May i be actively working, doing what i love, and making a difference at 91. You are an inspiration to us all and sets a goal for me to strive for. Keep it up – be a model for the rest of us. And many more birthdays (and movies).
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Tulsa, 1921. You will hear about this all weekend if you haven’t already. Tulsa happened and we need to acknowledge that it did. It was not one of our finer moments. In fact just the opposite. Tulsa is what hate can bring. It is what demonizing other people can cause. In a short span of time over 300 innocent people died, hundreds injured, hundreds rounded up like cattle. Why? Because they were black and successful. This is why we should not tolerate hate speech. And why there should be consequences for same. Remember the past so we can avoid it in the future.
ASCE complies a report card of the nation’s infrastructure every four years. They look at all infrastructure, from dams and airports to water and sewer. The newest release was March 2021. Table 1 shows a comparison over the past 20 years. The grades are bad. The new report shows slight improvements in water and sewer, but a D+ and C- still are not passing grades. It points to significant needs for infrastructure in our field as well as the accompanying fields for power, roads, drainage and more. It also suggests that as utilities have invested over the past 4 years, we can move the grades upward. It is just that more needs to be done. Washington has been talking about this problem for many years but little has come from. We got some money in 2009, but since then, very little other than WIFIA funds. Now its Biden’s chance.
Table 1 ASCE infrastructure grades
The reality is that our infrastructure condition probably peaked in the 1950s or early 1960s. The major roadway, water, and sewer piping and treatment expansions were well underway of nearing completion. Rural areas had running water and sewers, something that did not exist before the Great Depression. The construction of infrastructure has always been critical for economic development. Look no further than China to demonstrate this.
The Biden Plan started with $2.3 trillion dollars, about 15% of the total economy per year, and less than the value of private property in south Florida (which doesn’t sound quite as expensive as it initially seemed). The package would include investments fixing 10,000 bridges (there are over 600,000 bridges and nearly 50,000 that are inadequate), 20,000 miles of roads (there are 4.2 million miles of roads in the US), $120 billion for water and sewer (AWWA says the need exceeds $1 trillion in the next 20 years), $150 billion for transit and rail, $100 billion for broadband so rural and underprivileged areas have better access to the internet, and funds for the electrical grid which is woefully inadequate in many places.
The funds would be spent over 8 years. The payback is expected to exceed 2:1 in private sector economic activity. Most of the funds would be directed by government’s to the private sector for design and construction (and Engineer and contractor employment act), which translates to millions of jobs. People can easily see how this benefits them by increasing employment and likely increases wages due to tightening job markets. As a result, there is a lot of support for this in much of the country among the people.
There are contrarians in Congress who think it costs too much or for other reasons. But look at the statistics – one could easily argue that the proposed expenditures are 10% of what is really needed – the bill does not go nearly far enough. But if this is only a start to returning American infrastructure to its glory days, the economy appears to have taken notice. Bloomberg forecasts the economy to increate 5.5% this year. Goldman Sacs thinks that is conservative. The more federal dollars move to the private sector, the more fuel there is in the economy. Getting unemployment in the construction industry down from 9.6% is part of that plan. The Federal Reserve is keeping inflation in check which could wipe out this growth, but needs to ensure that secular stagnation does not appear (a stalled economy). Continued investments by both the pubic and private sector can prevent this.
But returning the infrastructure to the 1950s is not going to be enough in the 21st century. And no one can expect the federal government to foot the entire bill. Local communities will need to invest more as will the states. The US has permitted its infrastructure to decline under the premise that if it works fine, we do not need to worry about it. Until it fails. Then there is a big discussion to assign blame. The blame goes back to many people many years when actions could have been taken. Reactive maintenance is the expensive kind. Proactive replacement is easier to plan and develop. And less costly.
There is an argument that our lack of attention to infrastructure condition has weakened our economy. We invested heavily in automation in the 1990s and early 2000s to increase our productivity (through robotics which created massive job losses for factory workers), but not in the replacement jobs for those displaced. There is an argument that part of the Rust Belt’s problems is antiquated infrastructure (think Flint). There is an argument that rural dissatisfaction in the US, especially toward government, is directly related to the fact that little investment in infrastructure has taken place there, causing the economy to pass them by. Less jobs, lower pay, higher unemployment, poorer healthcare and less access to quality education are common rural complaints. And the complaints are not without merit because we know that relying on the private sector to construct the grid means that they will invest where the payback is highest, which is populated areas. That is why these differences between rural and urban areas exist and continue to widen. Hence the broadband cost in the Biden proposal. The situation is no different than the rural electrification efforts that started in the 1930s.
