No Labor Infrastructure For $2 Trillion Infrastructure Spend

Democratic congressional leaders announced Tuesday after a meeting with President Donald Trump that an agreement had been reached on the price tag for a potential infrastructure plan: $2 trillion. — CNN

We are reposting and a piece we wrote a few years ago to reiterate our skepticism on a massive infrastructure spend, which apparently resurfaced today as Trump, Chuck, and Nancy reached some kind of agreement on a big deal. Seriously, are you kidding me, $2 trillion?

Yes, fix the potholes, repair the bridges, modernize JFK and La Guardia, and build out broadband.

No Labor

If you haven’t noticed, the U.S. has a labor shortage and no more so than in the construction industry. Moreover, infrastructure labor, what the BLS labels “Heavy and Civil Engineering Construction“, is extremely scarce,

The Heavy and Civil Engineering Construction subsector comprises establishments whose primary activity is the construction of entire engineering projects (e.g., highways and dams), and specialty trade contractors, whose primary activity is the production of a specific component for such projects. Specialty trade contractors in Heavy and Civil Engineering Construction generally are performing activities that are specific to heavy and civil engineering construction projects and are not normally performed on buildings. The work performed may include new work, additions, alterations, or maintenance and repairs. – BLS

It ain’t easy to take an unemployed coal miner, for example, move her from West Virginia to Queens for training to repair the runway at JFK or chip and paint the George Washington Bridge.

The data in the table illustrate only 747k workers were employed in heavy and civil engineering construction in February or just 0.50 percent of total nonfarm payrolls!

Furthermore, job growth in the industry has been fairly robust over the past two years, almost 4x that of total nonfarm payrolls, which we suspect has reduced any slack in the sector’s labor force.

Good For China

Because of, in large part due to the labor shortage, we suspect many projects will have to be outsourced to, say, China once again. Bad for the bilateral trade deficit that POTUS obsesses about.

Read further into our old post and you will see how the modernization of the of San Francisco-Oakland Bay Bridge, probably one of the largest infrastructure projects in the past decade, was outsourced to China. The alternative is to allow for more immigration, coupled with massive training programs. Whoops!

The modern Bay Bridge is nice but if the goal of policymakers is to create jobs and boost long-term economic growth they could do much better. Certainly, fix the potholes and bridges but, come on, man, the main focus of policy should be on fixing the nation’s education infrastructure.

Isn’t it time to redouble efforts to prepare the labor force for the coming automation of the economy, and not succumb to fatalism and the futilitarians who preach “universal basic income” as the only hope for a disappearing middle class?

This takes leadership, however, which is also in scarce supply today.

Rebuild The Educational Infrastructure

We believe that rather than trying to turn coal miners and their children into CalTrans and bridge construction workers and engineers, policymakers should refocus their efforts on the long-term and prepare the workforce for the Fourth Industrial Revolution.

Moreover, infrastructure, as the one now being considered, creates only a temporary economic boost, though a better infrastructure creates positive externalities and increases overall economic productivity.

A concerted effort to begin teaching children, say, coding and the basics of the new technology beginning in primary school and following it through to the senior year of high school, including a test in order graduate would be a much more productive and efficient use of taxpayers’ (and Japanese and Chinese bondholders) scarce resources, in our opinion.

Python, which is becoming the coding language of choice for AI and big data, is really not that hard to learn. There are even now fun games to teach coding to third graders.

I introduced twenty 3rd graders to programming in a special 75-minute session, using computer art and video games as motivation.

We began with physical activities. We then moved to a pen and paper exercise and then to programming in TurtleScript. Finally, we talked about some of the big ideas in computer science and saw some examples of games in codeheart.js that my college students wrote in their first semester of programming. – Casual Effects

Let’s get at it!

P.S.. With trillions of dollars being tossed around by the politicos, coupled with the rise of Modern Monetary Theory, the deflationistas must be, or should be, shitting razor blades.

Misplaced Policy Thinking – $1 trillion infrastructure build

Posted on November 18, 2016

As the stock market celebrates and is downright giddy over the prospect of a massive fiscal expansion through a one trillion dollar infrastructure build, we are less sanguine and propose a different and more long term policy track.

The U.S. doesn’t have the skilled labor and experience to do such a large infrastructure spend and will have to depend on Chinese and foreign firms and labor to implement the program, just as the U.S. built out its railroads in 1830-60s with Chinese labor.

The mega infrastructure build this decade in the SF bay area was the rebuild of the SF Bay Bridge, done by a Chinese firm, by the way.

Bridge Comes to San Francisco With a Made-in-China Label – NY Times

SHANGHAI — Talk about outsourcing.

At a sprawling manufacturing complex here, hundreds of Chinese laborers are now completing work on the San Francisco-Oakland Bay Bridge.

