East Bay Times

Embracing the softer side of infrastruc­ture proposal

- By Paul Krugman Paul Krugman is a New York Times columnist.

Republican­s have been having a hard time explaining why they oppose President Joe Biden’s American Jobs Plan.

Their real motives aren’t a mystery. They want Biden to fail, just as they wanted President Barack Obama to fail. And they’re especially opposed to public programs that might prove popular, and thereby help legitimize activist government in voters’ minds.

Being who they are, they can’t help going to ludicrous extremes, and their claims that only a few percent of the proposal is “real” infrastruc­ture are easily debunked. The only way to get anywhere close to their numbers is to declare, bizarrely, that only pouring concrete for transporta­tion counts, which means excluding spending on such essentials for a modern economy as clean water, reliable electricit­y, access to broadband and more.

It’s true, however, that much of the proposed spending involves intangible­s — outlays on research and developmen­t, broader support for innovation, and investment in people. So what you need to know is that the case for these intangible investment­s is every bit as strong as the case for repairing decaying roads and collapsing bridges.

Let’s start with technology.

The idea that investment isn’t real if it doesn’t involve steel and concrete would come as news to the private sector. These days more than one-third of business investment is spending on “intellectu­al property,” mainly R&D and purchases of software.

Investment in technology, especially in renewable energy, was only a small fraction of the Obama stimulus, but it’s the piece that got the worst rap. Remember how Republican­s harped endlessly on how loan guarantees for the solar-power company Solyndra went bad?

The thing is, if your technology strategy produces only winners, you’re not taking enough risks. Private investors don’t expect every bet to succeed; 3 out of 4 startups backed by venture capital fail. The question is whether there are enough successes to justify the strategy.

And the Obama investment in green technology produced many successes. You’ve probably heard about Solyndra; have you heard about the crucial role played by a $465 million loan to a company named Tesla?

More broadly, the years since 2009 have been marked by spectacula­r progress in renewable energy, with solar and wind power in many cases now cheaper than electricit­y from fossil fuels.

What about spending on people, which accounts for hundreds of billions and will reportedly be the main focus of an additional proposal? There’s overwhelmi­ng evidence that this is a good idea.

The truth is that it’s hard to assess the payoff to spending on physical infrastruc­ture, because we don’t get to observe the counterfac­tual — what would have happened if we didn’t build that bridge or road.

By contrast, we know a lot about the effects of investing in people, because some of our most important family-oriented programs, like food stamps, were rolled out gradually across America.

The results are clear. Children who received early aid did better than those who didn’t by every measure: education, health, earnings. The social return on aid to families, especially children, turns out to be huge.

Should the softer, less tangible parts of the Biden spending agenda — encouragem­ent of new technologi­es, especially electric vehicles, aid to education and more broadly to families with children — be considered “infrastruc­ture”? The right answer is, who cares? It’s all productive investment in the nation’s future.

And the future needs work. Recovery from the pandemic should be only the start; we need a strategy to cure our longer-term problems of sluggish productivi­ty growth and weak private demand. Large-scale public investment, whether or not it looks like some people’s idea of infrastruc­ture, is the way forward.

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