President Donald Trump would like to bring back Infrastructure Week.
Look, when the man’s got a point, the man’s got a point. I mean, he’s a little off on the details—while the short-term interest rates controlled by the Federal Reserve are hovering near zero, yields on 10-year Treasury notes are currently at about 0.7 percent, just above the historic low set earlier this month. But whatever. The bottom line is that the U.S. can borrow money for just about nothing—less than nothing, if you factor in inflation—which makes this a really good moment for the United States of America to finance some long-neglected home improvement projects.
There’s an important caveat, though: While this is a really good time to borrow money for infrastructure spending, it’s not a great moment to actually build infrastructure. First, we’re in the middle of a pandemic. We don’t want to encourage nonessential workers to go out and spread the coronavirus. Second, infrastructure spending wouldn’t do that much to help the economy and create jobs right now, at least compared with during a normal downturn. One reason infrastructure typically makes for good fiscal stimulus is that it has a multiplier effect. You pay some crews to fix up a road, which gives them work, and then they go and spend their paychecks, and the cash makes its way through the economy, perking up growth. Right now you wouldn’t get much of a multiplier effect, because we’ve literally ordered large parts of the economy to shut down and outlawed going to work. If you pay a crew to fix up a road right now, they’ll probably just go home afterward and not spend much of it.
You know when would be a great moment to build a bunch of infrastructure? Once this pandemic is under control, and we need the country to get back to work. This crisis will almost certainly leave some lingering economic damage, and some well-timed stimulus spending could help speed up the recovery process. Plus, interest rates will likely still be near their current lows in the immediate aftermath of this whole disaster; the Fed isn’t going to hike that quickly, and investors’ appetite for riskier assets is going to take a while to recover.
So here’s an idea: The government should pass a big infrastructure bill soon, and plan a whole bunch of projects that can break ground once the immediate crisis is over, when we can wring the most economic benefit out of them. Get everything teed up now, do the spending a bit later.
Devoting an entire phase 4 aid bill to infrastructure would be a mistake, given the many shortcomings that need to be addressed in the last rescue package that Congress passed. Also, any legislation should focus on direct public spending, not the sort of tax breaks for developers the Trump team has toyed with in the past. But given that there’s no guarantee that the Republican Senate will actually try to pass another piece of relief legislation right now, House Democrats should take advantage of Trump’s fixation on literal bridge-building to try and make another bill happen. It doesn’t hurt that, for once, the president’s idea here is actually good on the merits.
