If Concrete Pouring Were a Stimulant, the U.S.S.R. Would Be Booming

Most mornings in my home office, I have CNBC on the television in the background. Unfortunately, it’s not uncommon to hear an “expert” say something silly about the economy or business. On the morning of March 16, it was Jim Cramer’s turn.

Cramer, who hosts “Mad Money” in the evenings and is a morning “Squawk on the Street” co-host, declared, “Everybody believes in infrastructure spending.” By infrastructure spending, I assume he was talking about President Trump’s promise for a big federal infrastructure spending program.

Now, I really shouldn’t pick on Cramer in particular, as government infrastructure spending has been a favorite of the Left since John Maynard Keynes and the Great Depression. Unshackled from disciplined thinking about how markets and incentives actually work, Keynes gave assorted economists an excuse to serve up justifications for all kinds of government spending programs.

In the political world, for as long as I can remember, Democrats in particular – though Republicans certainly aren’t immune – have been proclaiming that the nation’s infrastructure is falling down, and that federal infrastructure spending will be a big boost to the economy. We certainly heard that when President Barack Obama took office. Remember how “shovel ready” projects were going to drive the economy forward? That didn’t really work out too well.

No one should be surprised at the dismal results. After all, government pouring concrete is not how an economy grows. If it were, then the Soviet Union would still be around and achieving ever-greater heights of wealth.

As for the U.S. federal government, when it doles out dollars on infrastructure, the results tend to be “bridges to nowhere,” rather than meeting some critical infrastructure needs that enhance the productivity of U.S. businesses and workers. True public infrastructure needs tend to be better met by states and localities that at least have some understanding of local, regional and state economies. Though that’s not to say that states and cities don’t spend serious money on wasteful government infrastructure projects. They most certainly do – after all, government incentives are government incentives. But the damage is limited to local taxpayers. Infrastructure dollars descending from Washington, D.C., tend to go for non-essentials dreamt up by politicians, or to subsidize projects that would have been otherwise paid for with state and local resources.

Of course, a very different kind of infrastructure spending goes on in the private sector that can legitimately be called infrastructure investment. Private infrastructure investment is driven by markets, ultimately guided and disciplined by competition and consumer sovereignty, and includes, for example, investment in oil and natural gas pipelines. The Trump administration deserves credit for reversing the Obama administration’s decisions to halt the Keystone pipeline project and the Dakota Access pipeline. Here are private infrastructure investments that will move crude oil to the market.

For good measure, massive infrastructure investments made by telecommunications firms in both wireline and wireless broadband networks have been huge economic plusses for entrepreneurs, businesses, consumers and our overall economy, with investments in 5G wireless networks coming next – as long as state and local governments don’t impede such investment with onerous permitting, regulations and fees.

Indeed, when it comes to clearly beneficial investment in infrastructure, government’s role often is about getting out of the way.

As for what is thought of as more traditional government infrastructure endeavors – namely, roads, bridges and highways – they should be left to the states and localities, with the most innovative of those lawmakers turning to private-sector solutions where appropriate, such as private highways and bridges.

So, if Jim Cramer was talking about private infrastructure investment, then, yes, everybody should believe in infrastructure spending. But if he was talking about big-government doling out dollars and projects according to politics, then, no, everybody should not believe in infrastructure spending. The Trump administration would be wise to keep such infrastructure realities in mind as it moves ahead.