ASCE estimates that delays to infrastructure upgrades may cost US households $3400 per year, increasing with time. This includes water and sewer utilities. A study conducted 2 yea4rs ago indicated that only about 20% of Flroida utilities were spending the needed amount on infrastructure. Some of those who did, relied on larger periodic bond issues that come with rate increases, to accomplish their updates. Pay as you go can be demonstrated to be a cheaper, but too subject to trimming for political reasons. The question is how to get elected and appointed officials to buy into the long-term upgrade plans so we can make that C+ and D- into at least a B. At the same time, the costs will impact certain segments of the population that have not participated as yet in the economic growth. But that is a topic for another column.
For many years, and especially over the past four years we have heard about a variety of subsidies the industry. Subsidies come in a variety of forms – from outright cash payments, to reduced amounts for use of land.
Agriculture gets huge subsidies from the federal government each year ($46 billion or 39% of all ag income). So does the oil and gas industry ($20 billion per year). Many others as well. The question is why? Why subsidized industries that are profitable? Ranching, mining and oil and gas also get to use federal lands at ridiculously low costs for lease costs -far less than any individual of corporate entity would charge for similar leases. Oil and gas is an industry that makes money every year – there are huge private corporations. Most of the agricultural subsides go to huge agri-businesses because the family farm is quickly becoming something of the past. The question is why?
In theory, subsides are used by governments to encourage private companies to invest in new technologies. One of the most obvious is recycling. In the early 1970s when the US decided recycling should be a goal, there was no easy way to recycle steel, aluminum and plastics. Ten years or so later, these technologies emerged as a result of taxes on these products. Today virtually no bauxite mining occurs (the material that yields aluminum) because the amount of material that can be recycled exceeds the demand. Small pug mills to recycle steel have become the backbone of the steel industry in the US< much to the Chagrin of Big operators like Bethlehem steel. The small pug mills can be located almost anywhere. Bu the technology was born of innovation and taxes on steel that were used to subsidize the industry until it became competitive.
Another place where subsidies have paid off is renewable energy, the price of which has fallen by 99% in the past 20 years. If we want a less-carbon energy future, the investment in renewable energy seems like a good investment. And if we create the patents for these new technologies, we can make them and earn the profits off royalties in others. It is what we did with cars and oil.
Subsidies to develop fracking and like technologies might be a place to subsidize exploration, bu that was generally not the case. Those developments were created by innovative entrepreneurs and corporate backers. It has also allowed the US to become independent from certain energy sources because we can now recapture oil and gas in places that used to be to costly to recover.
What about markets we do not want to encourage? Coal and tobacco have received huge subsides in the past. If we want to move away from coal, subsidies would need to end. Coal plants in some area lose money that rate-payers pay for. So people subsidize coal plants? That make little sense. Many Americans live paycheck to paycheck. Most corporations do not. A Bloomberg article from October 2020 notes that corporate America has over $2 trillion saved up in reserves and cash, money that has not been reinvested. Many of these companies are likely to be those with subsidies.
So let’s ask – with $2 trillion in cash, do you think there might be a better use of subsides than cash on hand right now??
The virus has wracked havoc on the world for over a year now. And fortunately, it does look like covid is abating somewhat in the US, although there are pockets like the state of Michigan where covid is on the rise again. Vaccines have helped as have some of the public health mandates like masks. If you don’t believe me, not that cold/flu incidence appears to be down 98% in the winter of 2021 – really masks and hand washing work. But we knew that, or at least health professionals have been trying to tell us this. The good news is that it looks like getting together, while an ongoing concern – we still see spikes) are going to permit a more “normal” Memorial day, 4th of July and summer.
Testing verifies this also. Testing has taken several forms but one of the more interesting is wastewater. Covid survives in wastewater. Lift stations are the best place to take samples because you get a nice mix. The results tend to portend the rise in covid incidence – when the numbers tart to increase, the actual cases start to rise about two week later. FAU has been doing this testing for six months. The cases were limited in the fall until November, then climbed quickly. The number fell over the holidays (no students after thanksgiving, then increased after the first.
Biden exceeded his goal of 100 million vaccines in the first 100 days, and everyone having access by the summer. In part that is fueling a return to the new normal. Schools will likely include continued simulcasting and businesses will continue to zoom, but more normalcy is coming. Now most states will vaccinate those over 16 but all evidence points to the fact that boosters will be needed in the fall.
The question has been how will the winter flu season be in 2022. In 2021 the flu season was 98% below “normal” – that looks like social distancing, handwashing and masks. IF we continue will that perpetuate the slower spread of flus? The covid crisis cannot recede fast enough. I think we all want a return to the new “normal,” which will include being able to go out to dinner, movies, plays, sporting events and concerts.
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