Counterparties: Things fall apart

November 5, 2012

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Infrastructure: you never really appreciate it until it breaks down. As America did after Katrina and the 2007 Minnesota bridge collapse, we are once again suddenly paying attention to infrastructure. That happens when subways flood, power lines fall, and storm barriers are notable by their nonexistence.

Since Superstorm Sandy, there’s been a minor clamor over America’s infrastructure, which received a “D” grade in 2009 from the American Society of Civil Engineers and similar marks from the World Economic Forum. Jonathan Cohn thinks that the lesson of Sandy is that “government matters”, particularly when it comes to disaster management and infrastructure. Jared Bernstein looks at the possible effects of Sandy on GDP and calls for “infrastructure to help mitigate the impacts of these 100-year storms that now seem to hit us twice a year”. The AP argues that neither candidate has a workable plan to upgrade America’s infrastructure.

New York City officials, Reuters reports, have been pondering a $29 billion storm defense system for the area, but can’t find a way to pay for it. In a survey of what it would cost to hurricane-proof New York, Rebecca Greenfield suggests that even limited protection like levees would cost many billions of dollars. And as Matt Zeitlin notes, none of this is anything new: New York City’s been “thinking seriously about how to adapt to climate change to make the system more resilient at least since 2008″.

Der Speigel thinks America’s aging infrastructure is evidence of imperial decline, noting that the Northeast’s power lines are located above ground, “the way they are in developing countries.”  While subway service and electricity have been restored rather quickly in most areas of New York, those power lines are proving particularly troubling for residents of Long Island and New Jersey:

Hauser, deputy mayor of the still-dark Village of Flower Hill on the north shore of Long Island, said that not only has the cleanup been too slow, Long Island Power Authority “is doing nothing to prepare for the future.”He would like to see the utility consider underground lines and metal rather than wood poles. “Every year it’s a Band-Aid,” he said. “This can happen next year and nothing will change.”

Citing ultra-low interest rates, Brad DeLong last year suggested that $500 billion of new federal infrastructure spending would create $1 trillion in increased economic activity, including an extra $20 billion in income and social welfare. Kevin Drum last year proposed a trillion-dollar infrastructure program. For context: that’s less than half of what the Society of Civil Engineers suggests we need to spend. — Ryan McCarthy

On to today’s links:

Bad News
China is now the “world’s capital of diabetes” – Bloomberg

An extremely detailed explanation of the theoretical basis for actually voting tomorrow – Steve Waldman

Wall St. bonuses expected to be 0-10% higher this year – Dealbook

Man arrested for gas hoarding in Connecticut – NBC New York
How the Occupy Movement found a mission after #Sandy – Rosie Gray

Does unemployment make people more likely to vote? (In short, yes) – The Monkey Cage

Price Points
Why Luxottica dominates how much you pay to see – 60 Minutes

Academic research destroys trading strategies – Chronicle of Higher Education
Mom-and-pop investors are tapping their retirement accounts to buy foreclosed homes – Bloomberg
You are not “investing” in commodities, you’re speculating – Josh Brown

Is Facebook “broken, on purpose, in order to extract more money from users”? – Ars Technica

Real Talk
Ohio native rebuts reports of Ohio’s greatness – Walter Kirn

“Social jet lag”: The science of why you’re so tired – Maria Popova

EU Mess
Merkel: The Euro debt crisis will last at least 5 more years – AP

How to build a better monthly jobs report – Matthew O’Brien

Possibly Useless Data
Britain has invaded all but 22 countries in the world – Telegraph

Foursquare CEO: “Everyone is trying to kill us” (meaning his business) – Fast Company

HSBC’s money-laundering scandal could cost more than $1.5B and result in criminal charges – Reuters

The economy is set to expand, regardless of who wins tomorrow – Bloomberg

Stuff We’re Not Linking To
What Will Ann Romney & Michelle Obama Wear On Election Night? – Huffington Post

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There is $2T of corporate profit outside USA. Why can’t the govt start a Public Private Partnership to invest in America’s infrastructure. Companies have 3 years to bring back all profit that is left outside USA. Companies can decide to either pay 20% tax or invest the money in a 2% bond which is tax-free. Let’s say 40 – 50% of the money is invested in the tax-free bonds. That’s $800B-$1T that can be plowed back into infrastructure investment immediately. The vehicle that oversees investment spending can be managed by a 50%-50% board of govt officials and private sector captains.

Economists have estimated 4,000-18,000 jobs per $1B of Infra spend. At $1T, we are looking at at least 4 million jobs. If we upgrade the infrastructure in 8 years, we are looking at a min. of 500,000 jobs per year

What are we waiting for?

Posted by InfiniteThought | Report as abusive

ASCE has been providing grades of the nations infrastructure since well before 2009, I think they had a D grade back in 2001.

Also note that the Minnesota Bridge Collapse was a design error . . . just in the interest of full disclosure.

Infrastructure improvements should be pursued as its own standalone policy . . . don’t get it wrapped up in the stupid stimulus/austerity debate or it will never get done.

Posted by river4 | Report as abusive

Society of American civil engineers isn’t exactly an unbiased source. They get paid by promoting large infrastructure products and thus its in their interest to grade our infrastructure poorly.

Posted by sditulli | Report as abusive