It’s Immoral NOT to Spend Money on Infrastructure Now

October 4, 2012Danny Vinik 2 Comments

Here’s Mitt Romney on reducing the deficit from the debate last night:

I think it’s not just an economic issue, I think it’s a moral issue. I think it’s, frankly, not moral for my generation to keep spending massively more than we take in, knowing those burdens are going to be passed on to the next generation and they’re going to be paying the interest and the principal all their lives.

And the amount of debt we’re adding, at a trillion a year, is simply not moral.

President Obama didn’t object to this at all and instead demonstrated a commitment to reducing the deficit. They’re both wrong.

We need to spend a lot of money rebuilding our infrastructure across the country – $2 trillion in total. If we put it off, the next generation will have to pay for it. If we do it now, the next generation will have to pay for it too. Our deficits aren’t going down over night and the next generation is inevitable going to either face higher taxes or reduced spending on programs. Either way, the next generation will have to pay to redo our decaying infrastructure. But, they’ll pay less if we do it now.

Here’s why:

We have to repair our infrastructure soon.

Right now, the rate on U.S. Treasuries is really low. So low, in fact, that when you account for inflation, people are actually paying us to keep their money. The current rate for a 1-year Treasury is 0.18%. That means that if you buy a 1-year Treasury at a $100 face value, the U.S. will take the $100 now and pay you $100.18 next year. But that $100.18 really is worth less than that because a year has passed and its purchasing power has decreased because of inflation. The current CPI, the most commonly used measure of inflation, from the Bureau of Labor Statistics is 1.7%. Let’s be generous and call it 1.5%. That $100.18 in 2013 is the equivalent of $98.51 in 2012.

Now, if the U.S. government took $100, held on to it and then gave you back $100.18, that would be dumb. It would lose money there. But, what if the U.S. took that $100 and bought $100 in infrastructure improvements? In a year, those improvements are still worth $100 (2012 dollars). but the government is only paying $98.51 (2012 dollars again). The government just made a profit!

Normally, when the U.S. borrows money, the interest rate is greater than inflation. Imagine if the 1-year Treasury rate was 3%. Now, the U.S. government is paying out $103 in 2013, worth $101.48 in 2012 dollars. In that case, the government loses money.

That’s how the real rate of inflation works. Right now, most U.S. Treasuries have a negative real rate of inflation. In the future, this will almost certainly not be the case. If we delay these infrastructure improvements until the next generation, they will have to pay for them with Treasuries that have a positive real rate of inflation. Instead of profiting on the infrastructure improvements, the next generation will be losing money. But they won’t have a choice. Our roads and bridges will be deteriorating so much that we will have to make those improvements and accept the losses.

By not spending money on infrastructure repairs now, we are making the next generation spend more. That’s what is really immoral. (Image via)

Debate Reaction

October 4, 2012Danny Vinik 1 Comment

Everyone basically agrees: Romney won last night’s debate convincingly and the poll numbers seem to show it.

If I had to sum up last night’s debate in one word, it’d be boring. Each candidate talked for 3+ minutes at a time, spouting out a long list of talking points and numbers, and moderator Jim Lehrer just had no control of the debate. But, I think that’s a big victory for Romney.

One of the biggest criticisms about Romney is that his policies are vague. Last night, his policies did not come off as vague. Instead, he offered just as many numbers and direct answers as Obama did, if not more. That’s a big win. For the many Americans there who keep hearing that Romney doesn’t have specific policies or his numbers don’t add up, he answered those questions.

On top of it, Obama just kind of gave up. As many people have said, he was on the defensive throughout and his body language from the beginning was poor. His head was down most of the time and he nodded as Romney listed off his rebuttal, even at times saying “yea.” In contrast, Romney was assertive, strong but didn’t come off as arrogant. Yes, his smirk when Obama spoke wasn’t great but I don’t think it was too bad.

