Muddled Messaging

Eakinomics: Muddled Messaging Bloomberg reported: “The U.S. Transportation Department is awarding some $450 million in grants for port-related projects to bolster capacity and improve the movement of goods,” and “This is the largest ever investment in the Port Infrastructure Development Program, nearly double last year’s investment.” That seems like exactly what should happen in the aftermath of a bipartisan infrastructure funding law (the Infrastructure Investment and Jobs Act). Had that been all it said, it probably would not have caught my attention. Indeed, it probably would not have been published at all. But it did not stop there. Instead, there was a conscious effort to portray this as a part of the administration’s efforts to fight inflation: “the U.S. economy continues to be affected by congested supply chains, senior Biden administration officials say.” This seems to place the focus on current conditions. Moreover, U.S. Transportation Secretary Pete Buttigieg said, “We’re proud to announce this funding to help ports improve their infrastructure — to get goods moving more efficiently and help keep costs under control for American families” (emphasis added). The problem is that the timetables are all wrong. Inflation is a 2022 problem. Infrastructure investments are implemented over years, if not decades. The money will probably not even be distributed until 2023. (“Applications are due May 16, with awards expected to be announced in the fall.”) One can only wonder how many more years until the projects are actually completed. This will have no impact on fighting the current inflation. Its ultimate contribution will be to enhance productivity over the long term. To do so, the money is being targeted on the most important problems and biggest priorities. Not. “Major U.S. ports, such as Los Angeles and Savannah in Georgia are eligible for the new funds announced on Wednesday, though 25% of the investment will be allocated for smaller ports.” Earmarking the money for small, relatively less important ports reduces the overall productivity of the investment and diminishes its impact on overall supply. But that kind of earmarking is very typical. At least this funding will be focused on raising the supply-side bang for the buck in the chosen port, right? “Applicants must show that their projects would improve the movement of goods through ports and comply with Biden administration goals on issues such as climate change, racial and gender equity and policies to promote building and buying domestically, the officials told reporters on a call.” Yes, of course, productivity is most enhanced by industrial policies that generate environmentally pure social equality. There have been lots of stories recently about how there was an internal divide between economic logic and poll-driven messaging on inflation. Looks like the latter continues to have the upper hand.