Infrastructure Spending Promotes Inefficiency, Corruption

corruption cartoonPresident Obama will not use the word “stimulus” in apparent recognition that his previous policies have failed. Instead, he will use the word “investment,” which is a complete misnomer. An expenditure can only be called an investment if there exists the possibility of a profit.

Infrastructure spending by the federal government promotes corruption because the work goes to the most politically well-connected contractors. At the state level where the money is spent, it is often “pay to play.”

Since decisions about infrastructure spending often result from a brokered process (witness Congressional earmarks), there is often a disconnect between the spending and where it is needed most.

Politicians collude with unions to increase the costs of construction through what are called Project Labor Agreements. These pacts are supposed to guarantee labor peace, but what they actually do is pad the costs of labor to the benefit of politically well-connected unions.

Federal “prevailing wage” requirements (Davis Bacon) ensure that infrastructure spending costs more than the market would dictate. The result is inefficiencies in spending and the creation of fewer jobs.

We suffer from an overhang of debt. Adding to the burden by spending billions more on public works projects does not solve the problem. It makes it worse. “Stimulus” spending, or whatever you want to call it, is modern-day alchemy.

A society does not become richer by taxing away resources from productive citizens to be spent by government officials intent on enforcing the inefficiencies inherent in public works spending.