in healthcare, education, energy use, and other key areas"; and "reining in an over-reliance on military projection and strengthening economic and diplomatic engagement…."

Specifically, Hometown America calls for investment in the following areas: basic infrastructure – roads, bridges, levees, water systems, electrical grids; a new energy infrastructure for biofuels, hydrogen, solar, and other renewables; the build-out of America's broadband infrastructure; an expanded and advanced air and rail transportation system, including a new Skyways and Rail system to for the American heartland to complement the Interstate Highway system; a new system of federal research centers to push the frontiers of science of technology; and a network of public health clinics, new technology extension centers, and regional art and culture centers. And, as many have pointed out, "For national security, environmental, and economic reasons, the promotion of a renewable energy industry must be the first priority of any new public investment initiative." The Apollo Alliance has provided a blueprint to do just that – with $300 billion invested over the next 10 years, creating 3.3 million jobs, leading to economic growth, more tax revenues, and energy independence.

Citizens need to make it clear to the presidential candidates – and their representatives – that they seek a bold vision to renew our shredded social contract and rebuild our public infrastructure. Otherwise we can expect continued tragedies as we saw last week, and the same path of privilege for the few and treading water for the rest.

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