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***ECONOMY GOOD

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Generic – Growth Solves War

Growth solves conflictMarquardt, 5 (Michael J., Professor of Human Resource Development and International Affairs, George Washington University, Globalization: The Pathway to Prosperity, Freedom and Peace,” Human Resource Development International, March 2005, Volume 8, Number 1, pg. 127-129, Taylor and Francis, Tashma)Perhaps the greatest value of globalization is its potential for creating a world of peace. Economic

growth has been identified as one of the strongest forces that turn people away from conflict and wars among groups, tribes, and nations . Global companies strongly discourage governments from warring against

countries in which they have investments. Focusing on economic growth encourages cooperation and living in relative peace (Marquardt, 2001, 2002).

Economic growth stops war Gjelten 09 (Tom Gjelten is a correspondent for National Public Radio news. Gjelten has worked for NPR since 1982, when he joined the organization as a labor and education reporter. Feb 18 2009 “Economic Crisis Poses Threat To Global Stability” http://www.npr.org/templates/story/story.php?storyId=100781975)// CG

More Cooperation Needed Throughout history, wars have often been preceded by serious economic crises. World War II followed the Great Depression, for instance. With such concerns in mind, Democratic Sen. John Kerry of Massachusetts, chairman of the Senate Foreign Relations Committee, invited several experts to testify last week at a roundtable on the foreign policy implications of this economic crisis. "The biggest single step the U.S. could take to send a message abroad and try to restore confidence would be what?" he asked. The answers were not encouraging. The steps that most need to be taken, the panel agreed, are the ones that are probably most difficult politically: Troubled U.S. banks, they all said, need to be nationalized, at least temporarily (that's probably a non-starter). The United States should lead the way in resisting protectionist pressures (but the U.S. stimulus package includes a Buy American provision). And governments around the world need to work together (the opposite has happened). "What we've seen is a lack of coordination [among countries] of economic policy to address what is truly a global crisis," says Desmond Lachman of the American Enterprise Institute. "Otherwise, you're going to have countries very much at cross-purposes, and the danger is you're getting beggar-thy-neighbor policies pretty much in evidence." In times of economic stress, governments may protect their own national companies from foreign competition, even if it means the global economy suffers. The World Bank is predicting that trade this year could shrink by more than 2 percent. Some analysts even say the world is going through a period of deglobalization after years of increasing economic integration. That's a trend that could aggravate international tensions. It's the job of intelligence agencies to focus on risk and prepare their governments for what could happen, which is why they are now rehearsing all the worrisome scenarios that could result from the international financial crisis.

Studies show economic growth lessens that chance for conflicts Hupreys 03 (Macartan Huphreys is a Associate Professor, Department of Political Science, Columbia University And Director, Center for the Study of Development Strategies Feb 2003 “Economics and Violent Conflict” http://www.unglobalcompact.org/docs/issues_doc/Peace_and_Business/Economics_and_Violent_Conflict.pdf) //CG

One might expect rich nations to be more violent than poor ones because the rich ones have more to fight over. 10 The econometric

evidence however suggests the opposite. Most research shows that wealth reduces the likelihood of civil war, 11 and that economic growth also reduces risks while recessions worsen them. Figures derived from World Bank econometric models (Figure 1) show a striking relationship between the wealth of a nation and its chances of having a civil war. 12 The figure suggests that differences in wealth are most relevant among poorer countries. A country with GDP per person of just $250 has a predicted probability of war onset (at

some point over the next five years) of 15%, even if it is otherwise considered an “average” country. This probability of war

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reduces by half for a country with GDP of just $600 per person and is reduced by half again to below 4% for a country with income of $1250. Countries with income per person over $5000 have a less than 1% chance of experiencing civil conflicts, all else being equal. There are various

explanations for why this is so. But so far little work has been undertaken to distinguish between them. The most common is that wealthier societies are better able to protect assets, thus making violence less attractive for would-be rebels. 13 Another explanation, given by political scientist Thomas Homer Dixon argues that poverty causes violence, and points to cases where scarcity leads to migrations that result in conflicts between identity groups over resources. Alternatively, the relationship could be spurious in the sense that there are other features of a country, such as a democratic culture, that make it at once more prosperous and less violent. And causality may in fact run in the opposite direction: rich countries may be rich in part because they have had little civil conflict in their recent past. 14

Whatever the reason, the figures suggest that growth oriented initiatives and conflict prevention initiatives are mutually reinforcing. And the figures provide a rationale for those who say that it is in the interest of wealthy nations to promote economic growth in poor countries in order to avoid the spillover effects of likely conflicts there. In terms of policy implications, the analysis suggests that the greatest gains in conflict prevention are to be made by focusing development efforts on the very poor rather than on countries of intermediate wealth.

Economic growth is key to prevent conflict

Bernauera 10-[Climate Change, Economic Growth, and Conflict Thomas Bernauera, Anna Kalbhenna, Vally Koubia,b and Gabriele Ruoffa a ETH Zurich Center for Comparative and International Studies (CIS) and Institute for Environmental Decisions (IED) and b University of Bern Department of Economics and Oeschger Institute for Climate Change Research;http://ncgg.princeton.edu/IPES/2010/papers/S1115_paper1.pdf]

Economic growth and conflictPrevious research has shown that reduced levels of domestic economic activity tend to create incentives for increased conflict.6 Drawing on this research, we posit that climate change, by reducing economic growth (that is, reducing the ability of the economy to grow), affects the utility of individuals and groups to engage in civil conflict. It does so in two ways. First, negative climatic conditions, via their negative effect on economic growth, can reduce resources available to the government (e.g. by reducing tax revenue). The government thus has fewer resources to “invest in people”, for instance to provide better nutrition, schooling, and on-the-job training that would lead to improved living conditions. It also has fewer resources to “provide for the people” in terms of sustaining peace through the maintenance of law and order – the latter, for instance, lowers the probability of rebel victory by increasing the cost of rebellion. Second, climate related phenomena such as lower precipitation, higher temperature, and extreme weather events lead to lower personal income from production and also decrease the opportunity for future employment. Consequently, the opportunity cost of rebellion decreases because the expected returns from peaceful employment, say farming, compared to joining criminal and insurgent groups are lower. In situations like these, when individuals expect to earn more from criminal or insurgent activity than from lawful and peaceful activity, predatory behavior becomes more likely. The latter implicates conditions in which each individual or group’s effort to increase its own welfare reduces the welfare of others and also increases the probability of mutual attacks (Jervis & Snyder, 1999). The argument that poverty breeds conflict and war is supported by several empirical studies (e.g. Hidalgo et al., 2010; Dube & Vargas, 2008; Hegre & Sambanis, 2006; Collier & Hoeffler, 2004; Fearon & Laitin, 2003). For example, Collier and Hoeffler (2004) find that low economic growth, which is a proxy for foregone earnings, has considerable explanatory power in their intrastate conflict regression. They conclude that rapid economic growth reduces the risk of conflict. Dube and Vargas (2008) examine whether violent actions in Colombia in the 1994-2005 period are linked to low opportunity costs of agricultural labor, using crop prices as a proxy for such costs. They show that a drop in the price of coffee substantially increased the incidence and intensity of intrastate conflict in coffee-intensive areas. They attribute this result to the lowering of opportunity costs of joining a rebel movement (via depressed wages) in coffee growing areas. Hidalgo et al. (2010), using a panel data set with over 50,000 municipality-year observations, show that land invasions by the rural poor in Brazil occur immediately after adverse economic shocks, which in the statistical analysis are instrumented by rainfall. Consequently, our argument that reduced economic growth can impact on the likelihood of civil conflict is well supported by the existing literature.

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Generic – Collapse Causes War

Economic collapse now causes WWIIIHamer 10 3/6, *Prof Dr. Eberhard Hamer writes for Current Concerns, “Increasing Indications for a Third World War,” http://www.currentconcerns.ch/index.php?id=1012, AJ

Due to the fact that the US has assumed the bank debts and added them to the national budget and their already extreme increase in national debts – one billion dollars worth foreign credits is needed per day –, the biggest financial crisis since World War II has arrived . If the cash flow from abroad ceased or foreign countries decided to escape the dollar, the US would be bankrupt. Nevertheless, the US is not making sufficient efforts to reduce their growing national debts with cost-cutting measures. Neither do their raise taxes to generate more income, nor do they try to cut their budget, especially not their enormously grown military budget. The US has employed 200 000 soldiers in combat missions worldwide. Therefore nobody understood when the biggest warlord in the world, despite increased force levels, obtained the Nobel Peace Prize. A possible explanation: he received the prize as a precaution, because it depends mainly on him if there is a war in Iran or not. In history, politicians who were economically at an end have often opted for war as a last resort to maintain power. This has even be truer for a country in a crisis, which sees war as a way out of an economic crisis. This is how the US surmounted the biggest depression of the 20th century by entering World War I, as well as the Great Depression by entering World War II, and now they could try to solve their third crisis in the same way. We should not forget that both world wars enabled the US not only to overcome their

enormous national debts, but they also developed into the leading economic power of the world. The temptation to go the same way a third time is big. Furthermore, Israel has positioned the atomic submarines delivered from Germany with nuclear missiles in front of Iran, and in Georgia they not only rebuilt a nuclear missile position which was destroyed by Russia one and a half years ago, and which faces Iran, but fortified them

with 90 US missile experts. Military preparations are already advanced. Although the US military has not yet succeeded in “pacifying” the two neighbouring states Iraq and Afghanistan, they have practiced their biggest military concentration in the world in combat mission. The Nobel Peace Prize Committee have assessed the situation correctly, namely that a war against Iran cannot happen without the US president’s approval, the least without the approval of a Nobel peace prize winner. However, the pressure from banks, the oil billionaires, the arms industry, the military and the Israel lobby could force the US to come into war when Israel carried out the first strike against Iran and the above mentioned powers wanted to secure their interests. The US is not only the country with the highest debts in the world but along with their currency their empire decays. The world’s allegedly “only superpower” is at the moment imploding in the same manner the Russian did 20 years ago. With some kicks the Chinese have already told the US president quite clearly that they do not acknowledge their leadership any longer. Therefore, if Israel decided to strike, the US president would face the terrible choice between sinking further into the quagmire of financial-, economic and social crisis or seeking the solution of a world war, which has made the US a winner twice already. The danger of a world war has never been greater since World War II. Therefore, increasing warnings to the US mostly from a group of European intellectuals for more than a year

have been justified. However, we cannot prevent it . A war in Iran would not remain a local event even if it was only led with missiles at the beginning. On Iran’s side the Chinese would intervene directly or indirectly and the Russians possibly as well to prevent the US from approaching their borders and becoming too dominant. On the side of Israel and the US the NATO states would be obliged to help,

especially when they had sworn Nibelung loyalty before. Therefore, we in Europe have to brace ourselves for a participation in a war. Merkel’s government might find a war as the last political way out of their mess after the bailouts, public insolvency, the looming financial collapse of the social systems, and social unrest as a result of missing genuine corrections. War is coming up. The next few months will decide if we will be drawn into a Third World War or if we can escape this danger.

More evidence---war is probableJudis 11 8/8, *John B. Judis is a senior editor of The New Republic and a Visiting Scholar at the Carnegie Endowment for International Peace, “Liberals’ Strange Retreat on Government Spending,” http://www.tnr.com/article/john-judis/93287/obama-administration-economy-recession?page=0,1, AJ

The first consideration has to do with the sheer gravity of the situation. What is at stake goes beyond an abstract rate of unemployment, or the prospect of a Republican White House in 2012, or even the misery of the long-term unemployed. From the beginning, this recession has been global. Germany has to take leadership in Europe, but the United States

is still the world’s largest economy, the principal source of consumer and investment demand, and the banking capital of the world. If the United States fails to revive its economy, and to lead in the restructuring of the international economy, then it’s unlikely that other economies in the West will pull themselves out of the slump. And as the experience of the 1930s testified, a prolonged global downturn can have profound political and geopolitical repercussions . In the U.S. and Europe, the

downturn has already inspired unsavory, right-wing populist movements. It could also bring about trade wars and intense competition over natural resources , and the eventual breakdown of important institutions

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like European Union and the World Trade Organization. Even a shooting war is possible . So while the Obama administration would face a severe challenge in trying to win support for a boost in government

spending, failing to do so would be far more serious than the ruckus that Tea Party and Republican opposition could create over the next year.

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US Key to Global Economy

U.S economic growth is key to global recovery Washington Times 10-[“Obama: Strong U.S. economy key to global recovery” By Erica Werner-Associated Press< http://www.washingtontimes.com/news/2010/nov/10/obama-strong-us-economy-key-global-recovery/>]

SEOUL (AP) — President Obama said a strong, job-creating economy in the United States would be the country’s most important contribution to a global recovery as he pleaded with world leaders to work together despite sharp differences. Arriving in South Korea on Wednesday for the G-20 summit, Mr. Obama is expected to find himself on the defensive because of plans by the Federal Reserve to buy $600 billion in long-term government bonds to try to drive down interest rates, spur lending and boost the U.S. economy. Some other nations complain that the move will give American goods an unfair advantage. In a letter sent Tuesday to leaders of the Group of 20 major economic powers, Mr. Obama defended the steps his administration and Congress have taken to help the economy. “The United States will do its part to restore strong growth, reduce economic imbalances and calm markets,” he wrote. “A strong recovery that creates jobs, income and spending is the most important contribution the United States can make to the global recovery.” Mr. Obama outlined the work he had done to repair the nation’s financial system and enact reforms after the worst recession in decades. He implored the G-20 leaders to seize the opportunity to ensure a strong and durable recovery. The summit gets under way on Thursday. “When all nations do their part — emerging no less than advanced, surplus no less than deficit — we all benefit from higher growth,” the president said in the letter. The divisions between the economic powers was evident when China’s leading credit rating agency lowered its view of the United States, a response to the Federal Reserve’s decision to buy more Treasury bonds. Major exporting countries such as China and Germany are complaining that the Federal Reserve’s action drives down the dollar’s value and gives U.S. goods an edge in world markets.

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AT: Resilient

Economy is not resilient---we’re losing competitiveness and that causes global catastropheKoba 11 9/12, *Mark Koba is a Senior Editor at CNBC.com, “American Economic Decline? Exaggerated,” http://www.cnbc.com/id/44271677/American_Economic_Decline_Exaggerated, AJ

With a recent ratings downgrade, chronic unemployment, a growing budget deficit and a political system that seems determined to self-destruct, it might appear that the U.S. is losing its grip as the world's top economic power . That's not to say that the U.S. shouldn't look over its shoulder. Many countries, specifically China, have long been gaining economic strength. "China has had high growth rates for over 30 years," says Frank Lavin, CEO of Export Now and a former U.S. ambassador to Singapore. "Their ability to sustain those rates combined with the softness in the U.S. economy gives rise to speculation that China will surpass the U.S and assume economic leadership on international issues." With China's GDP rate at around 8 percent to 11 percent a year, and the U.S. stuck at around 2 percent to 3 percent, it's easy to see why some say China's economy will be larger than the U.S. economy by 2016 . China isn't the only growing economic force on the horizon, say experts. "The largest change over the last 10 to 15 years has been the growth of emerging markets ," says Thomas Root, associate

professor in finance at Drake University. "The BRIC countries capture the headlines, but many smaller countries, like some in South America and Asia, are having an increase in production." "The European Union and Germany in particular are the most formidable threats to the U.S .," Massey University's Haley adds. "They are big enough countries to be threats even as they struggle." America's battle to get its own economy growing at a faster pace opens the door for others, analysts point out. "Perhaps the most damning evidence [of potential American decline] is the unemployment rate of around 9 percent ," explains

Adrian Cronje, a partner and Chief Investment Officer at Balentine, a worldwide investment firm. "The question is whether large segments of the U.S. workforce are sufficiently skilled and productive to compete and drive future economic growth." There's also the falling value of the dollar that could help knock the U.S. off its perch, Cronje argues. "The U.S. dollar is in danger of losing its status as a safe haven for investors," Cronje says. "It's been in a long term bear market against hard assets like gold, and that decline reflects a decline in economic power." If the U.S. did lose its number one position, that would have global implications , according to Northeastern University's Dadkhah. "For the U.S., it would mean a lower standard of living and less power to influence international events," Dadkhah explains. "And America is

the pole holding up the tent of international finance. It the pole falls, we'd have a period of uncertainty and upheaval on a worldwide scale ." But what currently ails the U.S. is also hitting the rest of the world , according to analysts. Nations that for now seem to be riding a faster economic track will have likely have troubles of their own, says Roger Scher, professor of international political economy at Seton Hall University. "History has shown us that economic success stories turn sour," explains Scher. "Witness poorly growing Brazil and Peru,

and Europe's bust in recent years. And watch out for China's potential property price bubble. It's huge and brings considerable political risk ." As tempting as it may be to gloat over other countries' economic declines,

analysts say the U.S. has plenty of work to do in order to remain a viable leader. "We need long-term plans to cut the deficit and reduce entitlement and defense spending," says Seton Hall University's Scher. "At

the same time, we need to invest in education and infrastructure, and cut tax loopholes." In the end, say

analysts, the U.S. should ultimately focus on its own economy and leave the question of who's number one to history. "It's always trendy to speak about the decline of the U.S.," says Sizemore Investment Letter's

Sizemore. "I'm not sure it really matters that much. Other countries are beating us with faster growth , but they're starting at a lower base ."

Economy not resilient – tech innovation. ‘Industry Week 6/26 (Josh Cable “OECD: United States Losing its Edge in Innovation” Accessed: 6/27/12. Full Date: 6/26/12. http://www.industryweek.com/articles/oecd_united_states_losing_its_edge_in_innovation_27701.aspx?SectionID=4)

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The United States is losing its edge in innovation, and needs to implement strong pro-innovation policies as well as education reform "to maintain its status as the world's most vibrant and productive economy." That's the conclusion of the latest

"Economic Survey of the United States" by the Organization for Economic Cooperation and Development, or

OECD, which asserts that "fissures have begun to appear" in U.S. innovation. "The United States is still one of the most innovative economies in the world, but competition is growing and we need better policies to keep the U.S. at the frontiers of innovation," said OECD Deputy Secretary-General Richard Boucher.

Economy is not resilient

Gongloff 6/8/12 –[chief financial writer at The Huffington Post. He was previously a reporter, editor and blogger at The Wall Street Journal and CNN/Money [Mark “Jobs Report puts world on recession watch. Huffington Post http://www.huffingtonpost.com/2012/06/01/jobs-report-recession_n_1563002.html Accessed 6/25]

Get ready: The ugly May jobs report will revive talk of another recession. Don't believe it. Yet. The "R" word got dropped all over Twitter within minutes of the news that the economy had added just 69,000 jobs in May and that the unemployment rate had risen to 8.2 percent. Famed economic Cassandra Nouriel Roubini did his thing, tweeting: "From anemic sub-par growth to stall speed to double-dip recession? It is possible and 2013 looks worse with a serious fiscal cliff and drag." Pedro Da Costa of Reuters tweeted simply: "I'll say it: recession." Lakshman Achuthan, of the Economic Cycle Research Institute, who has been calling for a recession for several months now and saying we will know by the end of June whether we are in one or not, was traveling and not available to comment. But we can guess that he is not exactly backing down from his recession call today, after reiterating it twice in just the past month. Financial markets appear to be on recession watch already. The Dow Jones Industrial Average tumbled more than 200 points on Friday, giving up all of its gains for the year. It has shed nearly 9 percent since the start of May. Crude-oil prices are down 24 percent since February. The bond market is essentially warning of the End Of Days, with 10-year Treasury yields tumbling below 1.5 percent for the first time in recorded history. In a note to clients after the report was released, Dan Greenhaus, chief global strategist at New York brokerage firm BTIG, said the news was bad enough to make him consider reviving a recession warning he made last October. But in an interview with The Huffington Post, Greenhaus said he wasn't on full recession alert just yet. "My belief is that part of this is weather related," he said. "But I'm growing increasingly worried here." The recent slowdown in job growth, Greenhaus and other economists said, could be payback for freakishly warm winter weather, when hiring may have been stronger than usual. There's also a theory out there that the deep financial crisis in 2008 may have messed up seasonal adjustments for economic data in recent years, making winters look stronger than they really are and springs look weaker. And the job report wasn't that bad, taken in context, Greenhaus noted. Nonfarm payroll jobs have grown by an average of 165,000 per month in the first five months of 2012, down only slightly from an average of 176,000 per month in the first five months of 2011. Though unemployment rose in May, the household survey that produces the unemployment rate showed that 442,000 people got jobs last month. Unemployment rose simply because the labor force grew more than the number of employed people -- also possibly a positive sign. Remember how everybody freaked out last month when the labor force shrank and pulled unemployment lower in April? Maybe we should take heart that the opposite happened in May. Meanwhile, other key economic numbers released on Friday were not as scary. The Institute for Supply Management said its manufacturing index for May fell only slightly, to 53.5 from 54.8. Anything over 50 indicates expansion in the sector. All of the recessions since 1973 have begun when the ISM index was below 50, and only 2 of the 11 recessions since 1948 have begun with the ISM over 50. In other words, May's ISM reading of 53.5 suggests that we are not in a recession. "The recession case still looks flimsy to us," Michael Darda, chief economist at research and trading firm MKM Partners, said in a note. "Jobless claims are hanging in there, and the [ISM index] for May showed solid internals." And as for recessions, they don't just up and happen. Economies typically must be shocked into recession. Last year the global economy suffered a series of shocks, including the Japanese earthquake and nuclear crisis, the U.S. credit-rating downgrade and the ongoing European debt crisis, and the U.S. still managed to avoid a recession. That said, growth is clearly slowing around the world. The European debt crisis is nearing a potentially messy endgame, affecting financial markets and business confidence. It also seems to be dragging down China, one of the world's fastest-growing economies. At the same time, the other fast-growing emerging markets of India and Brazil are slowing down, as is Japan. The U.S. may not be in a recession, but much of the

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rest of the world may soon be. And the U.S. is growing too slowly, which leaves it vulnerable to shocks. "This is the beginning of the slowdown, which we expect to translate to only 1.0% GDP growth" by the fourth quarter, Bank of America Merrill Lynch economist Michelle Meyer wrote on Friday. One percent GDP growth may not exactly qualify as a full-on recession, but it makes a recession more likely, particularly with the "fiscal cliff" of tax increases and spending cuts approaching at the end of the year. This means we may be on recession watch for the foreseeable future -- or at least until the next jobs report.

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AT: Alt Cause – Europe

US economy is insulated from EuropeThe Week 6/7 2012, “Is the U.S. insulated from the European debt crisis?” http://theweek.com/article/index/228963/is-the-us-insulated-from-the-european-debt-crisis, AJ

Yes. The U.S. recovery could survive: Most investors "mistakenly think that Europe's malaise will be contagious," says Jack Albin at Bloomberg. The U.S. is actually "somewhat insulated from Europe's predicament." Three central drivers of the current U.S. economy — manufacturing, energy, and housing — will be untouched by the crisis and could even benefit from Europe's troubles . Furthermore, the U.S. has effectively "decoupled" from Europe , with exports to the continent representing "only 2 percent of gross domestic product." A dip in European trade is "not enough to derail growth."

