President Joe Biden has presented a comprehensive infrastructure plan worth $ 2.25 trillion. It is now becoming a form of political football, with Biden’s allies promoting his virtues and Republicans using him as a boondoggle of big government who unnecessarily increases taxes and national debt. There is a game book that could help the Democrats navigate part of it, one introduced in 1956 by a Republican, President Dwight D. Eisenhower.
Back when Eisenhower placed his considerable reputation and political weight behind federal funding for a national highway system, paranoia about a Russian nuclear attack on the United States was in full swing. So he set up the Federal Aid Highway Act as a national security measure to help evacuate cities more easily. The US not only built an extensive network of 41,000 miles of expressways. The National System of Interstate and Defense Highways was established.
But Ike knew what the real value of the highway system was. “The impact on the American economy – the jobs it would create in manufacturing and construction, the rural areas it would develop – has been unpredictable,” he later wrote.
Ike was handy too. As a young army officer traveling across the United States in a military convoy in 1919, he saw firsthand how bad the nation’s roads were. While leading the U.S. forces in Europe during World War II, he was impressed with the German highways and wanted America to catch up. Franklin D. Roosevelt felt the same way and sponsored a federal highway bill during his presidency, though funding for it was anemic.
Ike and his congressional allies rammed their Autobahn act past its many critics, one of whom described it as “another climb into the stratosphere of the New Deal jitterbug economy.” Senator Harry Byrd declined to use state-guaranteed bonds to finance highways because of his biographer, dubbed “an almost pathological disgust for borrowing.” But bipartisan support dominated the day. Both the Republican father of George HW Bush and the Democratic father of Al Gore were supporters. Indeed, Al Gore Sr. played a key role in shaping the financial aspects of the legislation. The 1956 bill approved an initial expense of $ 25 billion (about $ 242 billion in today’s dollars) versus estimates of about $ 101 billion in total spending ($ 977 billion today). The entire effort ended up costing more than $ 114 billion in more than three decades (which, adjusted for inflation, was much less than expected). The federal government agreed to pay 90% of the bill, with states taking the balance. The Highway Trust Fund, financed with a gasoline tax, paid the government’s share.
While it’s difficult to pinpoint the exact economic impact, the American highway system has obviously had many positive impacts. It has boosted the industries and workers who built it, making it possible to move goods to more places faster, cheaper, and more profitably. These gains helped boost productivity from the late 1950s to the early 1970s, along with leaps in profits at S&P 500 companies.
In addition, highways helped bridge economic gaps between states, particularly in the country’s southern belt, where they spurred the growth of new businesses like Walmart Inc, Home Depot and FedEx Corp while increasing workers’ incomes.
The motorway system undoubtedly had its drawbacks. A greater dependency on cars and trucks has damaged the environment. Suburban sprawl, traffic jams, longer journeys, underinvestment in public transportation and the erosion of many American cities are other scars. However, these problems do not speak against infrastructure investments. They reaffirm the need to anticipate the unexpected consequences of ambitious public works spending.
More than a quarter of Biden’s US employment plan, around $ 621 billion, is dedicated to classic infrastructure fundamentals: repairing and building bridges, roads, transit, rail, ports and air services. If its economic impact can be attributed to Eisenhower’s Autobahn Act, the money is well spent.
Biden will also face some of the same legal obstacles that Eisenhower faced. Stirring fears of a Russian nuclear strike no longer brings the same PR blow, but the US now has a very real economic competitor in the People’s Republic of China. The Chinese government has embraced infrastructure spending on an epic scale, which has contributed to an expansion that puts China on the path to outperform the US and become the largest economy in the world by the end of the current decade.
Republicans may refuse to support bold government initiatives that make America more competitive at home and abroad. But Biden and the Democrats can follow an effective playbook that is authentically populist and has a strong track record. Eisenhowers. The US has built great things before – and can build great things again.
Timothy L. O’Brien and Nir Kaissar are each lead columnist for Bloomberg Opinion and a columnist for Bloomberg Opinion, which covers the markets
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