In this campaign year, much of the time will be occupied by discussions of the huge cost of President Biden's infrastructure packages. It will be called fiscally irresponsible; some will call it "socialism." Now is a good time to bring up two points. The first is the impact of infrastructure on both productivity and cost within market activities. That is, the synergy of infrastructure and the functioning of the market system.
Second, the charge of socialism will be a reliable Republican campaign smear tactic. When applied to infrastructure spending, the accusation reveals a special case of economic ignorance because capitalism requires a well-functioning public sector. It is also laughably ignorant since it violates not just economic logic but fundamental logic as well.
The Market System Requires Public Sector Infrastructure.
There are certain things that provide benefits to society and enhance the market system that the market system does not have the financial incentives to provide for itself. Among these are hard infrastructure assets; i.e., streets, roads, bridges, sewer systems, water systems, broadband, etc. These are assets that can be invested in during one period of time in order to produce public (and private sector) benefits in many future periods of time. All of these assets add to labor productivity in the marketplace.
The cost of market activity tends to rise and fall inversely related to the rise and fall of productivity. This has two major impacts. First, when productivity rises and costs fall, the cost of doing business within the state of Wisconsin falls. As a result, the competitiveness of Wisconsin to attract more business increases.
Secondly, increasing productivity is one component of the never-ending battle with price inflation. When productivity grows, it is reflected in slower-growing producer prices. In turn, lower producer prices will -- after a time lag of a few months -- be reflected in slower-growing consumer prices.
Wisconsin’s Hard Infrastructure Report Card
The American Society of Civil Engineers provides a report card for each of the states, and Wisconsin is not doing well. Some of the state's more prominent public assets are getting terrible grades. For instance, bridges are assigned a grade of C+, which means terrible road surfaces, time-wasting lane closures as well as occasional closures of entire bridges. Because bridges are usually built in places where there are no nearby alternative routes, these lane and bridge closures impose gigantic time costs on commuters and freight haulers.
Drinking water earns a C- grade -- and that's an average: in some municipalities, the residents have to use boiled or bottled water. Ports earned a C+; how is Wisconsin supposed to move heavy manufactured goods to the world through Great Lakes Ports that are not in good working order?
Roads in Wisconsin earn a D+. Prominent economist Lawrence Summers has estimated that roads in such poor condition cost car owners more in repair bills than it would cost to fix the roads; such is the idiocy of long-term neglect!
The Charge of Socialism
There is an election coming up in November and the opposition ads have already begun to label government expenditures on infrastructure as "socialism." Advocates of spending on these productivity-enhancing assets should get ready for this onslaught. It is an absolutely ridiculous charge because capitalism requires a well-functioning public sector that includes roads and bridges.
Case in point: Interstate 43 from the City of Milwaukee to Green Bay is in terrible shape. North of the city, and well into the next county, this is a commuter route, congested at every rush hour and often in between. This 10-mile stretch is in a D+ condition and an additional lane has been called for the past 20 years. All of this is underway right now. Time costs will fall and smooth surfaces will increasingly greet electric cars and electric buses and vans for commuters as internal combustion vehicles are replaced. Those buses and vans will enable city residents to take jobs north of the city, where there are many advanced manufacturing and other state-of-the-art employers providing jobs with the promise of upward mobility. This is a win-win for our employers, our citizens, and Wisconsin.
The Socialism Smear Violates Logic 101
The logic is simply stated: socialists advocate government ownership of the means of production, therefore advocates of government ownership of means of production are socialists. It's as if repairing a road or a sewer system is a mile down the road to serfdom where gulags await those who complain.
This logical fallacy is known as "affirming the converse." Students are warned to avoid this fallacy in formal logic courses, and students in good geometry classes encounter it in high school. Affirming the Converse is so absurd that the fallacy is often explained with derisive examples, such as Green Bay Packers are all strong men; therefore all strong men are Green Bay Packers. Or: all dogs are mammals; therefore, all mammals are dogs. Still, the rhetorical ploy is used all the time by faux conservatives, basically because they know they can get away with it unchallenged by their opposition and by journalists.
This charge of socialism is an exercise in economic ignorance that would be comical if it were not so damaging to the nation, the localities where the infrastructure would be built, and the wages and working conditions of the people who would do the building. The infrastructure is a public responsibility because only the public can earn a cost-beneficial return on investment in these public goods. Hard-working and skilled workers are ready to bring the infrastructure report card up to straight A's, and earn family-supporting incomes while doing it.
William L. Holahan is Emeritus Professor and former Chair of Economics at the University of Wisconsin-Milwaukee.
 Topics for future essays in this series: investments in people, such as the child tax credit, subsidized college tuition, nutrition programs, etc, which, like infrastructure, also raise productivity.
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