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AT: Alt Cause – Oil

US is not relying on foreign oil Seeking Alpha 12 5/25, “A Surprising And Promising Trend In The U.S. Economy: Sharply Declining Oil Imports,” http://seekingalpha.com/article/617371-a-surprising-and-promising-trend-in-the-u-s-economy-sharply-declining-oil-imports, AJ

We've all been hearing about all kinds of ominous developments, and certainly the last few weeks have not been fertile ground

for optimism. I was, therefore, surprised on going through energy statistics when I discovered the powerful trend that has recently emerged in the United States economy: Oil imports are going down at a steady pace . In fact,

oil imports have plummeted. Net imports of oil and refined products (total imports of crude and refined

products minus exports of crude and refined products) have declined from 12.363 million barrels per day in January and February 2006 to 7.784 million barrels per day in the same two months of 2012. While net import figures are not available for more recent time periods, other data suggests that the trend is continuing. During this same time period, net imports from Canada have actually been increasing from 2.227 million barrels per day in 2006 to 2.639 barrels per day in 2012. As a result, net imports from the rest of the world ex Canada have been cut almost in half from 10.336 million barrels per day in 2006 to 5.567 million barrels per day in 2012. There are a few complicated moving parts behind these

numbers. There has been a huge increase (roughly a tripling) in the export of refined products from the United States. Apparently what has happened is that, as domestic demand for gasoline and distillate has declined, the U.S. refinery industry has more refinery capacity than is necessary for the U.S. market and is now refining crude oil in order to supply refined products to the export market. While total imports are down somewhat, net imports are down much more because of the large increase in exports of refined products. Behind this

trend are several key developments. Domestic oil production has increased more than 1 million barrels per day during this time period (this increase in domestic oil production is an important part of the increased real GDP during this time period). In addition, despite the fact that real GDP has increased, domestic consumption of petroleum and petroleum products has decreased by more than 3 million barrels per day during the same time period. This appears to be partly due to increased production of ethanol (which displaces gasoline), increased vehicle mileage (as more fuel efficient new cars enter the market), less driving, relatively warm winters, and some displacement of oil by natural gas in the heating and transportation markets. These trends seem to be

continuing and, while we still import a tremendous amount of oil, the strategic and economic vulnerability of the United States to the world oil market may be on the decline. What are the implications of this development for

investors and for the country in general? First of all, it may produce a change in the nature of the business cycle.

In the past, virtually every recession coincided with a run up in oil prices. Higher oil prices sucked dollars out of the U.S. economy and, at the same, created inflationary pressures which led to monetary tightening just as consumers had less money to spend because of higher gasoline prices. While U.S. gasoline prices will still be driven by world oil prices, a price increase will not suck as much money out of the domestic economy and will lead, instead, to a shifting around of wealth and economic activity within the United States (and its very economically integrated neighbor, Canada). Secondly, national security policy may be subject to a change in emphasis. To the degree that the United States is less vulnerable to an interruption in oil imports, we may see the use of the Strategic Petroleum Reserve as a price stabilizer rather than a

true strategic backstop. In addition, the United States may pursue other goals in Middle Eastern policy with more determination. Of course, other countries are importing more and more oil all the time and we may come to a point at

which China becomes a major player in the Middle East. Fourth and most importantly, I think that the trend illustrates the beginnings of a long-term displacement of petroleum by natural gas in the transportation market which will probably start in the more advanced economies. Natural gas has already displaced some 500,000 barrels of oil per month in the transportation market . This is a proverbial "drop in the bucket", but the trend is steady and powerful and companies like Clean Energy Fuels (CLNE) are poised to take advantage of the trend as it

accelerates. Each economic recovery and expansion emphasizes certain sectors of the economy - tech in the 1990s, housing in the 2000s. It is likely that a renaissance in the U.S. energy industry will be an important part of any further leg up in the U.S. economy. Picking winners and losers within the industry is

still difficult although the majors, including Exxon (XOM) and Conoco (COP), look very cheap at these price levels.

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***ECONOMY GOOD IMPACTS

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CCP Instability

Growth is vital to stop CCP instabilityLong, 10 (Yang, Ph.D. from Jilin University, professor at Nankai University in Tianjin, “Potential Instability Caused by the Financial Crisis – Measures Taken by the Chinese,” Duisburg Working Papers On East Asian Studies, Number 86, pg. 22-29, http://www.uni-due.de/in-east/fileadmin/publications/gruen/paper86.pdf, Tashma)The global financial crisis stemming from the U nited States has led to the decline of China’s economic

growth, caused rising unemployment, stock market declines, business failures, and reduced import and export trade. History and international experience have shown that an economic crisis or recession and a shift from a period of

growth are prone to cause problems of political and social stability . Once economic growth slows down

significantly, social contradictions and conflicts easily intensify . Alexis de Tocqueville found that social unrest was infrequent in places which experienced long-term economic stagnation, but was more likely to happen after a certain amount of

economic growth. It most likely happens at a point when an economy has stopped growing and begun to decline . The French Revolution, for example occurred in just such circ*mstances. 2 Thus deterioration of a stable economic environment leads to explosive social contradictions. When the deterioration is slight, it will cause local social tensions; but when

an economy deteriorates seriously, it will cause severe problems in political stability , such as social turmoil,

political crisis or even a regime change . Conversely, political instability will cause the government to respond to an economic crisis feebly, thus deepening the economic crisis and initiating a vicious circle. Influenced by the U.S. financial crisis,

China is now facing the risk of social instability from two sides. First, former potential instability was intensified by the economic downturn, including a class conflict of interest resulting from the large gap between rich and poor and an urban and rural confrontation caused by a gap between urban and rural areas. To this was added a lack of security on the part of low-income

groups caused by poor coverage from the social security system and government corruption. Second, the financial crisis could still lead to further instability issues, including panic resulting from the failure of personal investments,

asset shrinkage, currency devaluation , dissatisfaction triggered by unemployment and non-employment of

peasant workers and university students, lack of confidence in the government because of a decline in living standards, and public discontent due to the unsuccessful government response to the crisis.

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China Miscalc

US Economic failure kills SQ check on Chinese miscalc Glaser 5/2/12 “China is Reacting to Our Weak Economy” Bonnie S. Glaser (senior fellow at the Center for Strategic and International Studies.) 5/2/2012 http://www.nytimes.com/roomfordebate/2012/05/02/are-we-headed-for-a-cold-war-with-china/china-is-reacting-to-our-weak-economy

To maintain peace and stability in the Asia-Pacific region and secure American interests, the United States must sustain its leadership and bolster regional confidence in its staying power. The key to those goals is reinvigorating the U.S. economy. Historically, the Chinese have taken advantage of perceived American weakness and shifts in the global balance of power. In 1974 China seized the Paracel Islands from Saigon just after the United States and the Socialist Republic of Vietnam signed the Paris Peace Treaty, which signaled the U.S. withdrawal from the region. When the Soviet leader Mikhail Gorbachev met one of Deng Xiaoping’s “three obstacles” requirements for better ties and withdrew from Can Ranh Bay, Vietnam, in 1988, China snatched seven of the Spratly Islands from Hanoi. Two decades later, as the United States-Philippines base agreement was terminated, China grabbed Mischief Reef from Manila. Beijing must not

be allowed to conclude that an economic downturn means our ability to guarantee regional stability has weakened. The Chinese assertive behaviors against its neighbors in recent years in the East China Sea, the South China Sea and the

Yellow Sea were in part a consequence of China’s assessment that the global financial crisis signaled the beginning of U.S. decline and a shift in the balance of power in China’s favor. The Obama administration’s “rebalancing” or “pivot” to Asia will help prevent Chinese miscalculation

and increase the confidence of U.S. partners in U.S. reliability as the ballast for peace and stability in the region. But failure to follow through with actions and resources would spark uncertainty and lead smaller

countries to accommodate Chinese interests in the region. Most important, the United States must revive its economy. China will inevitably overtake the United States as the largest economy in the world in the coming decade or two.

The United States must not let Beijing conclude that a relative decline in U.S. power means a weakened United States unable to guarantee regional peace and stability. The Chinese see the United States as mired in financial disorder, with an alarming budget deficit, high

unemployment and slow economic growth — which, they predict, will lead to America's demise as the sole global superpower. To avoid Chinese miscalculation and greater United States-China strategic competition, the United States needs to restore financial solvency and growth through bipartisan action.

China rise exacerbates regional insecurities, if US sucked in means nuke war. Lieven 6/12/2012 “Avoiding a US-China War” Anatol Lieven (Former associate at Carnegie Endowment for International Peace, editor at International Institute for Strategies, author of numerous books on foreign policy, doctorate in Political science, Senior Research Fellow for New America Foundation) 6/12/2012 http://www.nytimes.com/2012/06/13/opinion/avoiding-a-us-china-war.html?_r=2

This month, Defense Secretary Leon Panetta announced that by 2020, 60 percent of the U.S. Navy will be deployed in the Pacific. Last November, in Australia, President Obama announced the establishment of a U.S. military base in that country, and threw down an ideological gauntlet to China with his statement that the United States will “continue to speak candidly to Beijing about the importance of upholding international norms and respecting the universal human rights of the Chinese people.” The dangers inherent in present developments in American, Chinese and regional policies are set out in “The China Choice: Why America Should Share Power,” an important forthcoming book by the Australian international affairs expert

Hugh White. As he writes, “Washington and Beijing are already sliding toward rivalry by default.” To escape this, White makes a strong argument for a “concert of powers” in Asia, as the best — and perhaps only — way that this looming confrontation can be avoided. The economic basis of such a U.S.-China agreement is indeed already in place. The danger of conflict does not stem from a Chinese desire for global leadership. Outside East Asia, Beijing is sticking to a very cautious policy, centered on commercial advantage without military components, in part because Chinese leaders realize that it would take decades and colossal naval expenditure to allow them to mount a global challenge to the United States, and that even then they would almost certainly fail. In East Asia, things are very different. For most of its history, China has dominated the region. When it becomes the largest economy on earth, it will certainly seek to do so. While China cannot build up naval forces to challenge the United States in distant oceans, it would be very surprising if in future it will not be able to generate missile and air forces

sufficient to deny the U.S. Navy access to the seas around China. Moreover, China is engaged in territorial disputes with other states in the region over island groups — disputes in which Chinese popular nationalist sentiments have become heavily engaged. With communism dead, the Chinese administration has relied very heavily — and successfully — on nationalism as an ideological support for its rule. The problem is that if clashes erupt over these islands, Beijing may find itself in a position where it cannot compromise without severe damage to its domestic legitimacy — very much the position of the European great powers in 1914. In these disputes, Chinese nationalism collides with other nationalisms — particularly that of Vietnam, which embodies strong historical resentments. The hostility to China of Vietnam and most of the other regional states is at once America’s greatest asset

and greatest danger. It means that most of China’s neighbors want the United States to remain

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militarily present in the region. As White argues, even if the United States were to withdraw, it is highly unlikely that these

countries would submit meekly to Chinese hegemony. But if the United States were to commit itself to a military alliance with these countries against China, Washington would risk embroiling America in their territorial disputes. In the event of a military clash between Vietnam and China, Washington would be faced with the choice of either holding aloof and seeing its credibility as

an ally destroyed, or fighting China. Neither the United States nor China would “win” the resulting war

outright, but they would certainly inflict catastrophic damage on each other and on the world economy. If the conflict escalated into a nuclear exchange, modern civilization would be wrecked. Even a prolonged period of military and strategic rivalry with an economically mighty China will gravely weaken America’s global position. Indeed, U.S. overstretch is already apparent — for example in Washington’s neglect of the crumbling states of Central America. To avoid this, White’s suggested East Asian order would establish red lines that the United States and China would both agree not to cross — most notably a guarantee not to use force without the other’s permission, or in clear self-defense. Most sensitively of all, while China would have to renounce the use of force against Taiwan, Washington would most probably have to publicly commit itself to the reunification of Taiwan with China. Equally important, China would have to acknowledge the legitimacy of the U.S. presence in East Asia, since this is desired by other East Asian states, and the United States would have to acknowledge the legitimacy of China’s existing political order, since it has brought economic breakthrough and greatly enhanced real freedoms to the people of China. Under such a concert, U.S. statements like those of President Obama in support of China’s democratization would have to be jettisoned. As White argues, such a concert of power between the United States, China and regional states would be so difficult to arrange that “it would hardly be worth considering if the alternatives were not so bad.” But as his book brings out with chilling force, the alternatives may well be catastrophic.

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China War

Economic growth is key to prevent U.S-China Conflict HSU 11-[“Economic Ties Could Help Prevent US-China War” Jeremy Hsu, Innovation NewsDaily Senior Writer; 01 November 2011 05:32 PM ET; http://www.innovationnewsdaily.com/660-china-military-cyber-national-security.html]

As the U.S. faces China's economic and military rise, it also holds a dwindling hand of cards to play in the unlikely case of open conflict. Cyberattacks aimed at computer networks, targeted disabling of satellites or economic warfare could end up bringing down both of the frenemies . That means ensuring the U.S. economy remains strong and well-balanced, with China's economy possibly representing the best deterrent, according to a new report. The Rand Corporation's analysts put low odds on a China-U.S. military conflict taking place, but still lay out danger scenarios where the U.S. and China face greater risks of stumbling into an unwanted war with one another. They point to the economic codependence of both countries as the best bet against open conflict, similar to how nuclear weapons ensured mutually assured destruction for the U.S. and Soviet Union during the Cold War. War Militaria Collectors www.JCAmericana.comWe Buy War Artifacts & Militaria Free Appraisals for AuthenticityLearn German in 10 Days PimsleurApproach.com/Learn-GermanWorld-famous Pimsleur Method. As seen on PBS - $9.95 w/ Free S&H.VA Home Loan for Veterans www.VAMortgageCenter.comGet a Quote in 2 Minutes! VA Loans now Up to $729,000 with $0 Down. Ads by Google "It is often said that a strong economy is the basis of a strong defense," the Rand report says. "In the case of China, a strong U.S. economy is not just the basis for a strong defense, it is itself perhaps the best defense against an adventurous China." Such "mutually assured economic destruction" would devastate both the U.S. and China, given how China represents America's main creditor and manufacturer. The economic fallout could lead to a global recession worse than that caused by the financial crisis of 2008-2009. The U.S. still spends more than five times on defense compared with China, but Rand analysts suggest that China's defense budget could outstrip that of the U.S. within the next 20 years. The U.S. Air Force and Navy's current edge in the Pacific has also begun to shrink as China develops aircraft, ships, submarines and missiles capable of striking farther out from its coast. Existing U.S. advantages in cyberwar and anti-satellite capabilities also don't offset the fact that the U.S. military depends far more heavily on computer networks and satellites than China's military. That makes a full-out cyberwar or satellite attacks too risky for the U.S., but perhaps also for China. "There are no lives lost — just extensive harm, heightened antagonism, and loss of confidence in network security," Rand analysts say. "There would be no 'winner.'" Open military conflict between China and the U.S. could also have "historically unparalleled" economic consequences even if neither country actively engages in economic warfare, Rand analysts say. The U.S. could both boost direct defense in the unlikely case of war and reduce the risk of escalation by strengthening China's neighbors. Such neighbors, including India, South Korea, Japan and Taiwan, also represent possible flashpoints for China-U.S. conflict in the scenarios laid out by the Rand report. Other possible danger zones include the South China Sea, where China and many neighboring countries have disputes over territorial claims, as well as in the murkier realm of cyberspace. Understandably, China has shown fears of being encircled by semi-hostile U.S. allies. That's why Rand analysts urged the U.S. to make China a partner rather than rival for maintaining international security. They also pointed out, encouragingly, that China has mostly taken "cautious and pragmatic" policies as an emerging world power. "As China becomes a true peer competitor, it also becomes potentially a stronger partner in the defense as well as economic field," the Rand analysts say.

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Democracy

Growth key to democracyMarquardt, 5 (Michael J., Professor of Human Resource Development and International Affairs, George Washington University, Globalization: The Pathway to Prosperity, Freedom and Peace,” Human Resource Development International, March 2005, Volume 8, Number 1, pg. 127-129, Taylor and Francis, Tashma)Freidman (2001) points out that globalization has provided the best opportunities for democracies and

good governance – Mexico , Ghana , and Bangladesh are just a few examples. The poorest countries and the least democratic countries – North Korea, Burma, Cuba, and Sudan – are also the least globalized countries.

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Disease

Growth allows for effective measures to prevent diseaseFidler, 8 (David P., Professor of Law, Indiana University, University Center on American and Global Security, “After the Revolution: Global Health Politics in a Time of Economic Crisis and Threatening Future Trends,” Global Health Governance, Fall 2008/Spring 2009, Volume 2, Number 2, Tashma)Further, the global economic crisis is absorbing ever larger amounts of capital to keep governments,

financial institutions, and corporations afloat , which drastically reduces the availability of resources for addressing the growing costs of providing adequate public health and health care for populations around the world . Even before the global economic crisis hit, experts argued that the unprecedented increases in national spending and development assistance for health were inadequate and, even worse, that many developed donor countries had not fulfilled existing aid pledges. 56 Thus, maintaining existing levels of domestic spending and development assistance on health would not be sufficient, but increased expenditures seem unlikely for years while the global economy recovers. The more likely scenario is reductions in health spending within national budgets and in foreign aid programs. Such reductions, even if shortlived, will have a severe impact on global health activities already desperately in need of more financial resources. Perhaps the cruelest irony of the global economic crisis is its emergence in the year WHO and global health stakeholders renewed the push for achieving primary health care for all. The report of the Commission on Social Determinants of Health advocated for primary health care in 2008.57 The World Health Report 2008 focused on primary health care, 58 and the WHO Director-General connected the new emphasis on primary health care to the Declaration of AlmaAta, which first launched the “health for all” strategy based on universal primary health care in 1978.59 However, 30 years ago, the Alma-Ata strategy was derailed by developments in the energy and economic sectors that sound ominously familiar, as the WHO Director-General recognized in September 2008: Nor could the visionary thinkers in 1978 have foreseen world events: an oil crisis [that began in 1979], a global recession [in the early 1980s], and the introduction [in the 1980s], by development banks, of structural adjustment programmes that shifted national budgets away from the social services, including health. As resources for health diminished, selective approaches using packages of interventions gained favour over the intended aim of fundamentally reshaping health care. The emergence of HIV/AIDS, the associated resurgence of tuberculosis, and an increase in malaria cases moved the focus of international public health away from broad-based programmes and towards the urgent

management of highmortality emergencies.60 The effort to rejuvenate the primary health care movement in a year in which global food,

energy, and economic crises emerged proved ill-timed, and the worsening nightmare of the global economic crisis threatens even more damage to the political , economic , and social conditions needed to achieve progress

on universal primary health care. Put another way, political, economic, and intellectual capital for advancing the primary

health care agenda will, for the foreseeable future, be in short supply. Instead, as with the energy and food crises, global health finds itself scrambling to address an emergency with potentially devastating consequences for the health of individuals and populations, health services and systems, and the social determinants of health.

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Hegemony

Economic collapse kills primacyBandow 8 10/11, *Doug Bandow is a senior fellow at the Cato Institute, specializing in foreign policy and civil liberties, “Economic Collapse: The Financial Death of the US Empire,” http://original.antiwar.com/doug-bandow/2008/10/10/economic-collapse-the-financial-death-of-the-us-empire/, AJ

The American empire is kaput. Neither John McCain nor Barack Obama realizes that fact yet, but the myth of the omnipotent unipower, the essential nation, the country which declares that what it says goes, has been exposed to all. The Iraq debacle sullied Washington’s reputation, but did not destroy the illusion of American indispensability. Assorted politicians, like McCain

and Obama, promised to restore US primacy, either through more bluster or better diplomacy. But the financial crash has wrecked the economic basis of America’s imperial pretentions . Washington simply can’t afford to attempt to run the world any longer. The US stock market has dropped 2500 points in 9 days. Trillions of dollars in wealth disappeared as the Dow lost six years worth of growth. The Bush administration and Congress have tossed ever increasing amounts of money at failing firms, hoping to appease the economic gods, rather as the ancient Canaanites sacrificed children to Baal. But the markets refuse to be appeased, and financial contagion has circled the globe. As Congress and the president continue to pile debt upon debt,

America’s financial problems will cascade . In May the Congressional Budget Office warned: "Budget deficits that grow faster than the economy ultimately become unsustainable . As the government attempts to finance its interest payments by issuing more debt, the rise in deficits accelerates. That, in turn, leads to a vicious circle in which the government issues ever-larger amounts of debt in order to pay ever-higher interest charges. In the end, the costs of servicing the debt outstrip the economic resources available for financing those expenditures. At some point, then, policy has to change: Taxes must be raised, spending

must be reduced, or both." It’s one thing to act like the global dominatrix when the country is living on easy street, enjoying record economic growth and government revenue. But as the economy is crashing and

Uncle Sam will soon have to visit the equivalent of global loan sharks to finance its operations, the time for the pretention of international hegemony is over. Empire isn’t worth the risk to American society or the lives of American

military personnel. It certainly isn’t worth the cost, especially at a time of economic crisis . Let us make John Quincy Adams’ apt dictum the lodestar of our new foreign policy: America "goes not abroad in search of monsters to destroy. She is the well-wisher to the freedom and independence of all. She is the champion and vindicator only of her own."

Hegemony solves conflict---your defense doesn’t applyKagan 12 2/11, *Robert Kagan: Senior Fellow, Foreign Policy, Center on the United States and Europe for The New Republic, “Why the World Needs America,” http://online.wsj.com/article/SB10001424052970203646004577213262856669448.html, AJ

History shows that world orders, including our own, are transient. They rise and fall, and the institutions they erect, the beliefs and "norms" that guide them, the economic systems they support—they rise and fall, too. The downfall of the Roman Empire brought an end not just to Roman rule but a and law and to an entire economic system stretching from Northern Europe to North Africa. Culture, the arts, even progress in science and technology, were set back for centuries. Many of us take for granted how the world looks today. But it might look a lot different without America at the top. The Brookings Institution's Robert Kagan talks with Washington bureau chief Jerry Seib about his new book, "The World America Made," and whether a U.S. decline is inevitable. Modern history has followed a similar pattern. After the Napoleonic Wars of the early 19th century, British control of the seas and the balance of great powers on the European continent provided relative security and stability. Prosperity grew, personal freedoms expanded, and the world was knit more closely together by revolutions in commerce and communication. With the outbreak of World War I, the age of settled peace and advancing liberalism—of European civilization approaching its pinnacle—collapsed into an age of hyper-nationalism, despotism and economic calamity. The once-promising spread of democracy and liberalism halted and then reversed course, leaving a handful of outnumbered and besieged democracies living nervously in the shadow of fascist and totalitarian neighbors. The collapse of the British and European orders in the 20th century did not produce a new dark age—though if Nazi Germany and imperial Japan had prevailed, it might have—but the horrific conflict that it produced was, in its own way, just as devastating. Would the end of the present American-dominated order have less dire consequences? A surprising number of American intellectuals, politicians and policy makers greet the prospect with equanimity. There is a general sense that the end of the era of American pre-eminence, if and when it comes, need not mean the end of the present international order, with its widespread freedom, unprecedented global prosperity (even amid the current economic crisis) and absence of war among the great powers. American power may diminish, the political scientist G. John Ikenberry argues, but "the underlying foundations of the liberal international order will survive and thrive." The commentator Fareed Zakaria believes that even as the balance shifts against the U.S., rising powers like China "will continue to live within the framework of the current international system." And there are elements across the political spectrum—Republicans who call for retrenchment, Democrats who put their faith in international law and institutions—who don't imagine that a "post-American world" would look very different from the American world. If all of this sounds too good to be true, it is. The present world order was largely shaped by American power and reflects American interests and preferences. If the balance of power shifts in the direction of other nations, the world order will change to suit their interests and preferences. Nor can we assume that all the great powers in a post-American world would agree on

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the benefits of preserving the present order, or have the capacity to preserve it, even if they wanted to. Take the issue of democracy. For several decades, the balance of power in the world has favored democratic governments. In a genuinely post-American world, the balance would shift toward the great-power autocracies . Both Beijing and Moscow already protect dictators like Syria's Bashar al-Assad. If they gain greater relative influence in the future, we will see fewer democratic transitions and more autocrats hanging on to power. The balance in a new, multipolar world might be more favorable to democracy if some of the rising democracies—Brazil, India, Turkey, South Africa—picked up the slack from a declining U.S. Yet not all of them have the desire or the capacity to do it. What about the economic order of free markets and free trade? People assume that China and other rising powers that have benefited so much from the present system would have a stake in preserving it. They wouldn't kill the goose that lays the golden eggs. A Romney Adviser Read by Democrats Robert Kagan's new book, "The World America Made," is finding an eager readership in the nation's capital, among prominent members of both political parties. Around the time of President Barack Obama's Jan. 24 State of the Union Address, Washington was abuzz with reports that the president had discussed a portion of the book with a group of news anchors. Mr. Kagan serves on the Foreign Policy Advisory Board of Secretary of State Hillary Clinton, but more notably, in this election season, he is a foreign policy adviser to the presidential campaign of Mitt Romney. The president's speech touched upon the debate over whether America is in decline, a central theme of Mr. Kagan's book. "America is back," he declared, referring to a range of recent U.S. actions on the world stage.

