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Friday, December 26, 2008

"An Eisenhower Moment" for Infrastructure?

What can the incoming administration learn about infrastructure spending from Eisenhower's experience in creating the interstate highway system?:

Eisenhower's roads to prosperity, by Tom Lewis, Commentary, LA Times: ...President-elect Barack Obama vowed to "create millions of jobs by making the single largest new investment in our national infrastructure since the creation of the federal highway system..." The story of President Eisenhower's decision in 1956 to create the interstate highway system ... holds lessons that the new president and the country would do well to heed.

Eisenhower was the first Republican to occupy the White House after Herbert Hoover, who in the 1950s still wore a mantle of shame for his role in the market crash of 1929 and its aftermath. Eisenhower had an almost pathological, but healthy, fear that he might be blamed for allowing the nation to fall into another depression. When a mild recession ... pushed the unemployment rate above 5%, Eisenhower ... asked for solutions.

The highwaymen at the Bureau of Public Roads ... heeded the call. They reported that each federal dollar invested in construction generated close to one half-hour of employment. ... Workers across America, not just those who built the roadways, would benefit -- in cement and steel plants (50 tons of concrete and 20 tons of reinforcing steel go into each mile), in paint and sign manufacturers and in heavy equipment factories and oil refineries. ...

Eisenhower realized that he could not fail with highways. Americans wanted more roads for their postwar cars. Construction would prime the economic pump ... and help secure the nation's future. He signed ... the $25-billion Federal-Aid Highway Act to build a 42,000-mile interstate highway system by 1972. Ultimately the cost would escalate to more than $130 billion, and workers would not finish the roads until 1993...

Eisenhower wasn't afraid to create a huge public works program, and unlike today's presidents, he wasn't afraid of taxes. ... The 1956 highway bill levied a tax of 3 cents on each gallon of fuel -- equal to 24 cents today. The revenue went into a dedicated highway trust fund. ...

Eisenhower's interstates are an essential part of our culture. ... In 1956, Eisenhower likely didn't fully realize that he was creating not just a public works program but an economic and social blueprint for the next 50 years. Now, along with every other aspect of our infrastructure, the interstates are crumbling. Irresponsible legislators rail against the current federal highway tax of 18.4 cents a gallon -- far less in today's prices than Eisenhower's 3 cents. Seduced by easy money, governors consider leasing parts of the highway system to foreign companies.

So the lessons for Obama are clear: Don't be afraid to propose bold -- and often expensive -- programs that improve the nation's infrastructure and peoples' lives, and don't be afraid to pay for them with taxes.

It is said the 44th president is taking office at a Lincoln moment and a Roosevelt moment. True enough, but it can be an Eisenhower moment as well.

Keeping the budget in balance while the economy is struggling is not good policy. If the goal is to stimulate the economy and to create new jobs, then the "clear" lesson - the advice to pay for the spending on infrastructure by raising taxes - is wrong. The new infrastructure does need to be paid for, but the time to do that is when the economy is healthy, not when it is under performing.

    Posted by on Friday, December 26, 2008 at 12:24 AM in Economics, Fiscal Policy, Politics, Taxes | Permalink  TrackBack (0)  Comments (37)


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