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Is crumbling infrastructure inhibiting American productivity?

December 1, 2016 at 6:25 PM EST
In recent decades, American productivity growth has slowed. Yale University's Jacob Hacker has a possible explanation: the country’s outdated and deteriorating infrastructure. Hacker, co-author of “American Amnesia,” argues the U.S. has forgotten the role government plays in engineering prosperity, and that public investment got us where we are today. Economics correspondent Paul Solman reports.
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HARI SREENIVASAN: Now infrastructure investment may be moving back front and center. President-elect Trump plans to push for it through the private sector. Democrats in Congress remain interested in greater public investment.

Our economics correspondent, Paul Solman, takes a trip on the rails to look at how attitudes have changed over time, part of his weekly series, Making Sense.

ANNOUNCER: Attention, please, this is the last call.

PAUL SOLMAN: Mid-morning at New York’s Penn Station. Throngs rush to the 10:00 a.m. Acela to Washington, D.C. Ridership is up and these highish-speed trains are at or near capacity as business travelers chug up and down the Northeast Corridor.

WOMAN: Amtrak conductor 2153 to the heading. All stations are cleared.

PAUL SOLMAN: But they’re hurrying up in an America of slowed-down productivity, the amount of output per hour of work rising at just 1.3 percent a year since 2007, compared to more than double that rate from 1947 to 1973.

One cause, America’s crumbling infrastructure, like our passenger rail system, some of which dates to the Civil War, causing delays that hamstring the economy.

Wick Moorman worked his way to the top of the Norfolk Southern Freight Railroad, before retiring last year, returning to work recently, at a dollar a year, to steer and revive Amtrak. Riding the Acela back to New York, he insisted it’s not just our railroads that need work.

WICK MOORMAN, CEO, Amtrak: When you look at the state of our highway system today, which we all get out and drive on every day, in terms of congestion, in terms of the surface conditions, in terms of the fact that we’re seeing that more and more bridges have to be closed to rehabilitate, it has to be an economic drag, right? Highway congestion alone costs this country an enormous amount of productivity.

PAUL SOLMAN: So, why aren’t we investing in infrastructure of the kind that made America great in the ’40s, ’50s, ’60s, government investments that hiked our economy to unheard-of heights of productivity?

So asks Yale’s Jacob Hacker. His answer?

JACOB HACKER, Co-Author, American Amnesia: We have forgotten the incredibly important role that government plays in our prosperity.

PAUL SOLMAN: And thus the term “American Amnesia,” Hacker’s new book, subtitled “How the War on Government Led Us to Forget What Made America Prosper,” because, in the 19th and 20th centuries, prosper, we did.

JACOB HACKER: We went from being from a relatively poor, relatively under-educated and relatively unhealthy society to being the richest, the most well-educated and the healthiest society that the world had ever seen.

After World War II, we see the blossoming of this really active investing state that’s investing on both non-defense and defense technology and really sowing the seeds for the productivity revolution that occurs during this period.

PAUL SOLMAN: Government outlays of land for railroads, say, subsidies for airports and waterways that helped make the country one market, speed goods and labor from coast to coast. Think of Republican President Eisenhower’s interstate highway system.

JACOB HACKER: The estimates are that it accounted for something like a third of productivity growth in the U.S. economy in the late 1950s, and around a quarter in the 1960s.

PAUL SOLMAN: And what’s true of hard infrastructure is true of what were once America’s greatest soft productivity advantages: health and education.

JACOB HACKER: If you look at older Americans in the United States, they’re the most educated older citizens in the world. But if you look at younger Americans, we have fallen to the high teens in terms of college completion rates.

So, in a new economy that’s based much more on knowledge and technology, we’re not investing adequately or correctly to get kids through college the way other countries are.

PAUL SOLMAN: In short, claims Hacker, we forgot what made us great, and instead adopted a profound skepticism about government.

JACOB HACKER: As we have seen government become weaker and lobbyists more powerful, Americans have also become less trusting of governments.

PAUL SOLMAN: And yet, these days, government investments may actually be the most productive ones available.

JACOB HACKER: If you look at how our economy has suffered over the last 15 or 20 years, it’s in significant part because we haven’t done the investments in research and development and infrastructure and other public goods that are necessary for our growth.

And, unfortunately, we’re going to be feeling that overhang for a long time to come, because it’s the investments we made in the 1950s and ’60s and ’70s that result in some of the greatest technological breakthroughs that we enjoy today.

PAUL SOLMAN: Such as?

JACOB HACKER: The iPhone. We have an iPhone here?

PAUL SOLMAN: I have got one.

JACOB HACKER: Every major component of your iPhone is as a result of public investment and development. GPS, the memory processors, touch-screen technology, originated in public research projects.

PAUL SOLMAN: As we neared New York, the lack of investment in passenger rail was hard to miss. The Acela decelerated, cars on I-95 whizzing past us.

That prompted a question to Amtrak’s CEO: Why had we slowed to a crawl?

WICK MOORMAN: Because there’s a New Jersey transit train going into Penn Station ahead of us, and we have exactly two tracks under that river. and we get this kind of congestion all the time.

PAUL SOLMAN: Moreover, those rail tunnels, now more than a century old, were flooded by Hurricane Sandy four years ago.

WICK MOORMAN: And I think that the day is coming when this nation is just going to be forced to invest, if we want to, you know, maintain our place in the world.

DONALD TRUMP (R), President-Elect: We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, which will become, by the way, second to none.

PAUL SOLMAN: On election night, president-elect Donald Trump touted his plan for rebuilding America, $137 billion in federal tax credits to private investors who would then be incentivized to finance toll roads, toll bridges or other projects that generate their own revenue, unleashing a hoped-for trillion dollars of infrastructure investment over 10 years.

And, if it works, says Jacob Hacker, a Democrat:

JACOB HACKER: He’s the Nixon-goes-to-China of infrastructure spending. But I also think he has a very good chance of putting through massive tax cuts. They’re going to take away a lot of the public funds that we need to do that kind of infrastructure investment.

PAUL SOLMAN: Furthermore, some private infrastructure investments, like toll roads, have failed in recent years.

As for private investment in Amtrak? Well, says its new CEO:

WICK MOORMAN: I’m skeptical. Where — how do you — you fund private investment, as you know, in the highways by things like tolls.

PAUL SOLMAN: Right.

WICK MOORMAN: Right?

Well, that’s harder out here.

PAUL SOLMAN: Not going to have a toll at Wilmington.

WICK MOORMAN: No. I mean, every time the train goes through with an E-ZPass, and you kind of click off another one? It’s just — it’s harder for me to see right now.

PAUL SOLMAN: And you’re a guy who went to Harvard Business School. You’re not talking as some kind of left-wing Democrat who’s always for more and more spending, more and more taxes.

WICK MOORMAN: No, no, no.

I’m just a person who looks at the country and what needs to be done and says, this is what we do in the business world. We fix this. Why can’t you fix it?

PAUL SOLMAN: Good question, to which we will all be waiting for the answer.

For the “PBS NewsHour,” this is economics correspondent Paul Solman, reporting aboard Amtrak 2168.

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