"Anyone who tells you otherwise, anyone who tells you that America is in decline or that our influence has waned, doesn't know what they're talking about," he continued. "America remains the one indispensable nation in world affairs—and as long as I'm president, I intend to keep it that way." Says Mr. Kagan: "No president wants to preside over American decline, and it's good to see him repudiate the idea that his policy is built on the idea that American influence must fade." Unfortunately, they might not be able to help themselves. The creation and survival of a liberal economic order has depended, historically, on great powers that are both willing and able to support open trade and free markets, often with naval power. If a declining America is unable to maintain its long-

standing hegemony on the high seas, would other nations take on the burdens and the expense of sustaining

navies to fill in the gaps? Even if they did, would this produce an open global commons—or rising tension? China and India are building bigger navies, but the result so far has been greater competition, not greater security. As Mohan Malik has noted in this newspaper, their "maritime rivalry could spill into the open in a decade or two,"

when India deploys an aircraft carrier in the Pacific Ocean and China deploys one in the Indian Ocean. The move from American-dominated oceans to collective policing by several great powers could be a recipe for competition and conflict rather than for a liberal economic order . And do the Chinese really value an

open economic system? The Chinese economy soon may become the largest in the world, but it will be far from the richest. Its size is a product of the country's enormous population, but in per capita terms, China remains relatively poor. The U.S., Germany and Japan have a per capita GDP of over $40,000. China's is a little over $4,000, putting it at the same level as Angola, Algeria and Belize. Even if optimistic forecasts are correct, China's per capita GDP by 2030 would still only be half that of the U.S., putting it roughly where Slovenia and Greece are today. As Arvind Subramanian and other economists have pointed out, this will make for a historically unique situation. In the past, the largest and most dominant economies in the world have also been the richest. Nations whose peoples are such obvious winners in a relatively unfettered economic system have less temptation to pursue protectionist measures and have more of an incentive to keep the system open. China's leaders,

presiding over a poorer and still developing country, may prove less willing to open their economy . They have already begun closing some sectors to foreign competition and are likely to close others in the future. Even optimists like Mr. Subramanian believe that the liberal economic order will require "some insurance" against a scenario in which "China exercises its dominance by either reversing its previous policies or failing to open areas of the economy that are now highly protected." American economic dominance has been welcomed by much of the world because, like the mobster Hyman Roth in "The Godfather," the U.S. has always made money for its partners.

Chinese economic dominance may get a different reception. Another problem is that China's form of capitalism is heavily dominated by the state, [is] with the ultimate goal of preserving the rule of the Communist Party. Unlike the eras of British and American pre-eminence, when the leading economic powers were dominated largely by

private individuals or companies, China's system is more like the mercantilist arrangements of previous centuries. The government amasses wealth in order to secure its continued rule and to pay for armies and navies to compete with other great powers. Although the Chinese have been beneficiaries of an open international economic order, they could end up undermining it simply because, as an autocratic society, their priority is to preserve the state's control of wealth and the power that it brings. They might kill the goose that lays the golden eggs because they can't figure out how to keep both it and themselves alive. Finally, what about the long peace that has held among the great powers for the better part of six decades? Would it survive in a post-American world? Most commentators who welcome this scenario imagine that American

predominance would be replaced by some kind of multipolar harmony. But multipolar systems have historically been neither particularly stable nor particularly peaceful . Rough parity among powerful nations is a source of uncertainty that leads to miscalculation . Conflicts erupt as a result of fluctuations in

the delicate power equation. War among the great powers was a common, if not constant, occurrence in the long periods of multipolarity from the 16th to the 18th centuries, culminating in the series of enormously destructive Europe-wide wars that followed the French Revolution and ended with Napoleon's defeat in 1815. The 19th century was notable for two stretches of great-power peace of roughly four decades each, punctuated by major conflicts. The Crimean War (1853-1856) was a mini-world war involving well over a million Russian, French, British and Turkish troops, as well as forces from nine other nations; it produced almost a half-million dead combatants and many more wounded. In the Franco-Prussian War (1870-1871), the two nations together fielded close to two million troops, of whom nearly a half-million were killed or wounded. The peace that followed these conflicts was characterized by increasing tension and competition , numerous war scares and massive increases in armaments on both land and sea . Its

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climax was World War I, the most destructive and deadly conflict that mankind had known up to that point. As the political scientist Robert W. Tucker has observed, "Such stability and moderation as the balance brought rested ultimately on the threat or use of force. War remained the essential means for maintaining the balance of power." There is little reason to believe that a return to multipolarity in the 21st century would bring greater peace and stability than it has in the past. The era of American predominance has shown that there is no better recipe for great-power peace than certainty about who holds the upper hand. President Bill Clinton left office believing that the key task for America was to "create the world we would like to live in when we are no longer the world's only superpower," to prepare for "a time when we would have to share the stage." It is an eminently sensible-sounding proposal. But can it be done? For particularly in matters of security, the rules and institutions of international order rarely survive the decline of the nations that erected them. They are like scaffolding around a building: They don't hold the building up; the building holds them up. It will last only as long as those who favor it retain the will and capacity to defend it. Many foreign-policy experts see the present international order as the inevitable result of human progress, a combination of advancing science and technology, an increasingly global economy, strengthening international institutions, evolving "norms" of international behavior and the gradual but inevitable triumph of liberal democracy over other forms of government—forces of change that transcend the actions of men and nations. Americans certainly like to believe that our preferred order survives because it is right and just—not only for us but for everyone. We assume that the triumph of democracy is the triumph of a better idea, and the victory of market capitalism is the victory of a better system, and that both are irreversible. That is why Francis f*ckuyama's thesis about "the end of history" was so attractive at the end of the Cold War and retains its appeal even now, after it has been discredited by events. The idea of inevitable evolution means that there is no requirement to impose a decent order. It will merely happen. But international order is not an evolution; it is an imposition. It is the domination of one vision over others—in America's

case, the domination of free-market and democratic principles, together with an international system that supports them. The present order will last only as long as those who favor it and benefit from it retain the will and capacity to defend it. There was nothing inevitable about the world that was created after World War II. No divine providence or unfolding Hegelian dialectic required the triumph of democracy and capitalism, and there is no guarantee that their success will outlast the powerful nations that have fought for them. Democratic progress and liberal economics have been and can be reversed and undone. The ancient democracies of Greece and the republics of Rome and Venice all fell to more powerful forces or through their own failings. The evolving liberal economic order of Europe collapsed in the 1920s and 1930s. The better idea doesn't have to win just because it is a better idea. It requires great powers to champion it. If and when American power declines, the institutions and norms that American power has supported will decline, too. Or more likely, if history is a guide, they may collapse altogether as we make a transition to another kind of

world order, or to disorder. We may discover then that the U.S. was essential to keeping the present world order together and that the alternative to American power was not peace and harmony but chaos and catastrophe —which is what the world looked like right before the American order came into being.

US Economy key to global economy and heg—multiple warrants Tellis 10 Strategic Asia 2009-2010, Economic Meltdown and Geopolitical Stability. The National Bureau of Asian Research. Edited by Ashley J. Tellis, Andrew Marble, and Travis Tanner Overview The Global Economic Crisis and U.S. Power Ashley J. Tellis (Ashley J. Tellis is a senior associate at the Carnegie Endowment for International Peace, specializing in international security, defense, and Asian strategic issues. While on assignment to the U.S. Department of State as senior adviser to the Undersecretary of State for Political Affairs, he was intimately involved in negotiating the civil nuclear agreement with India.)

http://www.nbr.org/publications/strategic_asia/pdf/Preview/SA09/SA09_Overview_preview.pdf

The current global recession is certainly the worst economic crisis that has afflicted the international system since the Great

Depression. What began in the United States in 2007 as a financial crisis centered on failing subprime mortgages soon expanded into a larger recession that engulfed the real economy and thereafter was transmitted globally. The Business Cycle Dating Committee of the National Bureau of Economic Research has now concluded that the current recession in the United States began in December 2007 when payroll employment peaked before beginning the downward slope from which it has yet to recover. 1 By September 2008, when the shocking bankruptcy of Lehman Brothers publicly signaled the advent of the financial crisis, the recession in the United States had indeed become severe measured by either the contraction in national output or the aggregate hours worked in the national economy. At the time of this writing in June 2009, the current national downturn has already exceeded the longest previous contraction since the Great Depression—the

1981–82 recession, which lasted sixteen months. 2 Thanks to the consequences of globalization, this recent crisis has left a dramatic impact on the international economic system as a whole. The transmission of

the deepening U.S. economic crisis to the global economy has occurred through multiple paths. For starters, weakening U.S. demand has depressed the imports of foreign goods and services, thereby affecting all of the United States’ major trading partners irrespective of how healthy their own economies might have been otherwise. The

slowing of U.S. economic growth has also affected the major natural resource exporting states, including oil and energy producers, whose own economic prospects are tied substantially to the high

resource prices that were the norm during periods of sustained growth. Further, the failing financial markets in the

United States and the falling stock prices in all U.S. bourses not only eroded the asset base of many multinational businesses but also undermined the ability of numerous foreign firms to raise capital in the United States. Declining securities prices in U.S. stock markets led to a dilution of the values of assets

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traded in other foreign stock exchanges as expectations of a contracting real economy both globally and within individual countries found quick reflection in falling stock prices, which are little other than indices reflecting investors’ anticipation of future income. The spiral of contracting credit triggered by the initial failures of U.S. financial institutions also resulted in reduced portfolio and direct foreign investments in foreign countries, a change that exacerbated macroeconomic balances and balance of payments

problems in countries whose economic fundamentals were already precarious. Finally, states that were afflicted by their own asset bubbles, manifested through the presence of non-performing loans in their financial systems, also experienced crashes. In many cases, the exposure of domestic financial institutions to troubled international partners and to problematic contracts, including derivatives, that have seen sharp reductions

in value contributed to replicating the U.S. contraction with varying degrees of intensity and scale. The cumulative effect of the U.S. economic crisis and its international spillover has been a global economic recession of significant magnitude. As the World Bank has noted, the current recession could result in the global economy contracting for the first time since World War II, with global trade also expected to fall for the first time in three decades.

With both direct and portfolio-based foreign investment tightening, the bank estimates that sharply constrained credit and higher interest rates will become significant constraints in many developing countries, with GDP growth in 2009, for example, expected to fall to 1.6% from the relatively high level of 5.8% the previous year. Since any global growth of under 2% per annum is considered a recession, the bank calculates that this depressed economic performance will likely trap some 90 million more people in poverty in 2009, with a billion or more people going chronically hungry. 3 Even as these tragedies unfold in the developing world, however, the situation in the developed market economies is barely recognizable. The extent of state intervention that the current crisis has engendered in countries that were long the example of successful capitalism is mind-boggling. While significant monetary easing generally occurs in any recessionary environment, the difficulty in stimulating economic growth despite the persistence of a zero nominal interest rate in the United States has once again breathed new life into the old fears that the U.S. economy might find itself in a Keynesian “liquidity trap” where even low interest rates cannot stimulate increases in investment and employment. In an effort to escape this snare, government spending in the United States and across much of Western Europe has ballooned dramatically, producing huge budget deficits of the kind not witnessed before. Sustaining these unprecedented budget deficits has been complemented by historically exceptional large-scale state acquisitions of troubled private sector assets— from banks to automobile makers—as governments struggle to keep major private employers afloat even as they attempt to resuscitate economic activity through loose monetary policies. The continuance of such intervention has raised fears about the long term impact of growing national deficits, which could precipitate inflation and rising interest rates leading to stagflation in the worst case. The United States has been able to sustain such massive government

spending in the near term only because the dollar still remains the international reserve currency. Because international lenders appear willing to sustain U.S. deficit spending on a significant scale, policymakers in Washington enjoy the luxury of being able to sustain such expenditures without triggering inflationary pressures immediately. Whether the United States can continue to live beyond its means indefinitely, however, is a critical issue and one that in many ways remains the underappreciated cause of the current crisis. This problem raises important questions about whether the binary deficits—the budgetary deficit and the current account deficit—can be sustained without severely undermining U.S. hegemony and with it the current global system that ultimately serves U.S. interests.

The current economic crisis and the character of state responses to that crisis, then, bear upon two

consequential matters: first, the future of capitalism as a mode of economic organization and, second,

the future of U.S. power. Both these issues are undoubtedly interlinked. If capitalism as a mode of production has been irretrievably damaged by the current economic The transmission of the deepening U.S. economic crisis to the global economy has

occurred through multiple paths. For starters, weakening U.S. demand has depressed the imports of foreign goods and services, thereby affecting all of the United States’ major trading partners irrespective of how healthy their own economies might have been otherwise. The slowing of U.S. economic growth has also affected the major natural resource exporting states, including oil and energy producers, whose own economic prospects are

tied substantially to the high resource prices that were the norm during periods of sustained growth. Further, the failing financial markets in the United States and the falling stock prices in all U.S. bourses not only eroded the asset base of many multinational businesses but also undermined the ability of numerous foreign firms to raise capital in the United States. Declining securities prices in U.S. stock markets led to a dilution of the values of assets traded in other foreign stock exchanges as expectations of a contracting real economy both globally and within individual countries found quick reflection in falling stock prices, which are little other than indices reflecting investors’ anticipation of future income. The spiral of contracting credit triggered by the initial failures of U.S. financial institutions also resulted in reduced portfolio and direct foreign investments in foreign countries, a change that exacerbated macroeconomic balances and balance of payments problems in countries whose economic fundamentals were already precarious. Finally, states that were afflicted by their own asset bubbles, manifested through the presence of non-performing loans in their financial systems, also experienced crashes. In many cases, the exposure of domestic financial institutions to troubled international partners and to problematic contracts, including derivatives, that have seen sharp reductions in value contributed to replicating the U.S. contraction with varying degrees of intensity and scale

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Inflation

Inflation guarantees economic decline, loss of competitiveness, and extinction via environmental crisisPorteous 6 2/26, *RUCE PORTEOUS is currently Head of Financial Risk with Standard Life Bank in Edinburgh, Scotland. He has a degree in Mathematical Statistics from Edinburgh University, Scotland, and postgraduate degrees, including a PhD, in Mathematical Statistics from Cambridge University, England, “The Coming Economic Collapse,” http://www.rense.com/general69/econm.htm, AJ

Printing money to solve a nation's economic problem can never be sustained . Eventually, it will lead to the debasing of a nations currency and run-away inflation. Yet for a short period, it can create an artificial prosperity, deluding the masses into believing this new prosperity can be sustained. The long-term consequences of inflating their money supply will spell disaster for America and Japan, and have dire consequences for the global economy . The rapid increase in the money supply of US dollars is the number one reason America's wealth has shifted from the US to Asia and Europe . In particular, China has benefited enormously from the inflow of dollars which has financed the rapid growth of its economy, providing the capital to develop their competitive export sector. The Asian economies high rates of personal savings have financed their domestic growth as well as finance the US deficits. This has continued to allow the USA to maintain its privileged position of retaining the $US dollar as the world's reserve currency; and allowing it to retain its global military and political dominance. 4 Damage to the global environment the increase of the money supply has stimulated economic growth to where the planet can no longer cope with the damage done to the environment. For the sake of short-term prosperity, we are destroying the ability of the planet to sustain life.

Economic decline makes US hegemony unsustainablePape 09 –[Robert A., Professor of Political Science at the University of Chicago, “The Empire Falls” from The National Interest, http://www.nationalinterest.org/Article.aspx?id=20484 , June 28, 2010]

THE EROSION of the underpinnings of U.S. power is the result of uneven rates of economic growth between America, China and other states in the world. Despite all the pro-economy talk from the Bush administration, the fact is that since 2000, U.S. growth rates are down almost 50 percent from the Clinton years. This trajectory is almost sure to be revised further downward as the consequences of the financial crisis in fall 2008 become manifest. As Table 3 shows, over the past two decades, the average rate of U.S. growth has fallen considerably, from nearly 4 percent annually during the Clinton years to just over 2 percent per year under Bush . At the same time, China has sustained a consistently high rate of growth of 10 percent per year—a truly stunning performance. Russia has also turned its economic trajectory around, from year after year of losses in the 1990s to significant annual gains since 2000 . Worse, America’s decline was well under way before the economic downturn, which is likely to only further weaken U.S. power. As the most recent growth estimates (November 2008) by the IMF make clear, although all major countries are suffering economically, China and Russia are expected to continue growing at a substantially greater rate than the United States. True, the United States has not lost its position as the most innovative country in the world, with more patents each year than in all other countries combined. However, the ability to diffuse new technology—to turn chalkboard ideas into mass-produced applications—has been spreading rapidly across many parts of the globe, and with it the ultimate sources of state power—productive capacities. America is losing its overwhelming technological dominance in the leading industries of the knowledge economy. In past eras—the “age of iron” and the “age of steel”—leading states retained their technological advantages for many decades.4 As Fareed Zakaria describes in his recent book, The Post-American World, technology and knowledge diffuse more quickly today, and their rapid global diffusion is a profound factor driving down America’s power compared to other countries. For instance, although the United States remains well ahead of China on many indicators of leading technology on a per capita basis, this grossly under-weights the size of the knowledge economy in China compared to America. Whereas in 2000, the United States had three times the computer sales, five times the internet users and forty times the broadband subscribers as China, in 2008, the Chinese have caught or nearly caught up with Americans in every category in the aggregate.5 The fact that the United States remains ahead of China on a per capita basis does matter—it means that China, with more than four times the U.S. population, can create many more knowledge workers in the future. So, how much is U.S. decline due to the global diffusion of technology, U.S. economic weaknesses under Bush or China’s superior economic performance? Although precise answers are not possible, one can gain a rough weighting of the factors behind America’s shrinking share of world production by asking a few simple counterfactual questions of the data. What would happen if we assumed that the United States grew during the Bush years at the same rate as during Clinton’s? What would have happened had the world continued on its same trajectory, but we assume China did not grow at such an astounding rate? Of course, these are merely thought experiments, which leave out all manner of technical problems like “interaction effects.” Still, these back-of-the-envelope approximations serve as useful starting points. The answers are pretty straightforward. Had the American economy grown at the (Clinton) rate of 3.7 percent per year from 2000 to 2008 instead of the (Bush) rate of 2.2 percent, the United States would have had a bigger economy in absolute terms and would have lost less power relative to others. Assuming the rest of the world continued at its actual rate of growth, America’s share of world product in 2008 would have risen to 25.2 percent instead of its actual 23.1 percent.6 When compared to the share of gross world product lost

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by the United States from 2000 to 2008—7.7 percent—the assumed marginal gain of 2.1 percent of world product amounts to some 27 percent of the U.S. decline. How much does China matter? Imagine the extreme case—that China had not grown, and the United States and the rest of the world continued along their actual path of economic growth since 2000. If so, America’s share of world product in 2008 would be 24.3 percent, or 1.2 percent more than today. When compared to the share of world product lost by the United States from 2000 to 2008—7.7 percent—the assumed marginal gain of 1.2 percent of world product accounts for about 15 percent of the U.S. decline. These estimates suggest that roughly a quarter of America’s relative decline is due to U.S. economic weaknesses (spending on the Iraq War, tax cuts, current-account deficits, etc.), a sixth to China’s superior performance and just over half to the spread of technology to the rest of the world. In other words, self-inflicted wounds of the Bush years significantly exacerbated America’s decline, both by making the decline steeper and faster and crowding out productive investment that could have stimulated innovation to improve matters. All of this has led to one of the most significant declines of any state since the mid-nineteenth century. And when one examines past declines and their consequences, it becomes clear both that the U.S. fall is remarkable and that dangerous instability in the international system may lie ahead. If we end up believing in the wishful thinking of unipolar dominance forever, the costs could be far higher than a simple percentage drop in share of world product. THE UNITED States has always prided itself on exceptionalism, and the U.S. downfall is indeed extraordinary. Something fundamental has changed. America’s relative decline since 2000 of some 30 percent represents a far greater loss of relative power in a shorter time than any power shift among European great powers from roughly the end of the Napoleonic Wars to World War II. It is one of the largest relative declines in modern history. Indeed, in size, it is clearly surpassed by only one other great-power decline, the unexpected internal collapse of the Soviet Union in 1991.

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Medicine Supply

Economic collapse hurts medicine supply – Greece provesSlavo, 12—writer and editor of SHTFPlan.com (Mac, “Consequences of Collapse: Access to Critical Medicines Is Disappearing In Greece”, SHTFPlan.com, 1/11/12, http://www.shtfplan.com/emergency-preparedness/consequences-of-collapse-access-to-critical-medicines-is-disappearing-in-greece_01112012)//JL

When a nation goes into economic crisis the paradigm to which its people have become accustomed begins to deteriorate. Access to critical supplies becomes difficult, sometimes immediately. In the case of Greece, which has been dealing with a loss of confidence in its debt instruments and economic policy, the collapse of life as Greeks know it has taken place over the last several years. While we have been fortunate enough to avoid as severe a calamity here in the United States, many of the forecasts put forth by ourselves and others regarding the effects of an economic collapse are already taking place in Europe, namely Greece. In the midst of the Greek panic in 2010, for example, as Greece’s meltdown was in full swing and the people scrambled to get out of paper currencies, the price of gold, which was trading for around $1100 an ounce in the global commodity exchange marketplace, soared to over $1700 an ounce on the streets of Greece. In recent months, as Greece implements austerity measures and the unemployment rate sky rockets, its people have lost the ability to engage in traditional commerce because, simply put, they have no tangible income or money to do so. As a result, we’ve begun seeing a barter society emerge all over the country, making it possible for some people to directly exchange labor for consumptive goods and service. When things get bad – and they will – the most essential items necessary for survival will disappear first . As currencies collapse, financial market destabilize and economies come to a standstill, critical supplies like food and medicine will become difficult to acquire at any price. This is exactly what is now taking place in Greece, where access to life-saving drugs and evencommon over-the-counter medicines like aspirin is becoming a tragedy where the losses will be measured not in Dollars or Euros, but lives.

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Mental Stability

Econ crisis causes mental instability – suicide and alcohol related deaths increase rapidlyW.H.O, 11—World Health Organization (“Impact of Economic Crisis on Mental Health”,http://www.euro.who.int/__data/assets/pdf_file/0008/134999/e94837.pdf)//JL

The economic crisis is expected to produce secondary mental health effects that may increase suicide and alcohol death rates. However, the mental health effects of the economic crisis can be offset by social welfare and other policy measures. For example, active labour market programmes aimed at helping people retain or regain jobs counteract the mental health effects of the economic crisis. Family support programmes contribute to counteracting the mental health effects of the crisis. Increasing alcohol prices and restricting alcohol availability reduce the harmful effects on mental health and save lives. Debt relief programmes will help to reduce the mental health effects of the economic crisis and accessible and responsive primary care services support people at risk and prevent mental health effects.

Economic crisis causes loss of stability WHO, 11—World Health Organization (“Impact of Economic Crisis on Mental Health”,http://www.euro.who.int/__data/assets/pdf_file/0008/134999/e94837.pdf)//JL

Good mental health allows for cognitive and emotional flexibility, which are the basis for social skills and resilience in the face of stress. This mental capital is vitally important for the healthy functioning of families, communities and society. As with individuals, societies can be more or less resistant to such stressors as economic crises. Economic shocks can destabilize public service budgets and affect education and health care systems. However, available data show that legislation for protecting social welfare can increase the resilience of communities to economic shocks and mitigate the mental health effects of unemployment and the stressrelated consequences of economic downturns. Conversely, while economic crises may have mental health effects, mental health problems have increasingly significant economic effects. The economic consequences of mental health problems – mainly in the form of lost productivity – are estimated to average 3– 4% of gross national product in European Union (EU) countries (4). Because severe mental disorders often start in adolescence or young adulthood, the loss of productivity can be long-lasting. Mental disorders account for more than one third of the years lived with disability in the WHO European Region (Fig. 1).

