In a moment of triumph, President Joe Biden beamed with pride, celebrating what he considered a significant achievement: the passage of a $1.2 trillion infrastructure proposal.
This week, on the White House lawn, Biden stated:
“That’s how our system works. That’s American democracy. And I am signing a law that is truly consequential because we made our democracy deliver for the people.”
Yet, it is hard not to question the integrity of American democracy. For quite some time now, it appears that democratic mob rule has overshadowed the principles of a limited government republic. This shift took a significant turn with the adoption of the Seventeenth Amendment in 1913, which instituted the direct election of Senators by popular vote.
Essentially, the Seventeenth Amendment enables Senators to procure votes from constituents in exchange for funneling federal funds back into their districts. This dynamic perpetuates a model where the government thrives on public spending that caters to private prosperity while simultaneously breeding political corruption and impropriety.
A prime example involves 19 Senate Republicans and 13 House Republicans who joined forces to approve this expansive bill, expecting considerable returns in the form of government funds.
Senator Deb Fischer and Representative Don Bacon from Nebraska, both supporters of the bill, secured $2.5 billion for state road and highway repairs along with $216 million for water infrastructure. Bacon asserted that he “thought it was good for the district and good for America.”
While we support Nebraska having effective infrastructure, shouldn’t the residents of the state be the ones footing the bill for their own roads and water systems? Shouldn’t state and local governments assume responsibility for providing such essentials? What role should Washington play in all this?
The bitter truth is that this $1.2 trillion infrastructure package imposes a substantial burden on the American populace while primarily benefiting the elites and connected insiders in Washington. This is the essence of how 21st-century American democracy operates: serving the elite, not the people.
Let’s delve deeper…
Ticking Time Bomb
Over the past century, the American democratic landscape has devolved into a cycle of self-destruction. The elite consume the productivity of hard-working Americans, ultimately burdening future generations with an insurmountable debt. Once they have indulged at the public trough, they offer mere crumbs to quell the masses.
This self-destructive cycle allows the nation to momentarily function beyond its actual means, a phenomenon best illustrated by the staggering growth of federal debt since the dawn of the new millennium.
At the turn of the century, the federal debt stood at around $5.6 trillion. Today, it has soared to over $28.9 trillion. In just 22 years, federal debt has surged by an astonishing 416 percent, while U.S. gross domestic product has only risen from about $12.5 trillion to roughly $23 trillion—a mere 84 percent increase.
The vast disparity between the growth of debt and GDP signals imminent peril. But that’s not the whole story…
This surge in national debt coincides with an uptick in “something for nothing” policies as well as an era characterized by alarmingly low interest rates.
However, cheap credit can transition to costly credit as interest rates begin to climb. With rising interest rates, so too will the costs to service this burgeoning debt.
In the fiscal year 2021, the net interest payments on the national debt exceeded $300 billion, largely occurring when the yield on the 10-Year Treasury note remained under 1.5 percent. Yet, even a slight interest rate increase could wreak havoc on the federal budget.
The Committee for a Responsible Federal Budget notes that a mere one percentage point rise in interest rates would elevate the interest costs to $530 billion—more than the expenses incurred by Medicaid. At two percentage points higher, interest costs would hit $750 billion, exceeding federal expenditures on defense and Medicare. At a staggering three percentage points higher, costs could reach $975 billion—nearly equivalent to Social Security spending.
The escalating federal debt leaves the government dangerously exposed to the looming crisis of rising interest rates. Imagine if the yield on the 10-Year Treasury note spiked to over 15 percent, reminiscent of rates during the inflation crisis of 1981.
Such a scenario could compel the government to finance net interest payments entirely through additional borrowing. This, compounded with rampant currency devaluation, illustrates the path of self-destruction that lies ahead.
Meanwhile, President Biden and his administration have devised a clever strategy to evade accountability…
Boondoggle Democracy for the Elites
For politicians, the primary aim is to dodge accountability when the outcomes of infrastructure spending, much like other wasteful initiatives, fail to materialize. Biden is no stranger to this reality; he has had his fair share of experience.
When President Obama enacted the American Recovery and Reinvestment Act in early 2009, he tasked his then-Vice President, Joe Biden, with overseeing the prudent spending of the $800 billion allocated. Biden assembled a team to monitor the funds and urged local leaders to avoid spending on “stupid things.” Yet, this proved largely ineffective. As reported by the Wall Street Journal:
“An Alaskan village called Ouzinkie, population 167, received a $15 million airport while some major hubs received nothing. Only about 10 percent of the law’s spending, or $80 billion, was devoted to infrastructure—and very little went for critical work. Funding ‘shovel-ready’ projects promised by Mr. Obama meant that money didn’t go to the bridges most in need of repair but to jobs that could quickly clear the thicket of regulatory permitting. Repaving roads was a typical activity; less than 12 percent of the infrastructure spending went for work on bridges. A promised green-jobs boom never materialized.”
So, where did the other 90 percent of the funds disappear if only 10 percent was directed at infrastructure? Does Biden have any insight into this? One can speculate that it likely benefited the elite and well-connected insiders, who did not contribute substantially to its intended goals while enjoying inflated salaries.
Sadly, the latest infrastructure bill seems to be a repeat of its predecessor. Washington is merely layering one boondoggle upon another. Randal O’Toole from the Cato Institute remarks:
“About half of the transportation dollars in the bill are dedicated to Amtrak and urban transit, modes of transportation that carry less than 1 percent of passenger travel and no freight. While the other half appears to be dedicated to highways, much of that will be spent on projects that will reduce, not maintain or increase roadway capacities.”
What primarily concerns President Biden now is ensuring that Kamala Harris, Pete Buttigieg, and other cabinet members have a mechanism to dodge accountability for the inevitable waste to come. Consequently, Biden announced that former New Orleans Mayor Mitch Landrieu will assume the role of senior advisor and infrastructure coordinator for this expansive bill.
Will Landrieu outperform Biden in this function?
One can only wish. Yet ultimately, it may not matter…
The Washington elite, thanks to the current state of American democracy, have yet another boondoggle bill to exploit. Following that, another will inevitably follow. Countless roads will be repaved whether they are actually needed or not.
In conclusion, as these infrastructure projects unfold, it becomes increasingly essential to scrutinize how our democracy operates and to whom it truly serves. A systemic reevaluation of accountability could pave the way for a more equitable future.
Sincerely,
MN Gordon
for Economic Prism
Return from Boondoggle Democracy for the Elites to Economic Prism
