America — The Build-Nothing Country?
America’s has a growing inability to build almost anything according to Noah Smith in The Build-Nothing Country (Link). Smith says, “what’s frustrating me is America’s seeming inability to build the things it needs to build in order to prosper and flourish in the 21st century. From housing to transit to solar power to transmission lines to semiconductor fabs, the U.S. has little trouble marshalling the financial and physical capital to create what it needs, but ends up stymied by entrenched local interests who exploit a thicket of veto points to preserve the built environment of the 1970s.”
Smith says, “Stasis has become America’s spoils system, and it can’t go on.” He cites the abuses of the California Environmental Quality Act in California that is being used to thwart new housing construction as example of the desire to limit development. Smith says, “Meanwhile, across the USA, housing is just not getting built. The recent runup in prices motivated a lot of developers to pull out their checkbooks, but they barely managed to raise housing starts to their pre-2008 levels, and now things are heading back to stasis as prices cool off.”
And Smith shares that this kind of short thinking is spreading throughout the U.S. to impede all kinds of development including green energy, transit, advanced manufacturing and more. He makes the point that “Last August the nation celebrated the passage of the Inflation Reduction Act, which allocated $400 billion to building green energy in the U.S. But as with housing and transit, allocating money doesn’t necessarily mean anything actually gets built.”
“Even in semiconductors, the ultra-high-tech industry where the U.S. and its allies must maintain leadership in order to maintain their edge over China, the U.S. can’t seem to build much. TSMC, the Taiwanese company that recently agreed to build a big plant in Arizona, is running into major cost issues.”
Smith says, “For decades, I’ve heard progressives bemoan America’s unwillingness to spend money on things like transit and green energy. But now America is spending all the money, and things still aren’t getting built, because of the country’s broken system of permitting, land use, and development.”
“This is such an important point that it bears repeating,” says Smith. “Money is not physical stuff. Just because you earmark $5 billion for a subway or $2 billion for a solar farm in some Excel spreadsheet somewhere doesn’t mean a physical train or power plant has actually been created. If permitting holds up the process for years, then you still haven’t built a damn thing. And if eventually construction does begin, but the cost balloons to absurd levels, that means that a pitifully inadequate amount of actual physical transit, or housing, or solar will be created, despite that huge flood of dollar signs in your spreadsheet.”
Driving home that point, Smith says, “For decades now, Americans have told ourselves that we’re the richest nation on Earth, and that as long as we had the political will to write big checks, we could do anything we wanted. But that was never really true, was it? The inflation that followed the pandemic should have been a wake-up call — we had all this excess cash, and we started spending it on physical goods, and mostly what happened was just that the price of the physical goods went up. And so R.I.P. to all that cash. From meaningless numbers on a spreadsheet you came, and to meaningless numbers on a spreadsheet you shall return.”
“What matters is not how big America’s spreadsheet numbers are, but how much physical stuff we get. And yet as a society we’ve decided to award people with stasis instead of stuff. In many dysfunctional societies, the government’s guarantee of economic inclusion comes in the form of a specific physical good — usually, cheap fuel. In the United States, the in-kind subsidy we provide our people is the option to keep their world from changing.”
And here’s an interesting observation by Smith: “If you’re one of the roughly 2/3 of Americans who owns a home, you can raise your wealth — at least on paper — by going to local government meetings and arguing to restrict the local housing supply. But perhaps just as importantly, you can preserve the built environment around you in exactly the form you’re used to. You can keep your streets quiet and uncrowded. You can preserve your open space, your big lawn, and your scenic views. You can keep your neighborhood free of any poor people who might live in nearby apartments or ride a train to your area. You have the option to keep your area free of anything you don’t want, for any reason.”
“This is a form of subsidy from the government to the people of America. It seems like a costless subsidy, because it doesn’t involve writing checks to people. But the costs are real, and Americans pay the costs. They pay them in the higher tax bills that citizens pay to fund infrastructure. They pay them in the increased prices businesses have to charge to make up for higher land costs. They pay them in higher rents. They pay those costs in more expensive electricity and increased carbon emissions. They pay them in the lower wages that workers earn because their cities can’t build sufficient housing near to the areas of greatest economic opportunity. They pay them in lower productivity because cities can’t grow big enough. They pay those costs in lost wages and incomes from disinvestment, when companies decide that America’s obstacles to land development make it a bad country to build a factory in. And eventually they pay the cost of a weak country that doesn’t have the economic strength to stand up to rivals like China.”
Smith says, “Physical stasis seems cheap, but it’s an incredibly expensive way to subsidize the lifestyles of Americans. And it seems that whenever our real incomes flatlined, as they did in the 70s and again in 1999-2015, we increased this stasis subsidy to compensate, making it even harder to build anything — a booby prize for an electorate mired in stagnation, which ended up exacerbating that very stagnation. The 70s were when the embrace of stasis began, but the 2010s are when it reached its apotheosis.”
“This ill-advised path has now come to its inevitable end,” cautions Smith. “We no longer have the luxury of giving our people a shadow subsidy by freezing their neighborhoods and cities in amber. Spiraling housing costs in any city with real economic opportunity, a floundering energy transition, and the inexorable migration of manufacturing to more development-friendly countries have become so severe that we must dispense with our collective illusion that America will always look like it looked in 1975. Slashing the thicket of red tape that prevent development, and subordinating local interests to the needs of the nation itself, are no longer idle dreams — they are immediate necessities. If we insist on continuing to be the Build-Nothing Country, our once-mighty middle class will sink into a genteel poverty, and someone else will build the future on the bones of our civilization.”
We hope that we will come together to support the new housing, green energy, infrastructure and advanced manufacturing our country needs and maximize the investment of our tax dollars in these projects to produce tangible results beyond a wider spread sheet.