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Poverty

Econ Crisis causes poverty—and this increases mental illnessWHO, 11—World Health Organization (“Impact of Economic Crisis on Mental Health”,http://www.euro.who.int/__data/assets/pdf_file/0008/134999/e94837.pdf)//JLThe current economic crisis is increasing poverty in the European Region. The economic crisis will hit people with low income – and those made poor through loss of income or housing – the hardest (24). The economic crisis has increased the number of households in high debt, repossession of houses and evictions. The current economic crisis is probably increasing the social exclusion of vulnerable groups, low-income people and people living near the poverty line in the European Region (23). Such vulnerable groups include children, young people, single-parent families, unemployed people, ethnic minorities, migrants and older people. Economic pressure, through its influence on parental mental health, marital interaction and parenting, affects the mental health of children and adolescents (25–27). The effects of extreme poverty on children include deficits in cognitive, emotional and physical development, and the consequences on health and well-being are lifelong (28). Social gradients of health exist in Europe, and moving down the socioeconomic ladder due to loss of jobs and income affects people’s health (29). During recessions, social inequality in health can widen (30,31). The least well-educated people are at greatest risk of ill health after job loss (24). Unsurprisingly, substantial research has revealed that people who experience unemployment, impoverishment and family disruptions have a significantly greater risk of mental health problems, such as depression, alcohol use disorders and suicide, than their unaffected counterparts (32–41). Especially men are at increased risk of mental health problems (42) and death due to suicide (17) or alcohol use (43) during times of economic adversity. Unemployment contributes to depression (32) and suicide (44–46), and young unemployed people have a higher risk of getting mental health problems than young people who remain employed. Evidence indicates that debt, financial difficulties and housing payment problems lead to mental health problems (47–50). The more debt people have, the more likely they are to have mental disorders overall (Fig. 3) (51). The crisis will increase mortality linked to mental health problems. In the EU, increases in national unemployment rates are associated with increases in suicide rates (3,52). In the Russian Federation, the societal change after the dissolution of USSR in 1991 and the collapse of the trouble in 1998 have been followed by increases in alcohol related deaths (53). Likewise, great increases in unemployment have been linked to a 28% rise in deaths from alcohol use in the EU (3). It can be concluded that the economic crisis is likely to negatively affect health, especially mental health. The next sections outline possible measures to mitigate the mental health effects of the current crisis.

Poverty causes conflict---multiple scenariosBrainard 7 February 2007, *LAEL BRAINARD, NGOZI OKONJO-IWEALA, DEREK CHOLLET, SUSAN RICE, JANE NELSON: Brookings Global Experts, “CONFLICT AND POVERTY,” http://www.brookings.edu/~/media/research/files/reports/2007/2/globaleconomics/200702_02poverty.pdf, AJ

In a world where boundaries and borders have blurred, and where seemingly distant threats can metastasize into immediate problems, the fight against global poverty has become a fight for global security. American policymakers, who traditionally have viewed security threats as involving bullets and bombs, are increasingly focused on the link between poverty and conflict; for instance, the Pentagon’s 2006 Quadrennial Defense Review

focuses on fighting the “long war,” declaring that the U.S. military has a humanitarian role in “alleviating suffering, ... [helping] prevent disorder from spiraling into wider conflict or crisis .” Such assertions have a compelling logic. Extreme poverty literally kills: Hunger, malnutrition, and disease claim the lives of millions each year . Poverty exhausts governing institutions, depletes resources, weakens leaders, and crushes hope—fueling a volatile mix of desperation and instability. Poor, fragile states can explode into violence or implode into collapse , imperiling their citizens, neighbors and the wider world as livelihoods are crushed, investors flee and ungoverned territories become a spawning ground for terrorism, trafficking, environmental devastation and disease. Yet if poverty leads to insecurity, it is also true that the destabilizing effects of conflict make it harder for leaders, institutions and outsiders to promote human development. Civil wars may result in

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as many as 30 percent more people living in poverty—and as many as one-third of civil wars ultimately reignite. Tragically, poverty and insecurity are mutually reinforcing, leading to what Brookings scholar

Susan Rice evocatively calls a “doom spiral.” Conflict increases infant mortality, creates refugees, fuels trafficking in drugs and weapons, and wipes out infrastructure. It also makes it harder for outside players to

deliver assistance and less attractive for the global private sector to invest. Thus, once a country has fallen into the vortex, it is difficult for it to climb out —as the world has witnessed with the ongoing catastrophe in Democratic Republic of Congo, a crisis that has claimed nearly 4 million lives and sparked a massive humanitarian emergency, where most people today are killed not by weapons but by easily preventable and treatable diseases. Violent conflict also produces considerable economic spillover for neighboring

countries, as refugees flow in, investment pulls out and supply chains and trade routes are disrupted.

Economic decline increases poverty dramaticallyBaldacci, Mello, and Inchauste, 02— Deputy Division Chief, Economic Counsellor to the Chief Economist of the OECD, and senior economist with the IMF Institute (Emanuele, Luiz and Gabriela, “Financial Crisis, Poverty, and Income Distribution”, International Monetary Fund, June 2002, http://people.ucsc.edu/~hutch/Lund/Financial%20Crises%20and%20Poverty%20FD%20June%202002.pdf)//JL

Not surprisingly, we also find that financial crises deepen poverty and incomeinequality. A fall in GDP per capita in the wake of a financial crisis is associatedwith a deterioration in income distribution and an increase in poverty. As a crisiscauses a country's average income to decline, growing income inequality resultsfrom a more-than-proportional fall in the income share of the lowest incomequintiles of the population and an increase in the income share of the richest onefifth. Households in the lowest and second lowest quintiles are most likely to have incomes below the poverty line; thus, a fall in their incomes is more closelyassociated with an increase in poverty than is a decline in the incomes of higher income quintile households. But the main losers are not the poorest (lowest income quintile), who might be finding income in informal sector activities, but those in the second income quintile. Rising inflation is associated with an increase in the income share of middle-income groups and with a fall in the income share of the highest quintile. This can be attributed to the indexation of interest-bearing assets held by the middle class. Cutbacks in government spending on education, health care, and social security programs—the main ways tighter fiscal policy affects the poor—are associated with falling incomes for the poorest groups. Poverty seems to be particularly sensitive to a decrease in government spending on health care after a financial crisis.

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Terrorism

Growth solves terrorism Gries, Kriegery, Meierrieksz 09-[Causal Linkages Between Domestic Terrorism and Economic Growth; Thomas Gries, Tim Kriegery, Daniel Meierrieksz; February 17, 2009;http://groups.uni-paderborn.de/fiwi/RePEc/Working%20Paper%20neutral/WP20%20-%202009-02.pdf]

Possible E¤ects of Economic Performance on Terrorism Economic theory argues that terrorists are rational individuals which choose their levels of violent activity according to the costs and benefits arising from their actions (cf., e.g., Sandler and Enders, 2004). Because of terrorists’ presumed rationality, the opportunity costs of terror also matter. Intuitively, low opportunity costs of violence –that is, few prospects of economic activity –lead to elevated terrorist activity, whereas high opportunity costs result in the opposite (cf., e.g., Freytag et al., 2008). Times of economic success mean, inter alia, more individual economic opportunities and economic participation. Higher levels of overall growth should coincide with higher opportunity costs of terror and thus less violence. Conversely, in periods of economic downturn should be accompanied by fewer economic opportunities and participation and thus by more economic dissatisfaction. In times of economic crisis, dissidents are more likely to resort to violence as the opportunity costs of terror are low, while the potential long-run payo¤s from violence –a redistribution of scarce economic resources which is to be enforced by means of terrorism are comparatively high (cf. Blomberg, Hess and Weerapana, 2004). To some extent, empirical evidence suggests that economic performance and terrorism are linked along the lines discussed before. The findings of Collier and Hoe er (1998) indicate that higher levels of economic development coincide with lower likelihoods of civil war, providing initial evidence that economic success and con‡ict are diametrically opposed. Considering economic development and terrorism, several studies …nd that higher levels of development are obstacles to the production of transnational terrorism (cf., e.g., Santos Bravo and Mendes Dias, 2006; Lai, 2007; Freytag et al., 2008). Blomberg and Hess (2008) also …and that higher incomes are a strong deterrence to the genesis of domestic terrorism. Furthermore, there is evidence connecting solid short-run economic conditions with less political violence (cf. Muller andWeede, 1990; Freytag et al., 2008).6 In general, the evidence indicates that terrorism and economic conditions are linked. Here, economic success seems to impede the genesis of terrorism, presumably due to higher opportunity costs of con‡ict. In other words, in times of stronger economic performance individuals simply have more to lose.

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***SPECIFIC SECTORS

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Transportation (Generic)

Solves economic growth and innovationASCE 11 *American Society of Civil Engineers, “Failure to Act: The economic impact of current investment trends in surface Transportation infrastructure,” http://www.asce.org/uploadedFiles/Infrastructure/Report_Card/ASCE-FailureToActFinal.pdf, AJ

The nation’s surface transportation infrastructure includes the critical highways, bridges, railroads, and transit systems that enable people and goods to access the markets, services, and inputs of production essential to America’s economic vitality . For many years, the nation’s surface transportation infrastructure has been deteriorating. Yet because this deterioration has been diffused throughout the nation, and has occurred gradually over time, its true costs and economic impacts are not always immediately apparent. In practice, the transportation funding that is appropriated is spent on a mixture of system expansion and preservation projects. Although these allocations have often been sufficient to avoid the imminent failure of key facilities, the continued deterioration leaves a significant and mounting burden on the U.S. economy. This burden will be explored further in this report. Deteriorating conditions and performance impose costs on American households and businesses in a number of ways. Facilities in poor condition lead to increases in operating costs for trucks, cars, and rail vehicles. Additional costs include damage to vehicles from deteriorated roadway surfaces, imposition of both additional miles traveled, time expended to avoid unusable or heavily congested roadways or due to the breakdown of transit vehicles, and the added cost of repairing facilities after they have deteriorated as opposed to preserving them in good condition. In addition, increased congestion decreases the reliability of transportation facilities, meaning that travelers are forced to allot more time for trips to assure on-time arrivals (and for freight vehicles, on-time delivery). Moreover, it increases environmental and safety costs by exposing more travelers to substandard travel conditions and requiring vehicles to operate at less efficient levels. As conditions continue to deteriorate over time, they will increasingly detract from the ability of American households and businesses to be productive and prosperous at work and at home. This report is about the effect that surface transportation deficiencies have, and will continue to have, on U.S. economic performance. For the purpose of this report, the term “deficiency” is defined as the extent to which roads, bridges, and transit services fall below standards defined by the U.S. Department of Transportation as “minimum tolerable conditions” (for roads and bridges) and “state of good repair” for transit1. These standards are substantially lower than ideal conditions, such as “free-flow2,” that are used by some researchers as the basis for highway analysis. This report is about the effect these deficiencies have, and will continue to have, on U.S. economic performance. In 2010, it was estimated that deficiencies in America’s surface transportation systems cost households and businesses nearly $130 billion. This included approximately $97 billion in vehicle operating costs, $32 billion in travel time delays, $1.2 billion in safety costs and $590 million in environmental costs. In 2040, America’s projected infrastructure deficiencies in a trends extended scenario are expected to cost the national economy more than 400,000 jobs . Approximately 1.3 million more jobs could exist in key knowledge-based and technology-related economic sectors if sufficient transportation infrastructure were maintained. These losses are balanced against almost 900,000 additional jobs projected in traditionally lower-paying service sectors of the economy that would benefit by deficient transportation (such as auto repair services) or by declining productivity in domestic service related sectors (such as truck driving and retail trade). If present trends continue, by 2020 the annual costs imposed on the U.S. economy by deteriorating infrastructure will increase by 82% to $210 billion, and by 2040 the costs will have increased by 351% to $520 billion (with cumulative costs mounting to $912 billion and $2.9 trillion by 2020 and 2040, respectively). Table 1 summarizes the economic and societal costs of today’s deficiencies, and how the present values of these costs are expected to accumulate by 2040. Table 2 provides a summary of impacts these costs have on economic performance today, and how these impacts are expected to increase over time. The avoidable transportation costs that hinder the nation’s economy are imposed primarily by pavement and bridge conditions, highway congestion, and transit and train vehicle conditions that are operating well below minimum tolerable levels for the level of traffic they carry. If the nation’s infrastructure were free of deficient conditions in pavement, bridges, transit vehicles, and track and transit facilities, Americans would earn more personal income and industry would be more productive, as demonstrated by the gross domestic product (value added) that will be lost if surface transportation infrastructure is not brought up to a standard of “minimum tolerable conditions.” As of 2010, the loss of GDP approached $125 billion due to deficient surface transportation infrastructure. The expected losses in GDP and personal income through 2040 are displayed in Table 2. Across the U.S., regions are affected differently by deficient and deteriorating infrastructure. The most affected regions are those with the largest concentrations of urban areas, because urban highways, bridges and transit systems are in worse condition today than rural facilities. Peak commuting patterns also place larger burdens on urban capacities. However, because the nation is so dependent on the Interstate Highway System, impacts on interstate performance in some regions or area types are felt throughout the nation. Nationally, for highways and transit, 630 million vehicle hours traveled were lost due to congestion in 2010. This total is expected to triple to 1.8 billion hours by 2020 and further increase to 6.2 billion hours in 2040.3 These vehicle hours understate person hours and underscore the severity of the loss in productivity. «The U.S. will lose jobs in high value, high-paying services and manufacturing industries. Overall, this will result in employee income in 2040 that is $252 billion less than would be the case in a transportation-sufficient economy. Second, the impact of declining business productivity, due to inefficient surface transportation, tends to push up employment, even if income is declining. Productivity deteriorates with infrastructure degradation, so more resources are wasted in each sector. In other words, it may take two jobs to complete the tasks that one job could handle without delays due to worsening surface transportation infrastructure. Third, related to productivity effects, degrading surface transportation conditions will generate

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jobs to address problems created by worsening conditions in sectors such as transportation services and automobile repair services. «By 2040 the cost of infrastructure deficiencies are expected to result in the U.S. losing more than $72 billion in foreign exports in comparison with the level of exports from a transportation-sufficient U.S. economy . These exports are lost due to lost productivity and the higher costs of American goods and services, relative to competing product prices from around the globe. The effect of infrastructure deficiencies on America’s job composition has a profound impact on the everyday lives of households and families. The total annual income for employees in the knowledge-based industries sector (which loses the most jobs) is $2.8 trillion, compared with annual income for employees in the transportation sector of $471 billion. Overall, industry sectors gaining jobs as a result of infrastructure deficiencies in 2040 have an average annual income level of 28% less than the income level of those sectors losing jobs. By requiring Americans to take lowerpaying jobs to

support the needs of deficient infrastructure, transportation shortfalls have a significant effect on personal income for all Americans. By 2040, it is estimated that Americans will be earning a total of $252 billion less than would have been possible if all infrastructure had been sufficient. Although American households earn less because of infrastructure deficiencies, the same households have to spend more of what they do have on transportation, instead of other household expenditures. By 2040, American households will be not only earning less in income; they will also be spending $54 billion more on transportation costs than they would with a fully sufficient system. Surface transportation deficiencies limit the types of jobs available to Americans, and affect how productive Americans can be in their work. Overall, by 2040, it is expected that American firms will be generating $232 billion less in value added than they would if all surface transportation infrastructure were sufficient. The loss of potential value added attributable to deteriorating surface infrastructure is most concentrated in the Mid-Atlantic region, costing roughly $69 billion. When deficient infrastructure makes U.S. firms less productive, the U.S. economy overall is also globally less competitive. The operating, reliability, travel time, safety, and environmental costs of a deficient transportation system affect the cost structure and competitiveness of firms operating in the U.S. Due to costs imposed by deficient infrastructure, in 2020 the U.S. economy is expected to export $28 billion less in goods than would have been the case with sufficient infrastructure, and in 2040 exports are expected to be $72 billion less. The United States ranks 19th in the quality of its roadways and 18th in the quality of its rail infrastructure, according to a 2009–10 executive opinion survey for 139 countries conducted by the World Economic Forum

(Table 5). Maintaining, if not improving, these conditions will be important in maintaining (or improving) the nation’s overall export position. With deteriorating surface transportation infrastructure, United States

exports of products and services will face elevated price pressures in two ways: 1. Exporting firms directly experience higher transportation costs with their own truck fleet for shipments to the Mexican and Canadian borders or to an airport or seaport; and 2. Exporting firms absorb price increases related to transportation costs on some portion of intermediate supplies that arrive by truck and go into a final product. Those intermediate supplies may be domestically produced, or they may be foreign imports that must incur a landbridging cost from an airport or seaport, or from the Canadian or Mexican borders. If the condition of surface transportation does not stabilize at current levels, 79 of 93 tradable commodities are expected to experience lower export transactions in 2020 and 2040. Table 6 shows the 10 commodities in each year that will lose the export sales expected under current conditions. The largest dollar export losses by commodity are the result of both the scale of projected export production and the expected impact from deficient surface transportation. Transportation deficiencies affect the production process by increasing costs of receiving goods . It also makes access to markets more expensive, and therefore less competitive, including market reach to Canada and Mexico, and in surface access to airports and seaports. In addition, some large knowledge-based activities (such as finance and insurance) that export services abroad, account for a sizable dollar loss. The total national export value lost is $28 billion in 2020 and $72 billion in 2040—relative to the expected base case economies in those years. U.S. commodities that lose the largest proportion of their exports are shown in Table 7. The table shows commodities irrespective of the volume of exports (that dimension is captured in Table 6), and illustrates the percent of impact per commodity. In 2020, the 10 commodities that are expected to lose the highest levels of export most of america’s major economic competitors in europe and asia have already invested in and are reaping the benefits of improved competitiveness from their intermetropolitan high-speed rail systems. dollars account for 53% of the export value lost by the aggregated 79 commodities and 52% in 2040. Moreover, many exports shown on the 2020 and 2040 tables, both in terms of percent declines and dollar losses, are key technology sectors that drive national innovation. These include machinery, communications equipment, medical devices, transportation equipment, aerospace, other instruments and chemicals. Most of America’s major economic competitors in Europe and Asia—including Japan, Germany, France, Spain and Great Britain, as well as rapidly developing and developed countries such as China, Taiwan, and South Korea—have already invested in and are reaping the benefits of improved competitiveness from their intermetropolitan high-speed rail systems. Simply continuing to invest in the nation’s existing transportation infrastructure may not be enough to maintain its standing in the global economy in the long run.

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Squo failsHalsey 11 7/27, *Ashley Halsey III is a writer for The Washington Post, “Decaying infrastructure costs U.S. billions each year, report says,” http://www.washingtonpost.com/local/decaying-infrastructure-costing-us-billions-report-says/2011/07/27/gIQAAI0zcI_story.html, AJ

As Congress debates how to meet the nation’s long-term transportation needs, decaying roads, bridges, railroads and transit systems are costing the United States $129 billion a year, according to a report issued Wednesday by a

professional group whose members are responsible for designing and building such infrastructure. Complex calculations done for the American Society of Civil Engineers indicate that infrastructure deficiencies add $97  billion a year to the cost of operating vehicles and result in travel delays that cost $32 billion. “If investments in surface transportation infrastructure are not made soon, these costs are expected to grow exponentially,” the ASCE said. “Within 10 years, U.S. businesses would pay an added $430 billion in transportation costs, household incomes would fall by more than $7,000, and U.S. exports will fall by $28 billion.” Deterioration of the U.S. transportation system has been likened to an iceberg, with just the tip of an enormous

obstacle to economic growth showing above the surface. The ASCE report contends that infrastructure failure already is dramatically affecting travel and commerce. It is the latest of several reports to predict dire consequences if the nation does not swiftly address the need to rebuild 60-year-old highway systems

and rail lines often far older than that. In May, a report by the Urban Land Institute warned that the United States is falling behind three emerging economic competitors : Brazil, China and India . The institute’s report put in global perspective an issue addressed last year by 80 experts led by former transportation secretaries Norman Y. Mineta and Samuel K. Skinner. That group concluded that as much as $262 billion a year must be spent on U.S. highways, rail networks and air transportation systems. The infrastructure crisis is not lost on Congress, but Republicans who control the House and Democrats who control the Senate have different ideas about how to address it. Unable to agree on long-term aviation funding, Congress proved incapable last week of passing a simple extension of current funding levels, something it has done 20 times since funding for the Federal Aviation Administration expired in 2007. The agency has been operating in a partial shutdown since midnight Friday, losing an estimated $30 million a day in airline ticket tax revenue. There is an equally deep divide between the two houses on a long-term plan for funding surface transportation. House Republicans favor a six-year plan that would provide about $35 billion a year, an amount that transportation committee Chairman John L. Mica (R-Fla.) says can be leveraged into about $75 billion through a variety of means, including public-private partnerships. Mica calls a two-year, $109 billion funding proposal that has won bipartisan support in the Senate “a recipe for bankruptcy” of the Federal Highway Trust Fund, which bankrolls surface transportation. Rep. Nick J. Rahall II (W.Va.), ranking Democrat on Mica’s committee, said the ASCE report underscored the folly of efforts to “do more with less.” “Today’s report provides the cold hard truth that America’s economic recovery and long-term competitiveness will suffer if we continue to under-invest in our future , ” Rahall said. “Slashing investments by one-third, as Republicans have proposed to do, will make the economic impact on America’s middle class even worse than the grim predictions by the economists in this report.” The ASCE report predicted that without infrastructure investment, 870,000 jobs would be lost and economic growth would be stifled to the tune of $3.1 trillion by 2020 . To avert that , the report says, will require an investment of about $1.7  trillion by 2020. It estimated the gap between what is being spent and what needs to be spent at $94 billion a year. “The link between a nation’s infrastructure and its economic competitiveness has always been understood,” said Kathy J. Caldwell, president of the ASCE. “But today, for the first time, we have data showing how much failing to invest in our surface transportation system can negatively impact job growth and family budgets.” Thomas J. Donohue, president of the U.S. Chamber of Commerce, said the necessary spending was “not just transportation for transportation’s sake.” “Without more robust economic growth, the U.S. will not create the 20 million jobs needed in the next decade to replace those lost during the recession and to keep up with a growing workforce,” he said. Ultimately, Americans would get paid less, the ASCE report says. The economy would lose jobs, and the paychecks of those who are able to find work would be cut by nearly 30 percent. The cost of a crumbling transportation system was described by Steven Landau of Boston’s Economic Development Research Group, which did the research for the ASCE. “Business will have to divert increasing portions of earned income to pay for transportation delays and vehicle repairs, draining money that would otherwise be invested in innovation and expansion,” Landau said.

Shrinks GDP and kills jobsNRDC 11 7/28, *Natural Resources Defense Council, “New Report: Failure to Invest in Transportation Infrastructure Will Cost Jobs, Shrink GDP,” http://switchboard.nrdc.org/blogs/dlovaas/new_report_failure_to_invest_i.html, AJ

As you might guess, it’s not pretty. ASCE calculates that the impact of deteriorating roads, rails, bridges and transit amounts to 870,000 jobs lost and $3.1 trillion in GDP lost by 2020 . Crumbling, congested roads and a lack of transportation options means American families and business are spending more time, using more fuel, and spending more money to get where they need to go. One interesting note for the large amount of traffic on interstate highways in urban areas -- 47 percent of that traffic is on deficient roads, versus only 15 percent of rural interstate traffic. And no matter where you happen to be traveling, the longer we delay infrastructure improvements, the worse it gets. By 2020, ASCE calculates, American businesses will be spending an extra $430 billion on transportation costs, leading to a lag in productivity, a drop in exports, and the loss of hundreds of thousands of jobs. Families would see incomes drop by $7,000 over that 10-year period.

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The upshot: We can’t afford NOT to invest in transportation . The costs to our economy, especially in high-wage industries, are simply too high. This report adds to a number of studies which have come to the same conclusion. Even conservatives agree that we need to invest in our national transportation infrastructure, not cut it off at the knees. How, in these fiscally constrained times, do we move forward? We need to design a transportation program with clear, national goals, which includes an oil-savings target and prioritizes critical repairs and maintenance. We need to find new ways to generate revenue for infrastructure projects, through tools

such as an oil-security fee and an infrastructure bank. And we need to ensure that our investments are smart, performance-based choices that will make the best use of limited funds. I hope President Obama and Congress will put us on the road to recovery. We simply can’t afford the road to nowhere.

