Lessons from the Past for the California Infrastructure of the Future

By Daniel J. B. Mitchell

Whenever California infrastructure investment is mentioned, there is a tendency to hark back to a Golden Age after World War II. During that period, our current governor’s dad, Pat Brown, was credited with freeways, a major state water project, and the 1960 Master Plan. But there were other political figures involved, and when you look more deeply, you find that these accomplishments had a longer history. Economists have a phrase, “path dependency,” which suggests that events of the past direct and constrain what we do in the present. And that was certainly true of the Golden Age.

One factor that ushered in the Golden Age was World War II and subsequent Cold War, both of which boosted California’s economy and its growth rate with an influx of federal spending on what became the aerospace industry and other related military sectors. The result was notably faster economic and population growth in California relative to the rest of the U.S. and with a focus on technology and high paying jobs. Fast growth with good incomes meant that nasty trade-offs could be avoided. We could have expanding social programs and infrastructure investment without worrying that a dollar more for one meant a dollar less for the other.

Absent some new external accident of history, Cold War-style above-average growth rates are not going to return to California. Despite the temptation to do so, in a period of mere average growth, infrastructure — whether water or transportation projects or college campuses — should not simply be charged off to the future via bond sales, the pattern that has developed in recent years and that was, for example, reflected in the water bond on the November 2014 ballot. Absent rapid growth, we can’t count on the future economy to be so much larger than it is today so that paying off past debt when the future arrives will be painless. If nothing else, there are intergenerational inequities in relying too heavily on bond finance.

So, what is to be done? Key elected officials are going to have to explain to the public what the end of the Cold War has meant for California fiscal affairs and for its infrastructure finance. It may seem odd a quarter century later that our politics are stuck at 1990, but that is the reality. User fees and user taxes for water, roads and other public projects need to become a larger part of the funding mix; it can’t be all bonds. And the credibility of public authorities when it comes to infrastructure implementation needs to be restored.

A more expansive version of this article appears in Dan Mitchell’s “Mitchell’s Musings” blog of the Employment Policy Research Network.

Comments

[P&A]

Thank you for this informative post.

[Infrastructure Funds]

Fast growth with good incomes meant that nasty trade-offs could be avoided. We could have expanding social programs and infrastructure investment without worrying that a dollar more for one meant a dollar less for the other.