DC Velocity - March 2013

thoughtleaders WALTER KEMMSIES

and Korea does—then you become very wealthy. That’s what China did 20 years ago. They started building infrastructure. It’s the main thing that we should be focusing on, but we are not. Look at the political debates during the November election. Infrastructure was mentioned, but only in passing.

doing this in a way that favors one region of the country over others.

QWhat should we do, then?

AFirst, we should identify our comparative advantages. Then you understand the bottlenecks; or not necessarily the bottlenecks, but what a transportation infrastructure that would enhance exports would look like. Instead of giving subsidies to companies, put them all into the infrastructure. Then, anybody who wants to make a good living can use the infrastructure we are providing them. The important thing is to make sure we are not

QThat gets to the need for a more cohesive national infra-
structure plan, then?
AExactly. If that is what you are doing, then you are creating
jobs. The exports that we produce
are not necessarily what creates the
jobs. It is the entire supply chain.
For example, agriculture is a natural
source of exports for the United
States. There are jobs in bringing in
seeds and fertilizer, in water man-
agement. There are jobs in bringing
the product from the farm. There
are jobs in inspecting the product
for quality. The financial sector gets
supported by this. You need price-
risk management for the future
contracts. Agriculture generates a
huge number of jobs, and it could
generate even more if we emphasize
that. And world food prices have
shot up a lot, and you can actually hold
back world economic growth if households
in many parts of the world can’t afford a
basic diet. So those are cornerstones for a
transportation policy.

QHow do we go about making the development of a national transportation policy a priority among our elected officials?

AWe need a champion, a true champi- on. In many ways, President Obama has tried to push for something to emerge. There is a mandate for the Department of Commerce, the Department of Transportation, the USDA, and a few other agencies to work together to establish the priorities.

Transportation infrastructure is very tangible. It creates jobs in the near term in construction, and once you put that infrastructure in place, it supports increased exports and therefore, creates jobs in the long run. But I don’t see an accurate analysis of that type coming out of places like the Office of Management and Budget. We don’t see the Council of Economic Advisers talking about that. Among the academic advisers on the economy, talk of infrastructure doesn’t really exist.

We look at our infrastructure, and we take roads for granted and take all our ports for granted. … The problem is, there is a lack of awareness about how much transportation contributes to employment in this country.

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QAny closing thoughts?

AWe live in a world where policy has uch a huge effect. The economists get clobbered when they get the forecast wrong. But the main reason forecasts often don’t pan out has to do with non-market criteria. The market models that are used when there are no external effects like policy tend to forecast very accurately. So policy actions really throw us off when we try to do pure market analysis.

The problem I have in trying to do forecasts is that not only do you have to forecast what the supply side and the demand side are going to do, but also what the policy actions are going to be. Predicting that is like predicting a coin toss. ;