More evidenceSledge 11 7/27, *Matt Sledge writes for Huffington Post, “Deteriorating Transportation Infrastructure Could Cost America $3.1 Trillion,” http://www.huffingtonpost.com/2011/07/27/transportation-infrastructure-cost_n_911207.html, AJ

The engineers found that overall, the cost of failing to invest more in the nation's roads and bridges would total $ 3.1 trillion in lost GDP growth by 2020 . For workers, the toll of investing only at current levels would be

equally daunting: 877,000 jobs would also be lost. Already, the report found, deficient and deteriorating surface transportation cost us $130 billion in 2010. Congestion, the report found, is of particular cause for concern. Already,

40 percent of urban interstates have capacity deficiencies. Currently, that costs us $27 billion a year in lost time and other inefficiencies wasted on the roads. By 2020, that number could grow tenfold, reaching $276 billion a year. The civil engineers are, by their own admission, a biased party -- they stand to gain the

most from renewed investment in infrastructure -- but they paint a picture of an infrastructure shortfall that would have ripple effects far and wide through society . Companies, the report estimates, would underperform by $240 billion over the next ten years without additional investment. Exporters, which would have trouble moving goods to market, would send $28 billion in trade less abroad. The cost to families' household budgets, the report suggests, would by $1,060 a year. "Today’s report from the American Society of Civil Engineers further reinforces

that the U.S. is missing a huge opportunity to ignite economic growth, improve our global competitiveness, and create jobs," Tom Donohue, president and CEO of the U.S. Chamber of Commerce, said in a

release. Richard Trumka, the AFL-CIO president, said in a release that "with a modest increase in investment, we can rebuild a strong economy where business can thrive and workers can afford a place to live, raise a family, take an occasional vacation, pay for their children’s education and have a dignified retirement." The ASCE claims the

answer to the transportation problem is simple: Invest more, and quickly. "The problems facing our nation's infrastructure are widely acknowledged and well understood," said Andrew Herrmann, the president-elect of the ASCE. But that doesn't mean Congress is rushing to fix them. Re-authorization of the transportation bill that pays for most of our highways has stalled. The House Republican outline for a bill would slash one third of transportation funding. The idea behind cutting those funds is that private enterprise could fill the gap. Further, gas taxes revenues, which have traditionally been used to pay for transportation funding, are falling because they aren't tied to inflation and more people are switching over to fuel-efficient cars. For conservatives, some sort of new tax is verboten, even though they might appreciate infrastructure's benefits to business. Most of America's major economic competitors in Europe and Asia -- including Japan, Germany, France, Spain and Great Britain, as well as rapidly developing and developed countries such as China, Taiwan and South Korea -- have already invested in and are reaping the benefits of improved competitiveness from their intermetropolitan high speed rail systems. Simply continuing to invest in the nation's existing transportation infrastructure may not be enough to maintain its standing in the global economy in the long run.

Transportation spending is key to economic growth SGA 11 2/4, *Smart Growth America, “New report reveals smart transportation spending creates jobs, grows the economy,” http://www.smartgrowthamerica.org/2011/02/04/new-report-reveals-smart-transportation-spending-creates-jobs-grows-the-economy/, AJ

In his State of the Union address, President Obama called on Americans to “ out-innovate, out-educate, and out-build the rest of the world” to win the future . To rebuild America , he said, we will aim to put “more Americans to work repairing crumbling roads and bridges.” Injecting money into transportation projects, the thinking goes, is an especially potent jobs-creation tool because it not only puts construction workers and contractors to work quickly, it also lays the groundwork for future economic growth and development. Obama predicted the transportation money alone would put hundreds of thousands of workers on the job. Historically, investments in public transportation generate 31% more jobs per dollar than new construction of roads and bridges. Smart Growth America’s

findings show that the payoff was even larger in ARRA spending, with public transportation projects producing 70% more jobs per dollar than road projects. The same historical statistics show that repair work on

roads and bridges generates 16% more jobs per dollar than new bridge and road construction. Repair and maintenance projects spend money faster and create jobs more quickly than building new roads because they employ more kinds of workers, spend less money on land and more on wages, and spend less time on plans and permits. Voters already believe that repair and maintenance and public transportation are where we

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should focus our transportation dollars, and are a good value for the dollar . A national poll conducted by

Smart Growth America and Hart Research in November 2010 found that nearly 91% of voters believe maintaining and repairing our roads and bridges should be the top or a high priority for state spending on transportation programs, and 68% of voters believe that improving and expanding public transportation options should be the top or a high priority.

Now is critical---investment solves competitivenessDiridon 6/22 2012, *Rod Diridon, Sr., has served as executive director of the Mineta Transportation Institute (MTI) and writes for SF Gate, “U.S. must fund transportation infrastructure,” http://www.sfgate.com/opinion/openforum/article/U-S-must-fund-transportation-infrastructure-3653903.php, AJ

The country that moves product to the market and people to work most efficiently wins the international geo-economic competition . That's never been more threateningly true than now, as the aging and incomplete U.S. transportation systems fall into decline with dwindling hope of recovery. Major sections of President Dwight Eisenhower's interstate highway system, especially interchanges and lane widening, are incomplete. The overall system is poorly maintained, including bridges and pavement, except for those supported by our San Francisco Bay Area's bridge tolls, which have been increased recently. Our mass transit systems are well planned but incomplete. New, more efficient and sustainable modes, such as high-speed rail and automated guide-way transit that already support the rest of the world's economies, are not available in the United States. The 18.4 cent-per-gallon federal gas tax, the traditional funding source for transportation, was increased last in 1993 and is woefully inadequate to meet current and future needs. Remember, fuel prices are up drastically, which results in fewer miles being driven and stimulates the development of more efficient cars. All of that leads to less fuel purchased. The gas tax is per gallon - fewer miles and better economy equals fewer gallons consumed, which equals less fuel taxes collected for four out of the past five years. Yet our aging and obsolete infrastructure needs more funding, not less. Congress has been unable to find the funding or the votes to reauthorize the essential

national surface transportation act. If that authorization lapses at the end of June, the national system will cease to function. The 2006 funding is being extended every three months or so at 2006 levels, which were inadequate then and even more so now. To replace the dwindling gas taxes, a significant portion of that funding now comes from the national general fund, which was not intended to support the transportation system. Yet no serious consideration is being given to increasing the traditional source of transportation funding, the gas tax.

Key to economic developmentLitman 10 8/18, *Todd Litman: Victoria Transport Policy Institute, “Evaluating Transportation Economic Development Impacts,” http://www.vtpi.org/econ_dev.pdf, AJ

Transportation enables economic activity by connecting people, businesses and resources . Transportation improvements are often advocated for economic development, and there is often debate over which transport policies best support economic objectives. This report explores these issues and provides guidance on practical ways to incorporate economic development objectives into transport policy and planning decisions. Increasing transport system efficiency provides productivity gains that filter through the economy in various ways . For

example, reduced shipping costs may increase business profits, reduce retail prices, improve service quality (more frequent deliveries), allow tax increases or a combination of these. Even modest efficiency gains can provide significant benefits. For example, if a business has an 8% annual return on investment and transport represents 16% of its costs, a 5% reduction in transport costs increases profits 10%.

Infrastructure is critical for economic successLitman 9 4/21, *Todd Litman: Victoria Transport Policy Institute, “Smart Transportation Economic Stimulation Infrastructure Investments That Support Economic Development,” http://www.vtpi.org/econ_stim.pdf, AJ

This report discusses factors to consider when evaluating transportation economic stimulation strategies. Transportation investments can have large long-term economic, social and environmental impacts. Expanding urban highways tends to stimulate motor vehicle travel and sprawl, exacerbating future transport problems and threatening future economic productivity. Improving alternative modes (walking and cycling conditions, and public transit service) tends to reduce total motor vehicle traffic and associated costs, providing additional long-term economic savings and benefits. Increasing transport system efficiency tends to create far more jobs than those created directly by infrastructure investments. Domestic automobile industry subsidies are ineffective at stimulating employment or economic development. Public policies intended to support domestic automobile sales could be economically harmful in

the long run if they increase future energy consumption and transportation system inefficiency. Since other public investments can provide greater short-term employment and business activity per dollar spent,

transportation projects would not be selected if economic stimulation were the only objective. Transportation investments

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justified if they also increase future economic productivity by reducing business transportation costs, such as traffic congestion and energy consumption, or achieve other objectives such as improved mobility for non-drivers. As a result, investments that increase transport system efficiency and diversity, and help create more accessible land use development patterns, can be justified for their long-term economic development benefits. Transportation planning decisions significantly affect future economic development by influencing energy consumption, particularly oil imports . North Americans currently consume about twice as much transportation fuel per capita as peer countries, due largely to differences in fuel taxes, transportation investments and land use planning. Had North America implemented energy conservation policies comparable to peer countries two decades ago, national fuel consumption would be about half its current rate, keeping hundreds of billions of dollars in the economy annually. Dependency on imported petroleum is economically harmful. A US Department of Energy study estimated that excessive dependence on imported petroleum cost the U.S. economy $150-$250 billion in 2005, at a time when oil averaged $35-$45/bbl (Greene and Ahmad 2005). A U.S. Department of Energy study estimates the external costs of imported oil (“the quantifiable per-barrel economic costs that the U.S. could avoid by a small-to-moderate reduction in oil imports”), excluding military costs, to be $13.60 per barrel, with a range of $6.70 to $23.25 (Leiby 2007). These costs are expected to increase in the future as international oil prices rise and as U.S. oil production declines. These impacts are likely to increase in the future as international oil prices rise, U.S. oil production declines, and petroleum and vehicle production become more automated. Although exact impacts are uncertain and impossible to predict with precision, between 2010 and 2020 a million dollars shifted from fuel to general consumer expenditures is likely to generate at least six jobs, and after 2020 at least eight jobs. This indicates that current planning decisions can support future economic development by encouraging transportation system diversity and efficiency, so consumers can reduce the amount they must spend

on vehicles and fuel. For example, transport policies and investments that halve U.S. per capita fuel consumption would save consumers $300-500 billion annual dollars , provide comparable indirect economic benefits, and generate 3 to 5 million domestic jobs . Many types of public investments can increase short-term employment and business activity, but some are much better overall because they also support other strategic goals. Smart economic stimulation responds to future demands and helps achieve various economic, social and environmental objectives.

More evidenceKlein 11 11/2, *Aaron Klein is the Deputy Assistant Secretary for Economic Policy Coordination, “Creating Jobs and Boosting the Economy: The Case for Rebuilding our Transportation Infrastructure,” http://www.treasury.gov/connect/blog/Pages/Creating-Jobs-and-Boosting-the-Economy-The-Case-for-Rebuilding-our-Transportation-Infrastructure.aspx, AJ

Our economy is as interconnected as our infrastructure, and well-targeted infrastructure investments create immediate and long-term economic benefits to both local communities and those further away. As the report highlights, when travel times are shortened, such as when the Hoover Dam bypass was built, the businesses and consumers who rely on goods which travel that route are the ultimate beneficiaries. As Secretary Geithner said when he visited the UPS Worldport Facility in Louisville, Kentucky recently, “If you do a better job of repairing roads and bridges, highways, airports, railways, it makes companies more competitive. It lowers their costs. It’s like a tax cut.” Simply put, wise investments in infrastructure save companies and consumers both time and money. In addition to laying the foundation for stronger economic growth, we must also work to address a crucial problem facing our economy today - unemployment. Investments in infrastructure today will put Americans back to work. And with over 1 million construction workers currently unemployed, now is the right time to invest in infrastructure. Eighty percent of jobs created by investing in infrastructure will likely be created in three occupations - construction, manufacturing, and retail trade - which are among the hardest hit from the recession.

Treasury Department analysis shows that these sectors pay middle-class wages, so employment in these sectors bolsters middle-class jobs.

Laundry listDOT 12 3/23, “A NEW ECONOMIC ANALYSIS OF INFRASTRUCTURE INVESTMENT: A REPORT PREPARED BY THE DEPARTMENT OF THE TREASURY WITH THE COUNCIL OF ECONOMIC ADVISERS,” http://www.treasury.gov/resource-center/economic-policy/Documents/20120323InfrastructureReport.pdf, AJ

Gallatin spoke in terms of infrastructure shortening distances and easing communications, even when the only means to do so were roads and canals. Every day, Americans use our nation’s transportation infrastructure to commute to work, visit their friends and family, and travel freely around the country. Businesses depend on a well-functioning infrastructure system to obtain their supplies, manage their inventories, and deliver their goods and services to market. This is true for companies whose businesses rely directly on the infrastructure system, such as shippers like UPS and BNSF, as well as others whose businesses indirectly rely on the infrastructure system, such as farmers who use publicly funded infrastructure to ship crops to buyers, and internet companies that send goods purchased online to customers across the world. A modern transportation infrastructure network is necessary for our economy to function, and is a prerequisite for future growth. President Eisenhower’s vision is even more relevant today than it was in 1955, when he said in his State of the Union Address, "A modern, efficient highway system is essential to meet the needs of our growing population, our expanding economy, and our national security." Today, that vision would include making not only our highways, but our nation’s

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entire infrastructure system more efficient and effective. Our analysis indicates that further infrastructure investments would be highly beneficial for the U.S. economy in both the short and long term . First, estimates of economically justifiable investment indicate that American transportation infrastructure is not keeping pace with the needs of our economy. Second, because of high unemployment in sectors such as construction that were especially hard hit by the bursting of the housing bubble, there are underutilized resources that can be used to build infrastructure. Moreover, states and

municipalities typically fund a significant portion of infrastructure spending, but are currently strapped for cash; the

Federal government has a constructive role to play by stepping up to address the anticipated shortfall and providing more efficient financing mechanisms, such as Build America Bonds. The third key finding

is that investing in infrastructure benefits the middle class most of all. Finally, there is considerable support for greater infrastructure investment among American consumers and businesses. Investments in infrastructure allow goods and services to be transported more quickly and at lower costs, resulting in both lower prices for consumers and increased profitability for firms. Major transportation infrastructure initiatives include the building of the national railroad system in the 19th century and the creation of the Eisenhower Interstate System in the 1950s and 1960s. Observers have concluded that in both of these cases there was a causal link running from infrastructure investments to subsequent private sector productivity gains.6 Alternatively, it is possible that infrastructure investments occur when productivity gains are also likely to follow but for unrelated reasons. Determining causality is difficult. Finally, a well-maintained and robust network of transportation infrastructure, which allows individuals to access multiple modes of transportation, results in significant efficiency benefits for Americans. One study found that in 2009, households at the national median level of income residing in “location efficient” neighborhoods with diverse transportation choices realized over $600 in transportation cost savings, compared to similar households living in less efficient areas.21Further, well-maintained roads with adequate capacity, coupled with

access to public transit and other driving alternatives, can lower traffic congestion and accident rates which not only saves Americans time and money but also saves lives. Congestion is not limited only to our nation’s roads but

also to our rails. Freight rail systems can play a vital role in relieving road traffic and in moving goods in a more fuel efficient manner. One study estimated that on average, freight railroads are four times more fuel efficient than

trucks.22 These benefits can also reduce dependence on foreign oil, improve energy efficiency, and reduce air pollution. For example, one study in the Los Angeles area found that traffic congestion has a significant effect on CO2 emissions, and that reducing stop-and-go traffic conditions could potentially reduce emissions by up to 12 percent.23 Another study estimates that America’s public transportation system reduces gasoline consumption by 4.2 billion gallons annually. 24 The recession that started in late 2007 had an exceptionally large impact on the labor market, as the United States lost 8.7 million jobs between December 2007 and December 2009 . Due to the collapse of the real estate market, the contraction of employment in the construction industry was especially acute. A full 21 percent of those who lost jobs over this time period were in the construction industry. Even as the economy has begun to recover, construction employment remains well below pre- recession levels. In December 2011, total payroll jobs in the construction industry remained 25 percent below the level of December 2007, dropping 1.9 million from 7.5 million to 5.6 million employees (seasonally-adjusted), which constitutes one-third of the total jobs lost over this period. In February 2012, the unemployment rate for construction workers was 17.1 percent, and over the past twelve months, the unemployment rate for construction workers has averaged 15.6 percent. Building more roads, bridges, and rail tracks would especially help those workers that were disproportionately affected by the economic crisis – construction and manufacturing workers. Accelerated infrastructure investment would provide an opportunity for construction workers to productively apply their skills and experience. Moreover, hiring currently unemployed construction workers would impose lower training costs on firms than would be incurred by hiring workers during normal times because these workers already have much of the requisite skills and experience. Analysis by the Congressional Budget Office found that additional investment in infrastructure is among the most effective policy options for raising output and employment.25 Given this situation, the President’s proposal to front-load our six-year surface transportation legislation with an additional $50 billion investment makes sound economic sense. Finally, it is important to consider the economic situation facing state and local governments who are significant partners in funding public infrastructure. During recessions, it is common for state and local governments to cut back on capital projects – such as building schools, roads, and parks – in order to meet balanced budget requirements. At the beginning of the most recent recession, tax receipts at the state and local level contracted for four straight quarters; receipts are still below pre-recession levels. Past research has found that expenditures on capital projects are more than four times as sensitive to year-to-year fluctuations in state income as is state spending in general.30 However, the need for improved and expanded infrastructure is just as great during a downturn as it is during a boom. Providing immediate additional federal support for transportation infrastructure investment would be prudent given the ongoing budgetary constraints facing state and local governments, the upcoming reduction in federal infrastructure investment as Recovery Act funds are depleted, and the strong benefits associated with public investment. For the average American family, transportation expenditures rank second only to housing expenditures. As can be seen in Figure 1, the average American annually spends more on transportation than food, and more than two times as much as on out-of-pocket healthcare expenses. Given how much Americans spend on transportation expenditures, public investments which lower the cost of transportation could have a meaningful impact on families’ budgets. Reducing fuel consumption, decreasing the need for car maintenance due to potholes and poor road conditions, increasing the availability of affordable and accessible public transit systems, and reducing fuel consumption by

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making better use of the land would benefit Americans and allow them to spend less money on transportation. Although infrastructure investments are expensive, it is even more expensive to skimp on infrastructure.

There are real costs of failing to invest in infrastructure, including increased congestion and foregone productivity and jobs. Already, Americans are wasting too much time, money, and fuel stuck in traffic. The Texas Transportation Institute (TTI) recently estimated that Americans in 439 urban areas spent some 4.8 billion hours sitting in traffic in 2010, equivalent to nearly one full work week for the average commuter. TTI’s calculations suggest that congestion caused Americans to purchase an extra 1.9 billion gallons of fuel, costing over $100 billion in wasted time and added fuel costs in the 439 urban areas it surveyed.41 By most measures,

the United States is investing less in infrastructure than other nations. While there are reasons for this disparity,

international comparisons can offer a useful benchmark to assess our investment decisions. We spend approximately 2 percent of GDP on infrastructure, a 50 percent decline from 1960.65,66 China, India and Europe, by contrast, spend close to 9 percent, 8 percent, and 5 percent of GDP on infrastructure, respectively.67 To be clear, these simple cross-country comparisons do not account for differences in the current public capital stock, differences in demographics and population densities, and different transportation preferences across nations. However, it is clear that persistent neglect of our infrastructure will impact America’s competitive position vis-a-vis the rest of the world. Indeed, the U.S. Chamber of Commerce noted in their Policy Declaration on Transportation Infrastructure that, “Long-term underinvestment in transportation infrastructure is having an increasingly negative effect on the ability of the United States and its industries to compete in the global economy.” An

analysis of the economic impact of transportation investment indicates that now is an optimal time to increase the nation’s investment in transportation infrastructure. Investing in transportation infrastructure would generate jobs to employ workers who were displaced because of the housing bubble. We estimate that the

average unemployment rate among those who would gain employment in the jobs created by additional infrastructure investment has averaged approximately 13 percent over the past twelve months. There is also accumulating evidence that construction costs are currently low because of underutilized resources, so it would be especially cost-effective to seize this opportunity to build the quality infrastructure projects that are ready to be built. Historically, we also know that state and local governments are more prone to cut back on infrastructure spending during tough economic times, despite the growing need and demand for these projects. Americans overwhelmingly support increasing our infrastructure investment, as evidenced by consistent support for local investments on ballot initiatives. This is hardly surprising given that our report documents that the American public is less satisfied with our transportation infrastructure than residents of most other OECD nations. Merely increasing the amount that we invest, however, must not be our only goal. Selecting projects that have the highest

payoff is critically important, as is providing opportunities for the private sector to invest in public infrastructure. Given the significant need for greater investment, the federal government cannot, and

should not, be expected to be the sole source of additional investment funds. More effectively leveraging federal investment by pairing it with state, local, and private investment is necessary to meet the challenges we face in expanding our transportation network. Thus, establishing a National Infrastructure Bank, along with other significant reforms in our infrastructure financing system, should remain a top priority. Evidence also shows that well-functioning infrastructure systems generate large rates of return not only for the people who travel on the systems every day – the direct beneficiaries – but also for those in the surrounding regions and our nation more generally. Investment in infrastructure today will employ underutilized resources and raise the nation’s productivity and economic potential in the future. By contrast, poorly

planned, non-strategic investment is not only a waste of resources, but can also lead to lower economic growth and production in the future. That is why any increase in investment should be coupled with broad-based reform to select infrastructure projects more wisely. The President’s proposal to increase our nation’s investment in transportation infrastructure, coupled with broad-based reform of our transportation funding

system, would have a significant and positive economic impact in both the short and long term, raising our nation’s economic output, creating quality middle-class jobs, and enhancing America’s global economic competitiveness.

Declining infrastructure is killing the economyReuters 11 7/27, “Infrastructure woes take toll on US economy-engineers,” http://www.reuters.com/article/2011/07/27/usa-economy-infrastructure-idUSN1E76Q0J120110727, AJ

(Reuters) - Failing infrastructure will cost the United States billions of dollars in lost productivity, income and trade in coming decades, according to a civil engineering report released on Wednesday that said the impact on gross domestic product could reach $2.7 trillion. The American Society of Civil Engineers regularly

tallies the amount needed to upkeep declining U.S. roads, bridges and waterways. It said the country will need to invest roughly $220 billion annually to maintain the country's infrastructure in "minimum tolerable conditions." "If present trends continue, the funding gap for rail and bus transit, seen as 41 percent in 2010, is expected to increase to 55 percent in 2040," it said. "The expected gap in highway funding, 48 percent in

2010, is expected to increase to 54 percent by 2040." Those gaps will take tolls on the economy. In 2010, it said,

deficiencies in surface transportation systems such as highways cost individuals and businesses $97 billion for vehicles, $32 billion in travel time delays and $1.2 billion on safety. Altogether, traffic and poor

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capital works conditions cost Americans $130 billion last year, the group said, a figure that will likely rise to $2.97 trillion by 2040. At the same time, the lost cumulative GDP will be about $2.7 trillion by 2040. "Although infrastructure deficiency creates jobs in sectors such as auto and bus repair, retail sales of gasoline, services and

parts purchased, due to the deficiencies and decreased productivity per worker, critical job opportunities are lost in highly skilled and well-compensated non-transportation sectors," the

group said. Without improvement to the country's transportation system, the economy will lose 400,000 jobs by 2040, it said, and income will take a hit. "By 2040 American households will be not only earning less in income; they will also be spending $54 billion more on transportation costs than they would with a fully sufficient system," it said. Without improvements to infrastructure, the group said, the U.S. trade position will also worsen. It expects the United States to export $28 billion less in goods "than would have been the case with sufficient infrastructure" in 2020 and $72 billion less in 2040 .

