Why We Don't Build

Ezra Klein is out with a characteristically one-sided take on 'Why We Don't Build'. A question that Marc Andreesen asked.

Klein's answer can be summed up with:

1. Too much agreement is needed for action
2. Local Interests have too much veto power.
2. Republicans want government to fail so build poorly.
4. Corporations are too short-term oriented.

1. While Klein begins by talking about how the branches of government need to be aligned and then on the filibuster, he eventually comes to the real reason: there is very little compromise between the parties. When one party has power, the other party doesn't deal with them. Both prefer to do nothing rather than let the other side have its way. He points out several, bipartisan examples: privatizing Social Security and funding vouchers for Republicans and the left can't increase the federal minimum wage or pass a climate bill. Neither side can pass immigration reform. (Side note: the closest Congress came was in the second term of George W. Bush. He had a compromise ready that Republicans would sign onto but Democrats poisoned the bill to prevent it). When both sides prefer complete obstruction in hopes that they'll eventually have power, the ability to progress is severely hampered.

2. There's too much resistance from locals to any sort of change and from special interests. Klein packs a lot into this and elides some of the other issues involved here. "This is representative democracy at its worst: A democracy that only represents those who know to show up at meetings most people never hear about, and so ends up handing power to special interests and aggrieved NIMBYs." The problem here is that the powers that be are too focused on making a narrow segment of the population happy. He cites both the Himalayan costs of the California high speed rail project and NYC subways to build. Both are famously outrageous. While he concentrates on their veto power, it isn't just the veto power at play. They also have the power to increase costs. Part of the reason the California rail project was so expensive was that local politicians wanted things to run through their area, which prevented the ideal rail line from being built. This increased costs. Environmental impact studies and preventions. Laws that required union labor at higher costs or American equipment. All of these increase costs without increasing the value of what's being built. Another problem here is that it's public money and everyone views it as an infinite resource that they deserve a piece of.

He's right though that this is fundamentally a product of too much democracy and. He says "government power is now spread so thin that places...cannot get good projects off the ground." It's not that power is spread too thin, it's that political pressure is coming from narrow interests and does not reflect the public interest and the government is too conciliatory to it. Klein speaks of Robert Moses, but the benefit of his style of government is that he could bypass the special interests and ignore them. The special interests are the groups damaging the system and need less stature in the public arena.

3. Unhappy that he has criticized the left as much as he has, he goes on to criticize Republicans in an act of moral equivalency. He claims that Republicans want government to fail so act to sabotage it. He gives one example, so I only need to give one example to counter him. While President Trump has been in office, the IRS has worked to make American's lives easier: they restructured the 1040 form so it would fit on one page and also restructured the Withholding forms. These were not attempts to make government work poorly. In fact, if Republicans really wanted bad governance to make people lose faith in government, there would be myriad examples and studies. Does Texas, the exemplar red state, really have worse governance than other states? Yet millions of people move there anyway? This is a canard that the left loves to throw out with anecdotal examples, of which there are probably examples of Democrats making government worse.

4. Finally, he bemoans capitalism. It is unclear what his point is here. First he points out that private interests don't build things they don't need like masks and ventilators pre-2020. Then, he discusses Obama's "wildly successful" loan program for renewable energy. It "turned a profit to taxpayers" despite its publicized busts. This example seems extraneous so he can talk about the government being a smart lender and Obama being a brilliant person. His point is that the government is too conservative an investor and therefore private industry is too. This is another anecdotal piece of information. Corporate investments fail all the time and are accepted as a part of doing business, while government investments fail and are typically ignored. Again, no study here, just a hand-picked example.

"Short-term shareholder capitalism acts as a kind of vetocracy on public companies." The fact that corporations are too short-term oriented is another canard put out there by the left. On hearing it, it's extremely easy to nod in agreement because it makes sense at a very superficial level, but when you really sit and think about it, there's no way it can be true. He even gives a great counter-example himself, maybe the best--Amazon. Amazon is famous for eschewing short-term profits in hopes of long-term growth. He dismisses this as an "exception that infuriates the rules." Amazon is not an "exception", it's an extreme. Most companies are looking long-term. Look at the Dow Jones Index components. How many of those companies have been there for a decade? Think of a corporation off the top of your head. Think of ten. Do you really believe that they put short-term growth over long-term growth? While you can think of examples of corporations making terrible, costly errors, it's doubtful you can think of examples that they put short-term growth ahead of long-term. Boeing made an enormous error recently. But the error they made was not that "We know this is unsafe and will lead to huge losses in a year, but, hey, we'll make money this quarter!" They made the error of thinking that their plane was safer than it actually was. There's no way they expected that the problematic plane was going to end up costing them billions of dollars. Imagine you could ask a Fortune 500 CEO (and get an honest answer) if they would fire a significant portion of their workforce in charge of developing new products so that they could focus on their current hot-product. I would venture that no CEO would sacrifice their long-term growth capability for the short-term boost. The left loves to believe otherwise.

Underlying these arguments from Klein and Andreesen, though, is the false assumption that America doesn't build anymore. There is no place in the world as innovative as the United States. A lot of that innovation is digital, but not all of it. Even if all of it was digital, though, what would be wrong with that? As far as physical goods, the US is manufacturing more than it ever has before. High quality, US-made clothing has found a large market selling online. While some goods have moved overseas, the argument that the US doesn't build anymore simply isn't true. Look at Tesla, just as one example.

Klein and his ilk think that insofar as the government or private industry don't build or invest in what they think we should, it's a market failure. Klein wants the US to spend more money on infrastructure and green energy. It's important to question whether Klein is unhappy because America doesn't build or because America doesn't build what he wants us to build. He ignores the issue that what he wants is costly. Neither high speed rail nor subway systems are market-driven. Their usage will never pay for their construction, but need to be subsidized even while in operation. Electric cars are subsidized; green energy is subsidized. Even with these subsidies, Klein believes there needs to be more. Where infrastructure makes economic sense--broadband and 5G networks--these things are being built, without government assistance. Klein should consider why this infrastructure gets built while other does not.

Finally Klein ignores one last important detail about infrastructure--the fact that politicians have expanded spending at all levels of government for items other than infrastructure, leaving less money for it. Infrastructure is built both at the federal level and state level. Another question he could ask is why aren't states building more infrastructure? The answer is likely because a growing portion of their budgets is going to Medicaid, and no state wants to raise taxes. At the federal level, more and more money goes to Medicare and Medicaid and Social Security. The federal debt increases every year. He has committed the same error that every Democrat commits-calling  for increased spending without considering the fact that without calling for tax increases, budgets are finite.