But I really do think it was just a bad debate. The candidates spoke for way too long at a time and it was just impossible to follow. Lehrer challenged them on just about nothing and had no command over the conversation. Issues melted together. Just from watching it, I doubt that many people could truly follow Romney and Obama’s arguments. They were actually too wonky. But that was entirely a result of the structure of the debate. Each answer should have been much shorter. Lehrer should have butted in and asked for specifics or pushed the candidates on different topics. The incredibly broad questions allowed the candidates to go off on long tangents. He should have asked specific, fact-based questions that candidates responded to specifically and quickly. He could have facilitated a quick back and forth on something, like…housing! Of course, housing was never mentioned. Neither was immigration. Those are two pretty huge issues but there was nothing on them.

All and all, a big Romney victory. He has to keep the momentum going and tomorrow’s job numbers are extremely important. Obama really needs some good news to pivot away from his debate performance. We’ll see tomorrow.

A Missed Opportunity

August 31, 2012Danny Vinik 2 Comments

Romney speaks at the RNC.

The Republican National Convention wrapped up last night with Mitt Romney giving the keynote address and Clint Eastwood adding the…um entertainment. I was not able to attend the first night, but last night was certainly much more exciting and interesting than the previous evening.

The reason? The night wasn’t full of politicians. It was full of people who knew Romney personally. Ted & Pat Oparowsky spoke about the care and compassion Romney showed their family, and in particular, their son, who was diagnosed with cancer at just 14 years old. Next, Pam Finlayson gave a moving speech about her daughter, who was born three and a half months premature and died just over a year ago at the age of 26. She told the quiet crowd how Romney had frequently cared for her two-year-son while her daughter was in the hospital and when she was unable to prepare a Thanksgiving meal, the Romneys stepped right in and showed up at her door, meal in hand.

The crowd was silent during these great speeches and many were wiping tears off their cheeks after them.

A number of other individuals – from Romney’s days as a pastor, his time at Bain and his term as Massachusetts governor – gave a tremendous picture of Romney as a smart, caring man.

Then, just before the networks cut in, a video played throughout the arena about the Romney family and Mitt’s parents. It had numerous old family photos and videos from Mitt’s father, George Romney. It had interviews with the Mitt’s sons, about how they always used to cause trouble as a kid and they would never go to their dad to ask for money (always their mother).The video was nothing short of adorable.

Then prime time came and out walked Clint Eastwood to a huge ovation. Then Clint Eastwood spent the majority of his speech talking to a chair (with an invisible Obama in it of course). I don’t think it was disrespectful but it was incredibly strange. From inside the arena, it felt weird. When I re-watched in on TV later, it was even weirder. I really cannot figure this one out. Eastwood had no teleprompter or notes. He went on stage and said what he wanted to – and it showed.

The empty chair routine was certainly awkward. I’m not sure why anyone at the RNC approved of the idea (or let Eastwood sneak a chair onstage). But it was a huge missed opportunity. The Oparowsky’s story, Pam Finlayson’s moving speech or the video of Romney’s family would have been perfect to humanize Mitt and show a complete different side of him to a huge audience.

Instead, the world saw an 82-year-old Clint Eastwood talk to a chair. It was a huge mistake.

As for Romney’s speech itself, it was solid and effective. But it was not a game changer. It was policy-light, rhetoric-strong. His top lines of the night were certainly:

If you felt that excitement when you voted for Barack Obama, shouldn’t you feel that way now that he’s President Obama? You know there’s something wrong with the kind of job he’s done as president when the best feeling you had was the day you voted for him.

And:

I wish President Obama had succeeded because I want America to succeed.

Romney was mostly his strong, confident self for most of the speech. He grew a bit emotional when talking about his parents but quickly transitioned to his time as Governor.

Overall, Romney was exactly who we know him to be: a presidential-looking, confident man that just cannot seem to connect to the average person.

That’s what makes the inclusion of Eastwood and the exclusion of the humanizing videos and speeches about Mitt such a huge missed opportunity. Those stories could have helped him connect with the average voter more than any speech could. But the millions of viewers in prime time didn’t get to see them and that may go down as one of the biggest mistakes of this election.