Transportation Infrastructure is the best way to spur economic recovery – highest multiplierBurgess, 11 –staff writer (cites really qualified people) (Zack, “Infrastructure key to Recovery” 15 October 2011, Philadelphia Tribune http://www.phillytrib.com/newsarticles/item/1052-infrastructure-key-to-recovery.html)

As the president struggles to pass his jobs bill, it cannot be forgotten that industry has always been at the forefront of moving this country forward. Whether it was the Industrial Revolution and railroads or the massive building of roads and bridges during the 1950s - somehow, someway - industry has provided the necessary income to stabilize the country's middle class. And let's not forget about the auto industry that helped thousands of African-Americans - many of whom were unskilled and uneducated - find decent, secure jobs that allowed them to support their families and plan for their futures. The auto industry was known for higher than average wages and served as a gateway to the middle class for many African Americans. "We're still

hemorrhaging jobs," the Rev. lesse Jackson said to NPR. "Think about Chicago, New York, Memphis, Oakland and Atlanta laying off thousands of transport workers. We have to look at it in a very real way ... the economic reconstruction." In the mid- 1900s, millions of Blacks living in the South, headed north to cities throughout the Midwest, lured by job prospects and a desire to escape the oppressive racism of the South. Automakers were among the few companies that would hire Blacks, and many of those who

migrated north ended up in the auto and steel plants throughout the Midwest. With these jobs, they were able to buy land, build homes and provide an education for their children. As a result stable Black communities were established, and the Black

middle class began to emerge. Needless to say, mis is not only President Barack Obama's plan for Blacks, but the country as a

whole, as he fights for his jobs plan. Most importantly, he hopes to rebuild the country's infrastructure. "In every instance," the president said earlier in the month at a news conference in the East Room of tire White House, "there has been games-playing in negotiations with Republicans. I have gone out of my way in every instance, sometimes at my own political peril, to work with Republicans to find common ground to move this country forward." Investing in infrastructure has always been at the forefront when it came to creating jobs in America and has always yielded lasting benefits for the economy, including increasing growth in the long run. Upgrading roads, bridges, and other basic infrastructure is at the very fabric of what has made America great. It helped people earn good, middle-class incomes, which has always expanded the consumer base for businesses. These kinds of investments also paved the way for longterm economic growth by lowering the cost of doing business and making U.S. companies more competitive. According to Bloomberg Business Week, the United States and other developed countries can stoke growth and reduce excess industrial capacity by investing in infrastructure at home and in potential consumer nations abroad, said the World Bank's chief economist, Justin Lin, in New York earlier in the year. "Whenever we have a strong wind, we have a blackout. It reminds me of the situation we had in China in the 1980s," Lin said. "This is a good investment opportunity. If we seize this opportunity, we can turn from the new normal to the new new normal." He's not alone when it comes to favoring infrastructure investment. Mary Meeker, a financial analyst at Morgan Stanley and author of a new

nonpartisan report called USA Inc., said the United States has in recent decades been spending less on productive investments, such as infrastructure and education, and more on areas of preservation, such as health

care. That combination has caused America to lose its innovation edge. "In the last 40 years, we've pumped the breaks on productivity-enhancing investments in infrastructure, education and technology, while health care and income security costs have accelerated dramatically," she wrote in the Atlantic. "Like an aging couple shifting its spending away from the kids' clothes and tuition toward pills and doctor visits, the U.S. government has transformed itself from a defense-technology infrastructure investor to a national insurance conglomerate for its aging population." Productivity-enhancing spending, according

to Meeker, comes from three main sources: infrastructure, education and research and development investment. The country has seen infrastructure spending collapse as a share of the budget since the 1960s. There is ample empirical evidence that investment in infrastructure creates jobs. In particular, investments made over the past couple of years have saved or created millions of U.S. jobs.

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Increased investments in infrastructure by die Department of Transportation and other agencies due to the American Recovery and Reinvestment Act saved or created 1.1 million jobs in the construction industry and 400,000 jobs in manufacturing by March 2011, according to San Francisco Federal Reserve Bank economist Daniel Wilson. And although infrastructure spending began with government dollars, these investments created jobs throughout the economy, mostly in the private sector. Infrastructure projects have created jobs in communities nationwide. Recovery funds improved drinking and wastewater systems, fixed bridges and roads, and rehabilitated airports and shipyards across the nation. Some examples of high impact infrastructure projects that have proceeded as a result of Recovery Act funding include: * An expansion of a kilometer-long tunnel in Oakland, California, that connects two busy communities through a mountain. * An expansion and rehabilitation of the I-76/Vare Avenue Bridge in Philadelphia and 141 other bridge upgrades that supported nearly 4,000 jobs in Pennsylvania in July 2011. * The construction of new railway lines to serve the city of Pharr, Texas, as well as other infrastructure projects in that state that have saved or created

more than 149,000 jobs through the end of 2010. Analysis of all fiscal stimulus policies shows a higher "multiplier" from infrastructure spending than other kinds of government spending, such as tax cuts, meaning that infrastructure dollars flow through the economy and create more jobs than other kinds of spending. Mark Zandi, the chief economist and co-founder of Moody's Economy.com, where he directs the company's research and consulting activities, found that every dollar of government spending boosts the economy by $1.44, whereas every dollar spent on a refundable lumpsum tax rebate adds $1.22 to the economy. The American Jobs Act seeks to remedy this situation by investing $105 billion in infrastructure. This should raise U.S. economic output by $151.2 billion based on Zandi's most recent economic multiplier for the impact of infrastructure spending on GDP. Clearly, the president's jobs bill is a "creative" way to help small companies, which have struggled more than larger ones to recover from the Great Recession of 2007-2009. According to Zandi, during recoveries, small businesses normally drive job creation. "Something like this is much needed" for an economy grappling with 9.1 percent unemployment, Zandi said to USA Today. Considering, "the economy is on the edge of recession."

Intelligent investment in infrastructure is vital to spur economic stability Shulz, 10 - Contributing Editor at Logistics Management Magazine Consultant-Council Member at Gerson

Lehrman Group (John D., “Increased spending on infrastructure ‘essential’ to economic recovery” Logistics Management v. 49. 2 January 2010 http://www.restoretrust.org/increased-spending-on-infrastructure-essential-to-economic-recovery-says-us-chamber-of-commerce) U.S. Chamber of Commerce CEO Donohue says intelligent investment in infrastructure projects could literally pave the way for a sustained economic rebound as the country seeks efficiencies from its transportation network to compete in the global economy. WASHINGTON-Saying America's infrastructure is "running out of capacity," the nation's top business lobbyist says it's time to boost public investment in highway, bridge, rail, and air projects now to help catapult the country out of the worst recession in 70 years. Speaking at the U.S. Chamber of Commerce's annual "State of American Business" outlook in Washington last month, U.S. Chamber of Commerce President Thomas Donohue said intelligent investment in infrastructure projects could literally pave the way for a sustained economic rebound as the country seeks efficiencies from its transportation network to compete in the global economy. "To meet our infrastructure needs, we need to boost public investments while working to ensure that the money is spent wisely in areas of genuine need," Donohue said, predicting a 3 percent growth in Gross Domestic Product in 2010. "Reauthorization of the nation's core highway bill is essential." Renewal of the federal-aid highway reauthorization bill has been stalled in Congress since the previous five-year, $286 billion bill expired last Sept. 30. Instead of passing a bill that would double that spending, Congress has instead punted and passed a stop-gap bill at the old law's spending levels, which transportation experts have said is too low to meet current infrastructure spending needs. "I'm not sure they've punted, but they've done a lot of things that haven't helped," Donohue said. The common misperception in Washington is that the U.S. Chamber is opposed to all taxes. In fact, Donohue has led the charge for higher "user fees" on the federal tax on fuel that last was raised in 1994 and is currently at 23.4 cents for diesel and 18.4 cents per gallon of gasoline. Some trucking executives are backing Donohue, who formerly ran the American Trucking Associations. "They (lawmakers)

would do better to increase the federal fuel tax that hasn't been changed in 16 years," Donohue said, adding that it's politically feasible because he called it "a user fee, not a tax." The Chamber has called for up to a 25-cent increase, perhaps increased in

stages, to help fund badly needed infrastructure projects. "If we did that, we would do serious road, bridge, and transport efforts," Donohue said. "That would create a lot of jobs ."

SQ infrastructure hampers econ recovery

MyDesert 5-21-12-[“ Falling apart, falling behind: Nation's aging infrastructure hurting economy”

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12:30 AM, May. 21, 2012 http://www.mydesert.com/article/20120521/NEWS11/205210301/Falling-apart-falling-behind-Nation-s-aging-infrastructure-hurting-economy?odyssey=tab%7Ctopnews%7Ctext%7CFrontpage]

Inland waterways quietly keep the nation's economy flowing as they transport $180 billion of coal, steel, chemicals and other goods each year — a sixth of U.S. freight — across 38 states. Yet, an antiquated system of locks and dams threatens the timely delivery of those goods daily. Locks and dams raise or lower barges from one water level to the next, but breakdowns are frequent. For example, the main chamber at a lock on the Ohio River near Warsaw, Ky., is being fixed. Maneuvering 15-barge tows into a much smaller backup chamber has increased the average delay at the lock from 40 minutes to 20 hours, including waiting time. The outage, which began last July and is expected to end in August, will cost American Electric Power and its customers $5.5 million as the utility ferries coal and other supplies along the river for itself and other businesses, says AEP manager Marty Hettel. As the economy picks up, the nation's creaking infrastructure will increasingly struggle to handle the load. That will make products more expensive as businesses pay more for shipping or maneuver around roadblocks, and it will cause exports to go to other countries — both of which are expected to hamper the recovery. “The good news is, the economy is turning,” says Dan Murray, vice president of the American Transportation Research Institute. “The bad news is, we expect congestion to skyrocket.” The ancient lock-and-dam system is perhaps the most egregious example of aging or congested transportation systems that are being outstripped by demand. Fourteen locks are expected to fail by 2020, costing the economy billions of dollars. Meanwhile, seaports can't accommodate larger container ships, slowing exports and imports. Highways are too narrow. Bridges are overtaxed.

Investment is key to growth

Market Watch 5-22-12-[ May 22, 2012, 1:07 p.m. EDT; Mayor Bloomberg and Ricardo Salinas Release Study on Immigration at the New York Forum-http://www.marketwatch.com/story/mayor-bloomberg-and-ricardo-salinas-release-study-on-immigration-at-the-new-york-forum-2012-05-22]

The forum was opened by founder Richard Attias, who was optimistic that the global economy was poised for recovery. He said: "Today, I have the conviction that we are close to the end of the global economic crisis. Leaders need to make decisions now - and to implement them. They need to find a balance between stimulus and austerity, and we as business leaders should do the same for our corporations. "At the NYF last year, I made a commitment to highlight Africa, which is far too often ignored. I have the conviction that Africa can be a major part of the solution for the global economic growth - especially when we look at its average of 6 percent growth overall in 2012. "As a result, in two weeks, we will be hosting the first edition of the New York Forum AFRICA in Gabon. More than 120 speakers and 600 participants from 50 countries, including 34 different countries in Africa, and six heads of states will discuss business and investment opportunities in this continent of more than a billion inhabitants." The keys to economic dynamism and stimulating growth were discussed by a high-level panel: Larry Kantor, managing director and head of research, Barclays; Craig Mundie, Chief Research and Strategy Officer, Microsoft Corporation; Anne-Marie Slaughter, Bert G. Kerstetter '66 University Professor of Politics and International Affairs, Princeton University; and Robert Wolf, Chairman, UBS Investment Bank, Americas. Wolf expressed optimism that the economy was poised for recovery - "80 per cent of CEOs think that there will be an increase in jobs and an increase in sales in the next six months". He added: "Infrastructure spending could be a key to growth. For every dollar spent in infrastructure, it has a 1.6 GDP multiplier, and for every billion spent, 25,000 new jobs are created. At the moment, the US is spending what it spent in 1968 - but the country is a third larger." Slaughter looked at the changes in the higher education system as giving huge opportunities for economic dynamism. "We are seeing a

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transformation in the middle sector of education, as we develop the ability to learn tech skills online and increasingly interactively. Infrastructure investment generates millions of jobs

Huffington Post 5-1-12-[Transportation and Infrastructure = Immediate Jobs = Deficit ReductionPosted: 05/ 1/2012 7:39 pm; http://www.huffingtonpost.com/dave-johnson/transportation-infrastruc_b_1469356.html]

President Obama spoke Monday at the AFL-CIO's Building and Construction Trades Department Legislative Conference in Washington, asking Republicans to stop blocking infrastructure and transportation projects. (See transcript here.) These projects would immediately create jobs, which would immediately start reducing the country's deficit -- which is probably why Republicans are blocking them. There are millions of infrastructure jobs that absolutely need doing. There are millions of people out of work who really, really need jobs. On top of that the cost of financing is the lowest ever. So maintaining and modernizing our infrastructure would immediately put millions of people to work. But wait, there's more! Modernizing our infrastructure would make our economy more efficient and our businesses more competitive, bringing returns for decades. So, of course, with all these points going for it Republicans are blocking it. The Obstruction. We have been deferring infrastructure maintenance since the Reagan years, but in recent years Republicans have doubled down on blocking public investment, calling it "just more government spending" and even "socialism." And, they complain, construction projects help union members. So Republicans have blocked bill after bill to repair and modernize the infrastructure, or to maintain and modernize our aging transportation system, build high-speed rail, etc. The president discussed this obstruction in his speech,... over the last year, I've sent Congress a whole series of jobs bills that would have put your members back to work. But time after time, Republicans have gotten together and said "no." I sent them a jobs bill that would have put hundreds of thousands of construction workers back to work repairing our roads, bridges, schools and transit systems, along with saving the jobs of cops, teachers, and firefighters, and creating a new tax cut for businesses. They said "no." Then, I sent them just the part of that bill that would have created those construction jobs. They said "no." And we're seeing it again right now. As we speak, House Republicans are refusing to pass a bipartisan bill that could guarantee work for millions of construction workers. Seeing a pattern here? That makes no sense. Congress should do the right thing and pass this bill right away.The Cost, Our aging infrastructure costs our economy. As things break down it gets harder to get things done. It is harder to start new businesses and our businesses are less competitive in the world. Shipments are delayed, etc. There are other costs. Cars have to be repaired from driving on our substandard roads, people have to pay higher fuel costs as they try to get where they are going on clogged streets or taking detours around closed bridges, etc. People's time is wasted, which also costs. As we move toward third-world status, property values decline, we lose tourism, etc. From a report on the president's speech in The Hill, (differs from advance transcript.) "There are bridges between Kentucky and Ohio where some of the key Republican leadership come from, where folks are having to do detours an extra hour and half drive every day on their commute because these bridges don't work," Obama said in a speech to the Building and Construction Trades Department Legislative Conference in Washington. "Time after time, the Republicans have gotten together and they've said no," he said. The Missed Opportunity; This infrastructure work has to get done at some point, and gets more expensive the longer we put it off. It not only gets more and more expensive to do this work the longer it is put off, but we are falling far behind our economic competitors as we fail to modernize. But here's the thing -- as a share of the economy, Europe invests more than twice what we do in infrastructure; China about four times as much. Are we going to sit back and let other countries build the newest airports and the fastest railroads and the most modern schools, at a time when we've got private construction companies all over the world -- or all over the country -- and millions of workers who are ready and willing to do that work right here in the United States of America? Jobs Fix Deficits; Jobs fix deficits. People are

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paying income taxes instead of collecting unemployment benefits or food stamps, they are spending their paychecks and the stores are paying taxes, etc. So government revenues are up and payouts are down. This is why the deficit is jobs, but there is a deficit of jobs. If you want to fix the deficit problem you have to get people working again. And since we have to maintain and modernize the aging infrastructure anyway, then let's get people working on... maintaining and modernizing the aging infrastructure!

Investment is key to long term growth-empirics prove

Boushey 11-[“Now Is the Time to Fix Our Broken Infrastructure” American Jobs Act Will Put Millions to Work; By Heather Boushey; Boushey is Senior Economist at American Progress. September 22, 2011;http://www.americanprogress.org/issues/2011/09/aja_infrastructure.html]

Investing in infrastructure creates jobs and yields lasting benefits for the economy, including increasing growth in the long run. Upgrading roads, bridges, and other basic infrastructure creates jobs now by putting people to work earning good, middle-class incomes, which expands the consumer base for businesses. These kinds of investments also pave the way for long-term economic growth by lowering the cost of doing business and making U.S. companies more competitive . There is ample empirical evidence that investment in infrastructure creates jobs . In particular, investments made over the past couple of years have saved or created millions of U.S. jobs. Increased investments in infrastructure by the Department of Transportation and other agencies due to the American Recovery and Reinvestment Act saved or created 1.1 million jobs in the construction industry and 400,000 jobs in manufacturing by March 2011, according to San Francisco Federal Reserve Bank economist Daniel Wilson.[1] Although infrastructure spending began with government dollars, these investments created jobs throughout the economy, mostly in the private sector.[2] Infrastructure projects have created jobs in communities nationwide. Recovery funds improved drinking and wastewater systems, fixed bridges and roads, and rehabilitated airports and shipyards across the nation. Some examples of high-impact infrastructure projects that have proceeded as a result of Recovery Act funding include: An expansion of a kilometer-long tunnel in Oakland, California, that connects two busy communities through a mountain.[3] An expansion and rehabilitation of the I-76/Vare Avenue Bridge in Philadelphia and 141 other bridge upgrades that supported nearly 4,000 jobs in Pennsylvania in July 2011.[ 4] The construction of new railway lines to serve the city of Pharr, Texas, as well as other infrastructure projects in that state that have saved or created more than 149,000 jobs through the end of 2010 .[5] Infrastructure investments are an especially cost-effective way to boost job creation with scare government funds. Economists James Feyrer and Bruce Sacerdote found for example that at the peak of the Recovery Act’s effect, 12.3 jobs were created for every $100,000 spent by the Department of Transportation and the Department of Energy—much of which was for infrastructure.[6] These two agencies spent $24.7 billion in Recovery dollars through September 2010, 82 percent of which was transportation spending. This implies a total of more than 3 million jobs created or saved. The value of infrastructure spending Analysis of all fiscal stimulus policies shows a higher “multiplier” from infrastructure spending than other kinds of government spending, such as tax cuts, meaning that infrastructure dollars flow through the economy and create more jobs than other kinds of spending. Economist Mark Zandi found, for example, that every dollar of government spending boosts the economy by $1.44, whereas every dollar spent on a refundable lump-sum tax rebate adds $1.22 to the economy.[7] In a separate study conducted before the Great Recession, economists James Heintz and Robert Pollin of the University of Massachusetts, Amherst, found that infrastructure investment spending in general creates about 18,000 total jobs for every $1 billion in new investment spending. This number include jobs directly created

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by hiring for the specific project, jobs indirectly created by supplier firms, and jobs induced when workers go out and spend their paychecks and boost their local economy.[8] Investing in transportation infrastructure in particular boosts employment. The Federal Highway Administration periodically estimates the impact of highway spending on direct employment, defined as jobs created by the firms working on a given project; on supporting jobs, including those in firms supplying materials and equipment for projects; and on indirect employment generated when those in the first two groups make consumer purchases with their paychecks. In 2007, $1 billion in federal highway expenditures supported about 30,000 jobs—10,300 in construction, 4,675 in supporting industries, and 15,094 in induced employment.[9] Investing in infrastructure not only creates jobs; it increases the productivity of businesses small, medium, and large . At the most basic level, infrastructure investments make it possible for firms to rely on well-maintained roads to move their goods, on an electricity grid that is always on to run their factories, and water mains that provide a steady stream of clean water to supply their restaurants. There is a large body of empirical work that documents this. Although the specific effect differs across studies, European Investment Bank economists Ward Romp and Jakob de Haan conclude that “there is now more consensus than in the past that public capital furthers economic growth.”[10] Because infrastructure investments create jobs and boost productivity, these investments have historically had bipartisan support. In early 2011, for example, AFL- CIO President Richard Trumka and U.S. Chamber of Commerce President Thomas Donohue issued a joint statement in favor of greater infrastructure investment in the near-term: “With the U.S. Chamber of Commerce and the AFL-CIO standing together to support job creation, we hope that Democrats and Republicans in Congress will also join together to build America’s infrastructure.”[11] But investments in infrastructure are now being pared back as states and localities struggle with budget constraints. Even so, there is a long list of infrastructure projects that municipalities, states, and the federal government can invest in. The American Society of Civil Engineers estimates that we need to spend at least $2.2 trillion over the next five years just to repair our crumbling infrastructure.[12] This doesn’t even include things like high-speed rail, mass transit, and renewable energy investments we need to free ourselves from foreign oil and climate change.

Transportation is key to employment. Bureau of Labor Statistics 2005 (Fatemeh Hajiha. An economist in the Division of Occupation Employment Statistics, U.S. Bureau of Labor Statistics. Accessed: 6/25/11. Full Date: May 2005. http://www.bls.gov/oes/2005/may/major.pdf)The OES survey uses the Standard Occupational Classification system (SOC), which categorizes workers into 801 detailed occupations and aggregates these detailed occupations into 22 major occupational groups. Chart 1 displays total employment for millions of workers, the percentage of total employment, and the mean wage for each group. The chart is organized by employment, with the largest occupational group on the bottom and the

smallest group on the top. In terms of employment level, the 22 occupational groups can be placed into three broad categories. The first consists of five groups with the largest employment. They are office and administrative support; sales and related; food preparation and serving related; production; and transportation and material moving. These groups together account for more than half of total employment, or more than 67 million work ers. Of the five groups, the office and administrative support group, with about 22.8 million workers, is the largest, and the transportation and material-moving group, with about 9.6 million workers, is the smallest. The mean wage in each of these five major groups is less than the mean wage for all workers across occupational groups ($18.21). The food preparation and serving related group has a mean wage of $8.58 per hour, the lowest among all occupational groups.

Infrastructure key to sustainable economy National Research Council 09 “Sustainable Critical Infrastructure Systems: A Framework for Meeting 21st Century Imperatives” Toward Sustainable Critical Infrastructure Systems: Framing the Challenges Workshop Committee- Board on Infrastructure and the Constructed Environment Division on Engineering and Physical Sciences, National Research Council of the National Academies International Standard Book Number-13: 978-0-309-0XXXX-X International Standard Book Number-10: 0-309-XXXXX-X. Copyrighted 2008 by the National Academy of Sciences

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The term infrastructure has been used many different ways to include a variety of components. In this report, critical infrastructure systems are defined as the water, wastewater, power, transportation, and telecommunications systems without which buildings, emergency response systems, and other infrastructure cannot operate as intended. They are the

“lifeline systems” that physically tie together metropolitan areas, communities, and neighborhoods, and facilitate the growth of local, regional, and national economies. These interdependent systems work together to provide the essential services of a modern society: Water for a vast array of needs, including drinking, washing, cooking, fire fighting, farming, and sanitation, as well as for manufacturing, industrial, and mining

processes; Power for numerous uses, including heat, light, refrigeration, cooking, food processing, and security purposes; the

production of durable goods; and the operation of oil and gas refineries, the Internet, television, and appliances; Mobility for people, materials, goods, and services to and from workplaces, markets, schools, recreational

facilities, and other destinations; Connectivity for purposes of communication, public safety, emergency services,

financial transactions, and for the control and monitoring of other infrastructure components. Opinions among economists

vary about the role of public spending for infrastructure as a means of creating jobs and equalizing opportunity. However, economists generally agree that (1) infrastructure and its quality affect behavior with respect to location—that is, where people, activities, and businesses are located or willing to locate—which in turn affects economic growth, land use,

and quality of life; and (2) it is difficult to achieve high rates of productivity in the absence of quality infrastructure (Gramlich, 1994). Thus, the efficiency, reliability, and resiliency of critical infrastructure systems affect many aspects of society, including the following: The costs of food, durable goods, and consumer

goods; The competitiveness of U.S. services and goods in the global market; The health, safety, and

well-being of citizens; The quality of life in communities; The availability and reliability of power and the maintenance of life-support systems; The travel time required for people to go from home to work or other destinations and for the efficient transport of goods and services; The reliability and speed of telecommunications; The speed and effectiveness of communications about actions to be taken during natural and human-made disasters (e.g., regarding evacuation

and safe harbors); The time, cost, and extent of recovery for communities following such disasters. Critical infrastructure systems also affect the quality of the environment and the availability of natural resources for other uses. Electric power and transportation account for 40 percent and 29 percent, respectively, of the nation’s total annual energy use; together they account for more than 50 percent of the greenhouse gas emissions linked to global climate change (EIA, 2008b). Critical infrastructure systems are built to provide services to several generations for several decades. These systems have become so integrated into modern life that they are taken for granted: Today, Americans expect to have power at the flip of a switch, clean drinking water by turning on a tap, the mobility to travel freely at any time, and the connectivity to communicate instantaneously.

