We didn’t build that

November 6, 2013

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The US government isn’t just cutting spending, Matthew O’Brien writes, it’s cutting the best kind of spending: particularly in “things like infrastructure, schools, and scientific research. The kind of things the economy needs to grow, but the private sector won’t invest enough in”. The FT’s Robin Harding, Richard McGregor, and Gabriel Muller chart the fall in US public investment, showing that it has reached “its lowest level since demobilisation after the second world war”.

Earlier this year, the American Society of Civil Engineers gave the country’s infrastructure a grade of D+. As Ezra Klein and others have repeatedly pointed out for quite some time, this decline in public investment has come at precisely the time when the US government can essentially borrow for free.

And we certainly aren’t short of opportunities to spend: the age of antibiotic resistant bacteria is here, and in response to this potentially very scary development, the US government is cutting scientific funding. There’s ample evidence that public schools are better at education than private schools, but most states have decreased education spending per student since 2008. Public colleges are getting less funding.

Cardiff Garcia unearths a chart that shows non-defense infrastructure spending falling at annualized rates of 3.3% and 2.4% between 2007-2012 and 2002-2012, respectively. Stratfor (subscription only) points out that infrastructure includes the US 12,000 miles of navigable inland water transportation routes, which the Army Corps of Engineers says need $125 billion in modernization.

When Jack Shafer hears the phrase infrastructure investment, on the other hand, he reaches for his wallet. “Infrastructure overhaul will obviously benefit some ‑ unions, businesses and politicians praising them before congressional committees, for example ‑ but as with most government projects, somebody always ends up paying for more than they consume.”

Evan Soltas looked at US infrastructure investment and concludes that a “broad, permanent increase in spending is unwarranted”. Compared to the rest of the world, when it comes to infrastructure spending, the US is in the “middle of the pack”. — Ben Walsh

On to today’s links:

6 reasons this infographic is just wrong enough to seem convincing – Zach Weiner

EU Mess
Looking for signs of hope in Europe’s economic gloom – Quartz

Four longtime traders say there’s a crude oil price-fixing scheme – Bloomberg

Best Mullet In Finance
Bart Chilton quotes Etta James, discusses speculative position limits, announces resignation – CFTC

In today’s tech IPOs, “there is no relationship between profitability and the startup’s enterprise value” – Tomasz Tunguz
Twitters’ narrow — but widening — economic moat – Morningstar

The housing fix that no one in Washington is talking about: the status quo – Jesse Eisinger

The Fed
Will the Fed taper and change its thresholds at the same time? – Calculated Risk
Fed research paper argues for lower unemployment threshold than current 6.5%, perhaps as low as 5.5.% – WSJ

MF Doom
MF Global customers will get their money back, search for Jon Corzine’s reputation continues – DealBook
Earlier: Corzine asks judge to dismiss lawsuit filled with “disparaging characterizations of old facts” – WSJ

Watch Steve Cohen stumble over insider trading rules in a deposition – Frontline

Spot the industry plagued by wrongdoing and huge fines (Hint: not banking) – FT Alphaville

Good Defenses of Things That Shouldn’t Have to be Defended
“In defense of food stamps” – WSJ

Great Bloomberg Headlines
“NYC boffins sift Citi Bike data to solve rebalancing riddle” – Bloomberg

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