Next month, the last four of more than two dozen giant steel modules — each with a roadbed segment about half the size of a football field — will be loaded onto a huge ship and transported 6,500 miles to Oakland. There, they will be assembled to fit into the eastern span of the new Bay Bridge.

http://www.nytimes.com/2011/06/26/business/global/26bridge.html

Furthermore, the U.S. is at full employment and only 936K (as of Ocotober 2016, including supervisors) of the labor force is employed in heavy construction and civil engineering. You can’t take an unemployed banker and have him/her build a bridge or hospital. This is not like the WPA and CCC during the great depression where the unemployed built campgrounds, for example.

If implemented, expect big inflation in a few years. The markets are already beginning to price it in with the collapse of the global bond markets and a huge rally in the dollar.

The U.S. will thus have to rely heavily on immigrant labor and foreign firms for its $1 trillion infrastructure build out. Exactly the opposite of what Trump has campaigned on. Ironic, no?

Finally, many construction jobs will be automated in 10 years anyway and most, if not all new, jobs will be in software and coding. We have been writing, no, warning about this for years.

The idea of paying families that lose their jobs to automation and robots, say, $50k per annum, is already being discussed in the private sector and policy circles, commonly known as the “universal basic income“.

The brave new world of robots and lost jobs

A look at the numbers suggests that the country is having the wrong economic debate this year. Employment security won’t come from renegotiating trade deals, as Donald Trump said in a speech Monday in Detroit, or rebuilding infrastructure, as Hillary Clinton argued in Warren, Mich., on Thursday. These are palliatives.

The deeper problem facing the United States is how to provide meaningful work and good wages for the tens of millions of truck drivers, accountants, factory workers and office clerks whose jobs will disappear in coming years because of robots, driverless vehicles and “machine learning” systems. – David Ignatius, Wash Post, Aug 11, 2016

Instead of a one-off massive infrastructure program, the U.S. should massively revamp its education system, teaching coding to second graders and continue through graduation. And ramp its vocational training for those not inclined to take a software job. But this faces violent opposition from the special interests – not excluding the public sector and teachers unions — and will take political vision, will and courage. We need a new Sputnik moment and we better get on with it. Quickly.

The Japanese spent the U.S. equivalent of almost $20 trillion of infrastructure build from 1991 to 2009, building bridges to nowhere and got them nothing — well maybe staved off a greater depression — but a debt of over 200 percent of GDP and are now on the verge of blowing up.

Japan’s Big-Works Stimulus Is Lesson

Moreover, it matters what gets built: Japan spent too much on increasingly wasteful roads and bridges, and not enough in areas like education and social services, which studies show deliver more bang for the buck than infrastructure spending.

“It is not enough just to hire workers to dig holes and then fill them in again,” said Toshihiro Ihori, an economics professor at the University of Tokyo. “One lesson from Japan is that public works get the best results when they create something useful for the future.”

In total, Japan spent $6.3 trillion on construction-related public investment between 1991 and September of last year, according to the Cabinet Office. The spending peaked in 1995 and remained high until the early 2000s, when it was cut amid growing concerns about ballooning budget deficits. More recently, the governing Liberal Democratic Party has increased spending again to revive the economy and the party’s own flagging popularity.

–NY Times, Feb 5, 2009

Enough of this same old archaic, not thought out policy-making,

Yes, it would be nice to have a first class and brand new “trophy” infrastructure to, say, one up the Chinese, but not at the expense of the future of our children. We prefer trophy children over trophy airports. Yes, fix and modernize LaGuardia and JFK; and in no way are we saying we don’t need to improve our infrastructure and restructure the way we pay for it.

But. economics is all about making choices. Staying at the Best Western instead of the Trump Casino Hotel while in Vegas is fine with us if it provides a better future for our children. $1 trillion dollars? Come on, folks, get real.

It’s about time we start to think outside the box, don’t you think?

2 Responses to No Labor Infrastructure For $2 Trillion Infrastructure Spend

Anonymous says:

April 30, 2019 at 4:12 PM

Gary, you really think we are going to import Chinese labor? Pleeease!

- macromon says:
  
  April 30, 2019 at 4:27 PM
  
  You should read first before commenting, J,, We already did and have….
  
  Bridge Comes to San Francisco With a Made-in-China Label – NY Times
  SHANGHAI — Talk about outsourcing.
  
  At a sprawling manufacturing complex here, hundreds of Chinese laborers are now completing work on the San Francisco-Oakland Bay Bridge.
  
  Next month, the last four of more than two dozen giant steel modules — each with a roadbed segment about half the size of a football field — will be loaded onto a huge ship and transported 6,500 miles to Oakland. There, they will be assembled to fit into the eastern span of the new Bay Bridge.