Today, in U.S. businesses and industries, it is expected and relied on that the required infrastructure is available to transport raw materials, to manufacture products, to deliver food and durable goods to markets and ports, and to enable the sharing of ideas and the conduct of transactions electronically. By 2030, an additional 60 million Americans and unknown numbers of businesses will have similar demands and expectations for the services provided by these systems (U.S. DOC, 2008).

Failing infrastructure kills the economy and threatens national safety. National Research Council 09 “Sustainable Critical Infrastructure Systems: A Framework for Meeting 21st Century Imperatives” Toward Sustainable Critical Infrastructure Systems: Framing the Challenges Workshop Committee- Board on Infrastructure and the Constructed Environment Division on Engineering and Physical Sciences, National Research Council of the National Academies International Standard Book Number-13: 978-0-309-0XXXX-X International Standard Book Number-10: 0-309-XXXXX-X. Copyrighted 2008 by the National Academy of Sciences

However, while the nation invested heavily in the design, construction, and operation of these systems, it has not invested the funds necessary to keep these systems in good condition or to upgrade them to meet the demands created by a growing and shifting population. Large segments and components of the nation’s water, wastewater, power, transportation, and telecommunications

systems are now 50 to 100 years old. Some systems and components are physically deteriorating owing to wear and tear and lack of timely maintenance and repair, which can lead to increasing rates of intermittent and periodic loss of service. For instance, in the United States between 1991 and 2000, 99 separate power outages occurred, affecting at least 50,000 consumers each time. However, between 2001 and 2005, there were 150 outages

affecting 50,000 or more consumers—that is, there were 50 percent more outages in half the time (Amin, 2008). The performance of systems is also deteriorating where system capacity is not adequate for the level of use. Each year, for example, every driver spends an average of 25 hours in traffic delays at a cost of $742 in time and

fuel (TTI, 2005). When critical infrastructure systems fail completely, the results can be devastating, as evidenced by the following events: Infrastructure can also fail if subjected to terrorist attack, as on September 11, 2001, with the collapse of the Twin Towers of the World Trade Center in New York City. The National Infrastructure Protection Plan developed by

the Department of Homeland Security states: Protecting and ensuring the resiliency of the critical infrastructure and key resources (CIKR) of the United States is essential to the Nation’s security, public

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health and safety, economic vitality, and way of life. Attacks on CIKR could significantly disrupt the functioning of government and business alike and produce cascading effects far beyond the targeted sector and physical location of the incident. Direct terrorist attacks and natural, manmade, or

technological hazards could produce catastrophic losses in terms of human casualties, property destruction, and economic effects, as well as profound damage to public morale and confidence. Attacks using components of the Nation’s CIKR as weapons of mass destruction could have even more devastating physical and psychological

consequences (DHS, 2009, p. 1). In summary, critical infrastructure systems matter because they directly affect the

daily lives of all Americans both positively and negatively. These systems provide the essential services for health, comfort, and prosperity. However, their deteriorating levels of condition and performance routinely

inconvenience individuals, pose risks to communities during and after emergencies, and inhibit the nation’s capacity to move goods and services efficiently to domestic and international markets. How the nation chooses to renew these systems will have a direct bearing on local, regional, and national economies and on the quality of life for more than 300 million Americans. Critical infrastructure system renewal will also have a direct impact on how the nation meets some other imperatives of the 21st century, as described in Chapter 2.

Infrastructure Key to Economic Competitiveness National Research Council 09 “Sustainable Critical Infrastructure Systems: A Framework for Meeting 21st Century Imperatives” Toward Sustainable Critical Infrastructure Systems: Framing the Challenges Workshop Committee- Board on Infrastructure and the Constructed Environment Division on Engineering and Physical Sciences, National Research Council of the National Academies International Standard Book Number-13: 978-0-309-0XXXX-X International Standard Book Number-10: 0-309-XXXXX-X. Copyrighted 2008 by the National Academy of Sciences

Throughout much of the 20th century, the United States was the global economic leader, and it remains so today. However, new technologies, political changes, and other factors have led to greater economic competition among nations, new production centers, and new trading patterns, all of which have implications for U.S. competitiveness in the future. The Internet and other technologies have changed the structure of businesses and the location of production centers around the world (Mongelluzzo, 2008). The development of “megaships” for transporting containerized goods, implementation of the North American Free Trade Agreement (NAFTA), and other major factors are changing trading patterns among nations. The fall of communism in the Soviet Union and

Eastern Europe and the emergence of the European Union, China, and India as economic powers have resulted in greater wealth

and consumer demand throughout the world (Gallis, 2008). For the United States, international trade (imports and exports) increased yearly between 1997 and 2005 as a proportion of the gross domestic product, a trend that is

projected to continue through 2030 (Figure 2.1 A key enabler of global trade is the “increasingly complex just-in-time supply chain

logistics system, which depends, in turn, on reliable power, mobility, and water” (Doshi et al., 2007, p. 4). Critical infrastructure systems, in fact, provide the foundation for producing and moving goods and services to seaports, airports, and shipping terminals for export to other countries. The primarily

east-west configuration of the nation’s highways, railways, and shipping terminals reflects the trading patterns of the 20th century. Food, vehicles, and other goods were primarily produced in the center of the country and transported to major cities on the East, West, and Gulf Coasts for domestic consumption and for shipment to Europe and Asia.

As new economic powers emerge, global trading patterns are changing. New ports are developing along the west coast of Mexico from which goods are shipped north to Los Angeles, San Francisco, and Seattle by ground and to Chicago, Detroit, and Toronto by air (Gallis, 2008). On the East Coast, goods are being transported from Halifax in Canada south to New York and the Gulf Coast. Canada and Mexico also supply a significant portion of the petroleum used in the United States. Trade routes from Southeast Asia across the Indian Ocean, into the Red Sea, and across the Mediterranean Sea mean that Asian goods can be directly delivered in containers to East Coast cities in the United States instead of being shipped to the West Coast and transported across the country (Gallis, 2008). The expansion of the Panama Canal by 2014 to accommodate megaships will allow

Asian goods more direct access to East Coast ports (Mongelluzzo, 2008) (Figure 2.2). The primarily east-west configuration of U.S. critical infrastructure systems does not reflect the north-south trade patterns with Canada and Mexico. Increased trade following the adoption of NAFTA, combined with new security requirements, “has caused significant congestion and cost increases at border crossings with Mexico and Canada and on corridors

serving NAFTA markets” (TRB, 2006, pp. 2-3). A separate but related issue is that “West Coast ports may be unable to handle the staggering projected growth in Asian trade over the next 20 years—even with significant increases in port productivity—because of landside constraints on rail and highway systems” (TRB, 2006, p. 2). To improve their competitiveness, other economic powers have developed integrated strategies for economic growth that include infrastructure as a key component. In 1986, the Ministry of Science and Technology of the People’s Republic of China launched a national high-technology research and development plan “to meet the global challenges of new technology revolution and competition” (MSTPRC, 2006). The program is now in its 10th Five-Year Plan period. The European Union Treaty “obliges the Community to contribute to the organization and development of Trans-European Networks (TENs) in the areas of transport, telecommunications and energy

supply infrastructure . . .to serve the objectives of a smooth functioning Single Market . . .” (EC, 1999, p. 14). The United States, in contrast, does not have a strategy to link its infrastructure to its global competitiveness. Domestically, congested highways, airports, and shipping terminals also impede the efficient movement of raw materials, meat, produce, and durable goods destined for local and regional markets. It has been estimated that highway congestion costs

Americans approximately $65 billion per year (2005 dollars) and wastes 2.3 billion gallons of gasoline (TRB, 2006). The additional

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costs incurred by such congestion increase the costs of food, fuel, and other commodities for every consumer. If the United States is to remain as economically competitive as possible, more efficient methods to transport goods and services and additional corridors may be needed. New corridors or infrastructure components in turn could have significant environmental and land use impacts unless they are fully evaluated and carefully planned.

Disaster Resiliency National Research Council 09 “Sustainable Critical Infrastructure Systems: A Framework for Meeting 21st Century Imperatives” Toward Sustainable Critical Infrastructure Systems: Framing the Challenges Workshop Committee- Board on Infrastructure and the Constructed Environment Division on Engineering and Physical Sciences, National Research Council of the National Academies International Standard Book Number-13: 978-0-309-0XXXX-X International Standard Book Number-10: 0-309-XXXXX-X. Copyrighted 2008 by the National Academy of Sciences

Communities and individuals require essential services in order to learn about, react to, and recover from natural or human-made disasters—earthquakes, hurricanes, tornadoes, flooding, terrorism, or accidents. Critical infrastructure systems provide crucial services, including clean water

for drinking and for the protection of public health; mobility for the evacuation and repopulation of communities; connectivity for

emergency communications and response; and power for hospitals, for safety, security, and incident management,

for cooking and refrigerating food, and for the continuity of government operations before, during, and after an event. The condition and performance of these infrastructure systems help determine how effectively a community can react in times of crisis. Critical infrastructure systems that are robust and resilient, as opposed to deteriorating, can also mitigate the effects of a disaster by limiting deaths and injuries, property losses, impacts on ecosystems (for example, uncontrolled discharge

of waste), and the time it takes for a community to recover. In summary, the materials, technologies, and methods chosen to renew critical infrastructure systems will be a determining factor in whether the nation will be able to meet some of the greatest challenges of the 21st century.

Natural disasters kill the economy—infrastructure shocks, unemployment, and increased commodity prices. Elmerraji 11 “The Financial Effects of a Natural Disaster” Jonas Elmerraji (Stock report editor and contributor to the Entrepreneur) 3/ 11/2011 http://www.investopedia.com/financial-edge/0311/The-Financial-Effects-Of-A-Natural-Disaster.aspx#axzz1yjsO9zRG

Today's huge earthquake and tsunami sent home the idea that despite advances in building and infrastructure, we're all subject to

Mother Nature's whims. In today's increasingly interconnected economy, the economic fallout from a natural disaster is rarely relegated to the geographic area that it hits. In fact, even natural disasters that take place thousands of miles away can shake up your portfolio here at home. Infrastructure Destruction Besides loss of life,

infrastructure destruction is by far the most obvious type of damage that comes to mind when we think about natural disasters. After all, traditional television news has made images of damaged homes and businesses ubiquitous following nearly every earthquake or tornado that touches down. But the economic consequences are rarely

considered beyond what the cost will be to rebuild. That's a serious problem for the victims of natural disasters because it's the economic fallout that leaves some of the longest-lasting scars. The Unforeseen

Problem One of the biggest problems for areas affected by natural disasters is business disruption.

With road, communication infrastructure, and building damage common after sizable disasters, it's not uncommon for local businesses to be shut down for some time after the aftershocks settle. On a grand scale, that's what happened after Hurricane Katrina ravaged the Gulf coast back in 2005 – as companies reeled from catastrophic losses, millions of workers in Louisiana, Texas and Mississippi were left jobless, compounding the already

staggering poverty problem in the region. With this mass unemployment came a severe cutback in consumer spending (at the few places that were open for business) and – consequently – tax revenues needed to aid in the rebuilding efforts. Furthermore, the international impact was especially felt throughout the energy sector as oil prices escalated due to destroyed rigs and refineries. (Learn more in Using Consumer Spending As A Market Indicator.) In places where significant portions of the country are decimated by disasters, governments are often left with little recourse; with a fraction of their former tax revenue coming in and deteriorated sovereign creditworthiness, foreign aid becomes an absolute necessity. The Commodity Effect and Scarcity But

those factors only touch on how much of an effect a natural disaster can have on investment portfolios around the world. Through the popularity of ADRs, ETFs and other forms of international investment diversification, the ability of U.S. investors to own shares of companies based abroad has expanded considerably in the last decade. Because of that,

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owning shares of any given company's stock can give an investor an interest in a refinery in Louisiana or a gold mine in Africa – and

it can expose investors to the risks associated with these locales. Less obvious – but perhaps even more significant – are the effects that a natural disaster can have on commodity prices. In the case of Hurricane Katrina, the storm's entry point at the Gulf coast is significant because of the fact that nearly half of the gasoline consumed in the U.S. passes through refineries that were affected by the storm. As a result, oil and gas supplies were affected immediately after Katrina made landfall. With increased gas pump prices, extra effects included diminished margins for industries - from transportation to consumer goods. Similar things happened in the copper market as earthquakes in Chile choked production and inflated copper prices worldwide.

These kinds of price increases aren't just limited to market-traded commodities. When natural disaster strikes, scarcity rules, and regular staples like food, merchandise and even housing can become commoditized as a result. (Learn more in How To Invest In Commodities.) The Bottom Line Ultimately, it's

difficult to imagine the extent of the economic repercussions a major natural disaster can bring about. And although the majority of disasters impact the devastated area's economy adversely, they can have an impact on a larger scale. Although there's little we can do to avoid Mother Nature's next catastrophe, we can better prepare for it – both physically and financially. Understanding the economic implications of a disaster is the first step toward that.

Infrastructure is key to the economy – construction sector and overall growthKlein, 1o - editor of Wonkblog and a columnist at the Washington Post, as well as a contributor to MSNBC and Bloomberg (Ezra “If you Build it…; Now’s the time to invest in infrastructure” Newsweek October 11, 2010, http://www.urbanconservancy.org/news/roundup/archive/1118)People say the government should be run more like a business. So imagine yourself as CEO. Your bridges are crumbling. Your air-traffic control system doesn't use GPS. The Society of Civil Engineers gave your infrastructure a D and estimated that you need to make more than $2 trillion in repairs and upgrades. Sorry, chief. No one said being CEO was easy. But

there's good news, too. Because of the recession, construction materials are cheap. So is labor. And your

borrowing costs? They've never been lower. That means a dollar of investment today will go much further than it would have five years ago--or than it's likely to go five years from now. So what do you do? If you're thinking like a CEO, the answer is easy: you invest. That's what the administration is proposing to do. But their plan is too modest. The $50 billion bump in infrastructure spending it outlined is only for surface transportation. And as for our water systems, schools, and levees? This is not a time for half measures. It's a rare opportunity to do what we need to do--and save money doing it. In 2009,

Congress passed the American Recovery and Reinvestment Act--the stimulus. Billions went to the Transportation Department to improve our roads, rails, and runways. That money was, in turn, given to the states, which drew up lists of what they needed to do and how much it would cost. When the Feds checked in on the funds, what they found shocked them.

The projects were coming in at about 20 percent less than estimated. The Transportation Department looked at the share that went to the Federal Aviation Administration for runway repairs. The money the FAA thought would

complete 300 projects was going to finish 367. The stimulus, the Feds realized, had blundered into an incredible deal: the recession was driven by the collapse of the construction sector. People who built things were now out of work. The materials used for building things were now on fire sale. The companies that organized the building of things were suddenly desperate for jobs. As a result, building things was suddenly dirt cheap. And it still is. Unemployment in the construction sector is at 17 percent--and that doesn't even count the construction workers who've given up looking for jobs. "There's work that needs to be done," Larry Summers, outgoing chairman of the National Economic Council, told me. "There are

people there to do it. It seems a crime for the two not to be brought together." As for debt, delaying a dollar of needed repairs is no different from racking up a dollar the government owes. "You run a deficit both when you borrow money and when you defer maintenance," Summers says. "Either way, you're

imposing a cost on future generations." Plus, if America has to borrow money, now is the time. The interest rate on 10-year Treasuries is less than 3 percent--the lowest it has been since the 1950s. So a dollar of debt is cheap, and a dollar of infrastructure investment goes far. We'll have to pay down that debt, of course. But part of paying down the debt is increasing economic growth . What worries the market is the size of our debt against the size of

our GDP. If our economy grows faster than our debt, then our debt, in the eyes of the market, gets smaller. But if our economy is going to grow that fast, we'll need an infrastructure able to support that kind of growth. Tomorrow's energy contracts won't be won by the country with yesterday's energy grid.

Transportation is tied to economic recovery – GDP, productivity, job creationDonohue, 11 - is president and chief executive officer of the US Chamber of Commerce, the world's largest business federation (Thomas J. “The highway to jobs - via betterinfrastructure; AsObama and Congress talk jobs, here's an appeal from the US Chamber of Commerce: Invest heavily in roads, air transport, and otherinfrastructure.The economy and jobs depend on it. Adopt innovative financing, including aninfrastructurebank to leverage private investment.” Christian Science Monitor, 8 September 2011 http://www.csmonitor.com/Commentary/Opinion/2011/0908/The-highway-to-jobs-via-better-infrastructure) Throughout America's history, feats in infrastructure, like the Interstate Highway System, have not only been symbols of national achievement but also conduits for commerce and keys to prosperity. Today, however, much of this foundation of the US economy is costly, cracked, and crumbling. Roads, rail, airports, and harbors need

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continual investment to keep pace with demand. Recent research by the US Chamber of Commerce discovered that underperforming transport infrastructure cost the US economy nearly $2 trillion in lost gross domestic product in 2008 and 2009. The chamber's Transportation Performance Index showed that America's transit system is not keeping up with growing demands and is failing to meet the needs of the business

community and consumers. Most important, the research proved for the first time that there is a direct relationship between transportation infrastructure performance and GDP. The

index findings also showed that if America invests wisely in infrastructure, it can become more reliable, predictable, and safe. By improving underperforming transport infrastructure, the United States could unlock nearly $1 trillion in economic potential. Making investments that tackle immediate challenges, like congestion, and that account

for growing demand into the future, America would boost productivity and economic growth in the long run and support millions of jobs in the near term. Investment in infrastructure would also improve quality of life by reducing highway fatalities and accidents and easing traffic congestion that costs the public $115 billion a year in lost time and wasted fuel - $808 out of the pocket of every motorist. Such an investment would also allow the country to better protect the

environment while increasing mobility. If America fails to adequately invest in transportation infrastructure, by 2020 it will lose $897 billion in economic growth. Businesses will see their transportation costs rise by $430 billion, and the average American household income will drop by more than $7,000. US exports will decline by $28 billion. Meanwhile, global competitors will surge past us with superior infrastructure that will attract jobs, businesses, and capital.

Transportation is key to economic recovery - Job growth, competitiveness, and GDPHalsey III, 11 – staff writer (Ashley, “Neglecting transportation has high price, report says” The Washington Post July 28, 2011” http://www.highbeam.com/doc/1P2-29261254.html)As Congress debates how to meet the nation's long-term transportation needs, decaying roads, bridges, railroads and transit systems are costing the United States $129 billion a year, according to a report issued Wednesday by a professional group whose

members are responsible for designing and building such infrastructure. Complex calculations done for the American Society of Civil Engineers indicate that infrastructure deficiencies add $97 billion a year to the cost of operating vehicles and result in travel delays that cost $32 billion. "If investments in surface transportation infrastructure are not made soon, these costs are expected to grow exponentially," the ASCE

said. "Within 10 years, U.S. businesses would pay an added $430 billion in transportation costs, household incomes would fall by more than $7,000, and U.S. exports will fall by $28 billion." Deterioration of the U.S. transportation system has been likened to an iceberg, with just the tip of an enormous obstacle to economic growth showing above the surface. The ASCE report contends that infrastructure failure already is dramatically affecting

travel and commerce. It is the latest of several reports to predict dire consequences if the nation does not swiftly address the need to rebuild 60-year-old highway systems and rail lines often far older than that. In May, a report by the Urban Land Institute warned that the United States is falling behind three emerging economic competitors: Brazil, China and India. The institute's report put in global perspective an issue addressed last year by 80 experts led by former transportation secretaries Norman Y. Mineta and Samuel K. Skinner. That group concluded that as much as $262 billion a year must be spent on U.S. highways, rail networks and air transportation systems. The infrastructure crisis is not lost on Congress, but Republicans who control the House and Democrats

who control the Senate have different ideas about how to address it. Unable to agree on long-term aviation funding, Congress proved incapable last week of passing a simple extension of current funding levels, something it has done 20 times since funding for the Federal Aviation Administration expired in 2007. The agency has been operating in a partial shutdown since midnight Friday, losing an estimated $30 million a day in airline ticket tax revenue. There is an equally deep divide between the two houses on a long-term plan for funding surface transportation. House Republicans favor a six-year plan that would provide about $35 billion a year, an amount that transportation committee Chairman John L. Mica (R-Fla.) says can be leveraged into about $75 billion through a variety of means, including public-private partnerships. Mica calls a two-year, $109 billion funding proposal that has won bipartisan support in the Senate "a recipe for bankruptcy" of the Federal Highway Trust Fund, which bankrolls surface transportation. Rep. Nick J. Rahall II (W.Va.), ranking

Democrat on Mica's committee, said the ASCE report underscored the folly of efforts to "do more with less." "Today's report provides the cold hard truth that America's economic recovery and long-term competitiveness will suffer if we continue to under-invest in our future," Rahall said. "Slashing investments by one-third, as Republicans have proposed to do, will make the economic impact on America's middle class even worse than the grim predictions by the economists in this report." The ASCE report predicted that without infrastructure investment, 870,000 jobs would be lost and economic growth would be stifled to the tune of $3.1 trillion by 2020. To avert that, the report says, will require an investment of about $1.7 trillion by 2020. It estimated the gap between what is being spent and what needs to be spent

at $94 billion a year. "The link between a nation's infrastructure and its economic competitiveness has always been understood," said Kathy J. Caldwell, president of the ASCE. "But today, for the first time, we have data showing how much failing to invest in our surface transportation system can negatively impact job growth and family budgets." Thomas J. Donohue, president of the U.S.

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Chamber of Commerce, said the necessary spending was "not just transportation for transportation's sake." "Without more robust economic growth, the U.S. will not create the 20 million jobs needed in the next decade to replace those lost during the recession and to keep up with a growing workforce," he said. Ultimately, Americans would get paid less, the ASCE report says. The economy would lose jobs, and the paychecks of those who are able to find work would be cut by nearly 30 percent. The cost of a crumbling transportation system was described by Steven Landau of Boston's Economic Development Research Group, which did the research for the ASCE. "Business will have to divert increasing portions of earned income to pay for transportation delays and vehicle repairs, draining money that would otherwise be invested in innovation and expansion," Landau said.

Transportation infrastructure increases economic opportunitiesRodrigue 09 (Jean-Paul Rodrigue received a Ph.D. in Transport Geography from the Université de Montréal (1994) and has been at the Department of Economics & Geography at Hofstra University since 1999. In 2008, he became part of the Department of Global Studies and Geography. “The Geography of Transportation” Chapter 7 http://people.hofstra.edu/geotrans/eng/ch7en/conc7en/ch7c1en.html) // CG

Like many economic activities that are intensive in infrastructures, the transport sector is an important component of the economy impacting on development and the welfare of populations. When transport systems are efficient, they provide economic and social opportunities and benefits that result in positive multipliers effects such as better accessibility to markets, employment and additional investments. When transport systems are deficient in terms of capacity or reliability, they can have an economic cost such as reduced or missed opportunities. Efficient transportation reduces costs, while inefficient transportation increases costs. Transport also carries an important social and environmental load, which cannot be neglected. Thus, from a general standpoint the economic impacts of transportation can be direct and indirect: Direct impacts related to accessibility change where transport enables larger markets and enables to save time and costs. Indirect impacts related to the economic multiplier effects where the price of commodities, goods or services drop and/or their variety increases. The impacts of transportation are not always intended, and can have unforeseen or unintended consequences such as congestion. Mobility is one of the most fundamental and important characteristics of economic activity as it satisfies the basic need of going from one location to the other, a need shared by passengers, freight and information. All economies and regions do not share the same level of mobility as most are in a different stage in their mobility transition. Economies that possess greater mobility are often those with better opportunities to develop than those suffering from scarce mobility. Reduced mobility impedes development while greater mobility is a catalyst for development. Mobility is thus a reliable indicator of development. Providing this mobility is an industry that offers services to its customers, employs people and pays wages, invests capital and generates income. The economic importance of the transportation industry can thus be assessed from a macroeconomic and microeconomic perspective: At the macroeconomic level (the importance of transportation for a whole economy), transportation and the mobility it confers are linked to a level of output, employment and income within a national economy. In many developed countries, transportation accounts between 6% and 12% of the GDP. At the microeconomic level (the importance of transportation for specific parts of the economy) transportation is linked to producer, consumer and production costs. The importance of specific transport activities and infrastructure can thus be assessed for each sector of the economy. Transportation accounts on average between 10% and 15% of household expenditures while it accounts around 4% of the costs of each unit of output in manufacturing, but this figure varies greatly according to sub sectors. Transportation links together the factors of production in a complex web of relationships between producers and consumers. The outcome is commonly a more efficient division of production by an exploitation of geographical comparative advantages, as well as the means to develop economies of scale and scope. The productivity of space, capital and labor is thus enhanced with the efficiency of distribution and personal mobility. It is acknowledged that economic growth is increasingly linked with transport developments, namely infrastructures but also managerial expertise is crucial for logistics. The following impacts can be assessed: Networks. Setting of routes enabling new or existing interactions between economic entities. Performance. Improvements

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in cost and time attributes for existing passenger and freight movements. Reliability. Improvement in the time performance, notably in terms of punctuality, as well as reduced loss or damage. Market size. Access to a wider market base where economies of scale in production, distribution and consumption can be improved. Productivity. Increases in productivity from the access to a larger and more diverse base of inputs (raw materials, parts, energy or labor) and broader markets for diverse outputs (intermediate and finished goods).

