Is infrastructure investment good for the U.S. economy?


New York Times columnist Thomas Friedman, who perhaps most-accurately conceptualized the revolutionary production shifts implied by globalization in The World Is Flat, has a 'radical' economic prescription for the United States, as it moves toward the second decade in what is quickly becoming the century of change.

Friedman suggests that the United States try nation-building....at home.

Moreover, Friedman makes the case for nation-building as good for U.S. business - - a much-needed shot-in-the-arm for the U.S. economy.

U.S.: inadequate infrastructures for a major power


Friedman's main concern: the U.S.'s inadequate infrastructure (electric grid, roads/bridges/rail network, air travel system, hospitals, among others), which is antiquated compared to the infrastructure of the U.S.'s chief economic rival, China. Friedman has just attended the 2008 Olympics in Beijing and its clear China's public investments - - better airports, roads, parks, to go along with the sports venues - - have impressed him.

It's also clear to Friedman that the U.S.'s period of underinvestment is holding the nation back economically, and that has to change if the U.S. expects to remain commercially competitive on the global stage. Economist David H. Wang told BloggingStocks he agrees, for the most part, with Friedman's analysis, but adds that the journey to a better infrastructure is not a strictly an economic equation.

"Infrastructure problems have and will continue to depress U.S. GDP growth," Wang said. "However, fixing them will require considerably more spending and taxes, which the American people may not be willing to undertake, given the nation's other domestic policy and foreign policy responsibilities. No question, it's a major political issue for the nation."

Economic Analysis:
Columnist Friedman offers an economic prescription, but as economist Wang outlined, infrastructure investment will hinge on the nation's political direction. Democratic Party nominee U.S. Sen. Barack Obama, D-Illinois, favors more programs, and taxes to pay for them; Republican Party nominee U.S. Sen. John McCain, R-Arizona, favors far fewer programs, and a maintenance of current tax rates, (possibly with additional tax cuts). Hence, the American people will decide the issue, at least from a federal resource standpoint, in the voting booth on November 4.

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