By Anthony Element
Setting aside for a moment, the socially and morally reprehensible ideas Trump has come out with, the infrastructure comment in his acceptance speech actually might be a winner.
Trump has promised to bring jobs back to America by applying tariffs to Chinese imports. This is patently nonsensical. For example, around 95% of the items on Walmart shelves are made in China. Just imagine when all those redneck Trump voters in rural America go into their Walmart one day and discover that virtually every item in the store just went up by 45%.
Meanwhile, middle America suddenly finds that clothes, white goods, and many food items just increased in price by close to half.
That dog simply wont hunt.
Meanwhile, the Chinese govt – which can do it at the stroke of a pen – cancels the rights of major American companies to trade in China as a response.
US shareholders will just love that.
So, Trump’s tariff plan will alienate the entire US electorate in one go, while failing to create a single new job. Efficient, but hardly effective.
So what can Trump do to create the promised jobs, given that his proposed tariff plan is unworkable?
The American Institution of Engineers estimates that the cost of just making American bridges safe is around 1.7 Trillion USD.
Throwing money at infrastructure which has been ignored for decades is one of the quickest ways of creating jobs. At the same time, it will save lives.
Every year someone in America dies when a bridge collapses. We have no idea how many deaths result from the state of US roads, but it’s a large number.
Investment in massive infrastructure projects was the beating heart of the FDR’s New Deal that finally pulled America out of the Great Depression, so it has credibility.
Of course, the US Right have for years howled about how to pay for it. (Somehow they can find the money for wars that make no sense but can’t find the cash to fix their own infrastructure and to create domestic jobs, but that’s another story.)
The answer is to borrow and to print money. Because the USD is the only currency that can truly revalue, (because all other currencies are valued against the USD), America has much more leeway to print money than other countries do.)
Yes this will be inflationary, but a decade of printing money, (QE1 and 2) hardly moved the inflation needle, and a bit more inflation would actually be good for the US economy.
Added to which, well spent infrastructure dollars tend to increase productivity, thus enabling the nation to service the new debt. (Australia would benefit “bigly” from doing the same thing, but that’s yet another story.)
So, from the American standpoint, infrastructure investment on the national credit card is a sensible, well proven plan.
And the cream is that a healthy US economy inevitably increases the demand for Australian exports.