In his recent column on The Boston Globe, Lawrence Summers, a economics professor at Harvard and former Treasury Secretary (fun fact: he has two Nobel Laureate uncles on both of his parents side), wrote on public investing in the infrastructure. His main point was that while the economy is running on low interest rate coupled with still troublesome high unemployment rate for considerable period, the U.S. government should borrow more and invest it on the public infrastructure such as airports, transportation and schools.
I agree with Summers because of three reasons: high unemployment in construction sector, inevitable investment in those infrastructures and more equal externality in the society.
Let me emphasize on each point.
First, with unemployment rate in the construction sector is hovering at 11.3 percent currently, there should be policy directed to those unemployed people, who suffered most during the recession. The beneficiaries of the investment in infrastructure will be the those unemployed people in the construction sector. Those people who would be employed for these new projects could continue their employment for other private projects once the economy recovers and construction and housing sector picks up. At that moment, these people would be already have been employed for two years, so their opportunity to get back on the employment list increases compared to the case when those people would be long-term unemployed people. Regarding the interest rate,
Second, these infrastructures including transportation and schools are inevitable in the future even though it doesn’t get done today because of increasing population and imminent increase in need for them. It might be the case that, today, primary and secondary schools are enough in numbers, but these will be insufficient as the population grows and socioeconomic status of low income families get better, and their children attend to school in growing numbers. Aside from new school buildings, there are still already built school infrastructures which don’t fulfill the need of better learning environment. In other words, it is evident that America will need more of schools and better transportation and education infrastructure, so why shouldn’t the policy makers tackle this projects now?
Last, these new projects will benefit most citizens- if not all- regardless of their today’s socioeconomic standings. At the end, who don’t drive on highways and wouldn’t like their children to attend better schools? As income inequality has been a discussion topic lately, the investment in public infrastructure will help to decrease the gap between people on different socioeconomic ladder.
Not only these projects put today’s unemployed people to work, these new infrastructures will benefit U.S. economy in the long-run as more children attend to school let alone better school. Investment in education is certainly inevitable if the U.S. seeks to improve its education system to be a front-runner in the world.