Infrastructure spending is comparatively better than status quo stimuli Baxandall 08 (Phineas Baxandall, Ph.D. Senior Analyst for Tax and Budget Policy U.S. Public Interest Research Grou “Economic Stimulus or Simply More Misguided Spending?” Dec 30 2008 http://www.pbs.org/now/shows/507/State-Stimulus.pdf)// CG

As a path to restoring economic prosperity, investment in transportation infrastructure makes a great deal of sense. The impact of last year’s stimulus checks were small because most funds weren’t spent and what was spent went largely to expensive gas. 1 Infrastructure is a far better stimulus than rebate checks. Unlike checks from the IRS, infrastructure projects are more likely to generate new economic activity and create jobs in construction industries which have been hit particularly hard by the housing meltdown. Few infrastructure activities can be readily outsourced overseas. And projects can reduce America’s dependency on oil. The transportation system greatly needs new investment. Much of America’s transportation network was built in the 1950s as part of President Eisenhower’s Interstate Highway system. Those projects were completed decades ago. However, a large portion of bridges and other construction now needs repair. Across the nation, over seventy thousand bridges (or 12 percent of all bridges) have been designated as structurally deficient. 2 A well functioning and modernized transportation sector will be an important part of improved future productivity and energy security, and will reduce traffic congestion and global warming pollution. If investments are made properly, transportation infrastructure will both stimulate the economy and modernize it for the 21 st century. America has learned the hard way that economic recovery spending must be accompanied by rules that ensure serious change and accountability. Many have criticized the federal Treasury Department for dispensing hundreds of billions of dollars to financial institutions without rules to ensure that recipients would use the money to make new loans to businesses and homeowners. December’s Congressional defeat of a proposed auto bailout package, in part, reflected a lack of confidence that public funds would produce necessary transformative outcomes. The 2009 Economic Recovery package must similarly do more than pump dollars into the economy while enlarging a dysfunctional transportation system. Done right, transportation infrastructure spending will both stimulate the economy quickly and fund forward-looking priorities. To do so, spending provisions must assure that money will well-spent.

Investment is key to reinvigorate U.S economic competitiveness

Kurt No Date [“Port-Related Infrastructure Investments Can Reap Dividends,”• American Associations Port Authority By Kurt Nagle- KURT J. NAGLE, President and Chief Executive Officer Kurt Nagle has over 30 years of experience in Washington, DC, related to seaports and international trade. Mr. Nagle was Director of International Trade for the National Coal Association and Assistant Secretary for the Coal Exporters Association. He worked in the Office of International Economic Research at the U.S. Department of Commerce. Mr. Nagle serves on the Executive Committee of the Propeller Club of the United States and is a former commissioner of PIANC, the International Navigation Congress. Mr. Nagle holds a Master's Degree in Economics from George Mason University<http://aapa.files.cms-plus.com/AAPAArticles/Industry%20Today%20-%20Port-Related%20Infrastructure%20Investments%20Can%20Reap%20Dividends%20-%20Nov%202011%20by%20Kurt%20Nagle.pdf-jt]

VIEW FROM THE LAND In addition to navigable waterways, American businesses benefit from reliable, uncongested roads, rails, bridges and tunnels. These present a competitive advantage in the global economy by providing businesses the ability to deliver products at lower costs while reaching larger markets. And the role of international trade is only projected to increase. As recently as 2005, the World Economic Forum ranked the United States as number-one in infrastructure economic competitiveness. Now, the US is ranked 15th. This drop down the charts should come as no surprise, considering that the United States spends only 1.7 percent of its domestic product on transportation infrastructure. Compare this to Canada, which spends

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four percent. Then look at China. It spends nine percent. This is troubling information for the United States. Even as the global recession has forced cutbacks in government spending, other countries continue to invest significantly more than the United States in expanding and updating transportation networks. For example, China has invested $3.3 trillion since 2000 and recently announced another $105.2 billion for 23 new infrastructure projects. Brazil has invested $240 billion since 2008, with another $340 billion committed for the next three years. Consequently, China is now home to six of the world’s 10 busiest ports. The United States isn’t home to one. Now turn to Brazil. Its Acu Superport is larger than Manhattan Island – and it boasts stateofthe-art highway, pipeline and conveyorbelt capacity to ease the transfer of raw materials onto ships heading to China. That’s not the only bad news. According to the National Surface Transportation Policy and Revenue Commission, US freight movements are increasingly choked by a lack of capacity, and the current system of funding improvements won’t even sustain what we’ve already built. Inadequate infrastructure hurts the economy – and the businesses, workers, farmers and consumers that drive it. The federal government has a unique constitutional responsibility to maintain and improve the infrastructure that enables the flow of commerce, and much of that infrastructure in and around seaports has been neglected – and for too long. Federal surface transportation programs have largely ignored freight mobility and the importance of intermodal connectors that provide the link between the federal highway system and intermodal marine terminals that move goods from land to water. To get our nation’s economy back on track, we must develop a national infrastructure strategy for the future. Washington must finally pass a reauthorized multiyear transportation bill and target federal dollars toward economically strategic freight transportation infrastructure of national and regional significance. Transportation helps Econ

Aschauer 91 - Professor of Economics at Bates College and University of Michigan, PhD from the University of Rochester, Senior economist on the Board of Governors at the Federal Reserve Bank of Chicago andadvised the U.S. Congress, The World Bank, the CIA and the U.S. EPA. (David, “Transpotation Spending and Economic Growth, the Effects of Transit and Highways Expenditures,” American Public Transit Association, September 1991, http://www.apta.com/resources/reportsandpublications/Documents/aschauer_economic_growth_1991.pdf) MSD Transportation spending has always been a major catalyst in the long term development of the United States economy. The Erie Canal, the Federal Road, and the Interstate Highway are a merely a few of the transportation projects which have been of significant importance to the nation’s economic expansion since Colonial times. However, the past couple of decades has witnessed a decline in the number of new transportation projects to only a few a year. For example, since 1960 highway spending by state and local governments has slid from nearly 2 percent of gross national product to just over 1 percent of output. This trend is reflective of a broader slump in public investment in infrastructure, with spending on a core infrastructure (including not only surface and air transportation but also water and sewer systems and electrical and gas facilities) falling from around 4 percent of output to just over 2 percent. While investment in surface transportation facilities has slumped, the demand for such facilities climbs unabated. For example, on the nation’s highways, travel by occupants of passenger vehicles has risen from less than 600 million miles in 1960 to 1.4 million miles in 1988. During the same period, motor vehicle freight carriage has climbed at 4.5 percent annual rate from 200 to nearly 700 billion on-miles.

Current Transportation is harmful to Econ

Aschauer 91 - Professor of Economics at Bates College and University of Michigan, PhD from the University of Rochester, Senior economist on the Board of Governors at the Federal Reserve Bank of Chicago andadvised the U.S. Congress, The World Bank, the CIA and the U.S.

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EPA. (David, “Transpotation Spending and Economic Growth, the Effects of Transit and Highways Expenditures,” American Public Transit Association, September 1991, http://www.apta.com/resources/reportsandpublications/Documents/aschauer_economic_growth_1991.pdf) MSD Similarly, public transit passenger trips have risen from 7.3 billion in 1970 to 9.1 billion in 1969, a 25 percent increase. An undesirable result of this imbalance between the supply of and the demand for facilities is increased congestion in the transportation network. The General Accounting Office reports that “traffic congestion is an escalating-transportation problem in this country. An increasing proportion of both rural and urban interstate highways are operating under crowded conditions. In California, the Chamber of Commerce estimated that in 1988 travel delays coat each motorist over $230 per year. The Texas Transportation Institute puts the 1988 cost of traffic congestion in urban areas above $400 per registered vehicle. The congestion is particularly acute In the Northeast, where the total congestion cost per registered vehicle above $750. Indeed, there is valid concern that traffic gridlock ii in our future and that severe economic repercussions will result unless additional resources flow toward transportation. In the words of Fred Barnes, Senior Editor of the New Republic, the truth is that congested highways and crowded airports, harmful enough now, will be economically ruinous if not corrected.

Transportation Spending helps econ in the long term

Aschauer 91 - Professor of Economics at Bates College and University of Michigan, PhD from the University of Rochester, Senior economist on the Board of Governors at the Federal Reserve Bank of Chicago andadvised the U.S. Congress, The World Bank, the CIA and the U.S. EPA. (David, “Transpotation Spending and Economic Growth, the Effects of Transit and Highways Expenditures,” American Public Transit Association, September 1991, http://www.apta.com/resources/reportsandpublications/Documents/aschauer_economic_growth_1991.pdf) MSD There is considerable evidence that transportation spending has a positive impact on long run economic growth. In a study which employed pooled data for the forty-eight contiguous states over the time period 1965 to 1979, L. Jay ‘Helms (1985) finds that state expenditures on highways strongly affects the level of state personal income. Specifically, an increase in average state highway spending by $1 per $1000 of personal income is estimated to raise personal income by 0.2 percent in the first year and by just over 2 percent in the long run. These results depend crucially upon the financing source being a reduction in state transfer payments, but even if a property tax increase is used to finance the highway expenditure, in the long run personal income increases by over 0.6 percent. Assuming that personal income per capita averaged $8000, these results mean that even in the case of property tax financed spending an increase in highway spending would raise personal income per capita by $48 for every $8 of expenditure—implying a long run multiplier of 6. Alicia Munnell (1990s) presents estimates of the Impact of an increase in highway capital on the level of gross state product for the forty-eight contiguous states over the period l969 to l986l. As the empirical specification includes private labor and capital inputs--as well as other forms of public capital— these estimates can also be interpreted as showing the impact of changes in highway capital on labor productivity. Viewed in this manner, the estimates show that a 1 percent increase in the stock of highway. (Approximately $5 billion in 1960) would generate an annual increase in gross state product of more than $1.5 billion. Assuming a 2 percent per year depreciation rate and a 5 percent discount rate, the present discounted value of output gains would equal approximately $25 billion and would imply a benefit to coat ratio in the range of 5.

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Transportation spending is key to economic recoveryO’neill 12 (Sean O'Neill Director, Congressional Relations, Infrastructure Advancement “Transportation Investment Drives Economic Recovery” 1/18/12 http://www.agc.org/galleries/advy/TalkingPoints.pdf) // CG

Multi-year Highway/Transit Bill • Since Congress has failed to pass legislation to reauthorize the highway and transit programs before SAFETEA-LU expired on September 30, 2009, these programs have been operating under short term extensions. The latest extension expires on March 31, 2012. The lack of certainty that comes with not having a multi-year program forces states to be very conservative in their project planning and design which significantly delays construction. Major transportation projects require at least one year of planning and design before they can be put out for bid and may take more than a year to construct. Without a multiyear authorization, it is impossible to know how much funding will be available for construction so it is impossible to plan, impossible to design and that makes it

impossible to construct major capital projects. As a result, the impacts of transportation investments are seriously diluted by a

congressionally abbreviated reauthorization program. States have billions of dollars worth of major projects held up waiting for a multiyear authorization. • The largest impediment to passing a fully-funded multi-year authorization bill is paying for all of the needed transportation investments. There is no single answer to solve our current funding

problem. All options must be on the table. The consequences of inaction are clear. The United States can either invest in our transportation infrastructure now or pay more later. • An efficient surface transportation network is essential for: • Delivering U.S. goods to domestic and international markets; • Providing U.S. business with access to workers; • Preventing traffic congestion from draining $87 billion from the economy each year; and • Keeping the U.S. economy globally competitive. • Without these core functions, U.S. productivity and economic strength will continue to be compromised. At the

same time, the U.S. construction industry today is faced with its worst economic crisis since the Great Depression: • Nearly two million construction jobs have been lost since 2007; • Construction industry unemployment now stands at 13 percent; and • Millions of American families are suffering as residential and commercial construction activity has plummeted and state and local spending on highways, roads and bridges declined.

Transportation funding is key to a strong economy Beckwith 2012 (MMA Executive Director Geoff Beckwith “Transportation funding debate key to strong economy “ April 2012 http://www.mma.org/advocacy-mainmenu-100/exec-directors-reports/6401-transportation-funding-debate-key-to-strong-economy) // CG

Our transportation infrastructure is in very bad shape. Not just here in Massachusetts, but in every region of the country. That’s a fact. Ask any person on the street in any city or town. People know that our roads, bridges and railways are in poor condition, and are getting worse every year. The need is simple to describe. Roads need to be repaved and rebuilt on a regular basis. Bridges need to be tested for safety and maintained to meet standards that protect us all. Public transit systems and roads must exist for everyone, regardless of region or economic status. This isn’t a luxury; this is essential to our economy. Businesses, individuals and families need a modern, integrated, safe and passable transportation infrastructure system with the capacity to facilitate robust commerce, connect communities, and invite manageable growth and development. The problem is straightforward. Federal, state and local governments should be spending much more money to maintain, build, rebuild, and enhance our transportation system, but they are not. The failure to adequately invest in roads, bridges and transit has several undesirable and counterproductive outcomes. First, a deteriorating transportation system undermines economic growth and competitiveness and drains businesses, households and governments of future income. Second, because construction inflation is significantly higher than general inflation, postponed investments become much more expensive for future

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taxpayers. Third, without a commitment to adequate resources, planning becomes nearly impossible because transportation professionals are forced to focus on patchwork efforts to hold together a crumbling system, addressing the most immediate emergencies. Few states have done as well as Massachusetts in quantifying the difference between what we are spending now, and what we should be investing. The Transportation Finance Commission projected a funding gap of $15 billion to $19 billion over the next 20 years just to maintain our current state and local transportation infrastructure, not including desperately needed improvements and expansions. As a part of that projection, the commission conservatively estimated a $1 billion Chapter 90 spending shortfall, which is important to emphasize because cities and towns are responsible for 90 percent of the roads in the Commonwealth, and Chapter 90 is the only explicit source of revenue that communities have to fund their road maintenance and repair efforts. MMA research shows that the actual annual Chapter 90 need to maintain existing roadways is well over $300 million a year. Cities and towns are extremely grateful to the Legislature and the administration for increasing Chapter 90 to its current level of $200 million, yet everyone recognizes that even at $200 million a year, municipalities are falling behind with each passing year, and our roads crumble with each passing day. The good news is that we know the scope of the problem, and we know that we must close the gap between what we are spending and what we need to spend. Otherwise, our economy and our safety will suffer. The bad news is that this is a bona fide crisis, and the only way to solve it will be to increase revenues, and that discussion is being kicked down the road for another day. The longer we wait, however, the worse the problem becomes. A case in point is what’s happening at the federal level. The U.S. Senate, after adopting eight extensions of the current federal surface transportation funding law over the past several years, passed a two-year reauthorization that provides flat funding and a short-term extension of the federal gas tax. But the speaker of the U.S. House of Representatives decided to take a radical approach, politicizing transportation funding for the first time in memory and carving up the current law into an unrecognizable proposal that would eliminate all gas tax funding for transit, and dramatically constrain existing surface transportation programs. This was a shrewd shift-and-shaft strategy designed to retreat from federal funding and instead transfer a massive burden onto states and localities. This radicalization of transportation funding blew up, and without the votes to move forward, the speaker now wants to pass an unprecedented ninth extension of the current law until after the November election. We note with pride that every member of the Massachusetts Congressional delegation supports a strong and well-funded bipartisan transportation bill. The result, however, is still a stalemate and no solutions at all from Washington. Closer to home, eastern Massachusetts has been consumed by headlines and raging protests regarding the MBTA’s $161 million budget deficit. But that’s just the tip of the iceberg, as the investment deficit for roads, bridges and all transit systems across the state is an order magnitude larger: more than $1 billion next year alone. Amazingly, there has been no audible discussion of the need to raise revenue to solve the funding crisis. In Massachusetts, we know that federal funding is weakening, and current state funding is inadequate. But what is also clear is that state leaders are deferring a full public discussion of gas taxes, tolls, and other revenue options until next session. Progress will be impossible until the citizens of Massachusetts and their public leaders have an open discussion about paying more to solve this crisis. Municipal leaders will be essential participants and stakeholders in this broad debate, calling for adequate revenues, equitable distribution across the state, and a vision to build a stronger economy for everyone. This is a discussion that must take place now. Kicking the can down the road is not an option – the potholes will get in the way. Infrastructure spending has no effect on the economy

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Aerospace

Aerospace Industry Key to Economy ITA 11 “Aerospace Industry is Critical Contributor to US Economy According to Obama Trade Official at Paris Air Show.” 6/21/2011, International Trade Administration.

PARIS – Francisco Sánchez, Under Secretary of Commerce for International Trade, addressed national and

international groups at the 2011 Paris Air Show to reinforce the President’s National Export Initiative (NEI) and support the U.S. aerospace industry. “The U.S. aerospace industry is a strategic contributor to the economy, national security, and technological innovation of the United States,” Sánchez said.

“The industry is key to achieving the President’s goals of doubling exports by the end of 2014 and contributed $78 billion in export sales to the U.S. economy in 2010.” During the U.S. Pavilion

opening remarks, Sánchez noted that the aerospace sector in the United States supports more jobs through exports than any other industry. Sánchez witnessed a signing ceremony between Boeing and Aeroflot, Russia’s state-owned airline. Aeroflot has ordered eight 777s valued at $2.1 billion, and the sales will support approximately 14,000 jobs. “The 218 American companies represented in the U.S. International Pavilion demonstrate the innovation and hard work that make us leaders in this sector,” said Sánchez. “I am particularly pleased to see the incredible accomplishments of U.S. companies participating in the Alternative Aviation Fuels Showcase, which demonstrates our leadership in this important sector and shows that we are on the right path to achieving the clean energy future envisioned by President Obama.” The 2011 Paris Air Show is the

world’s largest aerospace trade exhibition, and features 2,000 exhibitors, 340,000 visitors, and 200 international delegations. The U.S. aerospace industry ranks among the most competitive in the world, boasting a positive trade balance of $44.1 billion – the largest trade surplus of any U.S. manufacturing industry. It directly sustains about 430,000 jobs, and indirectly supports more than 700,000 additional jobs. Ninety-one percent of U.S. exporters of aerospace products are small and medium-sized firms.

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AviationAviation needs increased investmentHeintz et al 9 January 2009, *James Heintz: Associate Research Professor & Associate Director, **Robert Pollin: Professor of Economics & Co-Director, ***Heidi Garrett-Peltier: Research Assistant, Political Economy Research Institute, “How Infrastructure Investments Support the U.S. Economy: Employment, Productivity and Growth,” http://americanmanufacturing.org/files/peri_aam_finaljan16_new.pdf, AJ

Despite the sometimes pronounced difference between individual states, one fact stands out from this overview: rates of public investment have dropped off dramatically compared to the rates that prevailed in the 1950s and 1960s. There are some signs that this has changed in recent years for particular types of infrastructure. Nevertheless, the overall picture is one of diminished support for public investment. This would not be a problem if public investment provided few benefits to the economy and the people living in the U.S. However, as we show in the remainder of the report, this is not the case.

Public investment makes substantial contributions in terms of employment, economic growth, trade competitiveness, and essential services to the U.S. population. Such investments can also become a key driver in building a clean-energy economy. The decline in public investment has left the U.S. with a critical infrastructure deficit. We evaluate the size of this infrastructure investment gap in the next section. According

to forecasts compiled by the Federal Aviation Administration, the number of passengers flying on commercial airlines is expected to increases at an annual rate of 3.0 percent a year from 2008 to 2025 (FAA, 2008). By

the end of this period, annual passenger travel is expected to reach 1.3 billion . This increase in volume will require capital investments in airport capacity and air traffic control systems if congestion and delays are to be minimized and passenger safety maintained. Updating the traffic

control system has been ongoing since the mid-1980s, but the process has taken longer and required more investment than initially thought (ASCE, 2005). According to the results of a survey administered to the nation’s 100 largest

airports by the Airports Council International (North American branch), annual capital investment needs over the period 2007-2011 total $17.5 billion (ACI, 2007). This represents a $3.2 billion increase over the assessment of annual investment needs from 2005 to 2009. The FAA estimates the shortfall in investment funds available to be somewhat lower: $1 billion per year from 2006-2011, based on airport master plans and

ACI estimates (GAO, 2007). However, neither set of estimates include capital investment for security improvements and air traffic control systems, as documented by the ASCE (2005). Therefore, we use $3.2 billion a year in additional infrastructure as a reasonable estimate of investment needs in the absence of more comprehensive data.

Aviation infrastructure solves competitiveness and the economyCalio 11 2/9, *Nicholas E. Calio is the president and CEO of the Air Transport Association of America (ATA), “Aviation infrastructure is vital to winning the future,” http://thehill.com/blogs/congress-blog/technology/143033-aviation-infrastructure-is-vital-to-winning-the-future, AJ

In his State of the Union address, President Obama focused the nation’s attention on the economic importance of investing in infrastructure . America can win the future, and successfully compete against emerging powers such as China if we transform our economy with modern technology and infrastructure. As Congress moves forward with the reauthorization of the Federal Aviation Administration (FAA), lawmakers have an opportunity to pass a jobs bill that will enhance the global competitiveness of the U.S.

economy. It is vital that our government better utilize aviation policy to fuel economic growth, mindful that our competitors are effectively using commercial aviation to further their national ambitions. The growth markets of the world understand how commercial aviation can transform an economy and they are investing accordingly. Just a few weeks ago, China announced plans to pour a total of 1.5 trillion Yuan, roughly $228 billion, into its aviation sector over the next five years, including the construction of 11 new commercial airports and the acquisition of 290 new planes in 2011 alone. We must meet the challenge with government investment in our nation’s air traffic control system. This is critical infrastructure that will allow us to keep pace with our competitors . We have the technology. Now it is time for America to step into the future by fully deploying a modern system that supports the national goals of global competitiveness and putting people back to work. With broad consensus in the business community and organized labor that Congress should work with the president to improve the nation’s aging infrastructure, it is timely for bipartisan actions that support strategic investments to grow the economy. With deficit reduction a national priority, investing in infrastructure is not at cross purposes with cleaning up the nation’s finances. In fact, they go hand-in-hand. Making real

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progress on the deficit requires that we spark economic growth that drives job creation and generates additional tax revenue. It is essential that key infrastructure projects receive funding now so that industries like commercial aviation that enable businesses to grow can contribute more to the economic recovery. Providing the funding to accelerate implementation of modern air traffic infrastructure should be a top priority in the 112th Congress. The antiquated, ground-based system in place today is a major drag on productivity. As Ben Franklin famously proclaimed, time is money. Unfortunately, the nation has been losing both for years because our archaic air traffic control system has been unable to meet the demands placed upon it – let alone the demands of the future. According to a recent study

commissioned by the FAA, flight delays cost the U.S. $31 billion in 2007 . With a satellite-based system, airline efficiency will increase and flight delays will be minimized. Safety and customer satisfaction will improve and businesses - large and small - will reap the benefits of greater efficiency and be better positioned to create jobs. Commercial aviation already provides key connections that make the economy grow. The industry contributes $1.2 trillion to the economy, is responsible for 5.2 percent of the nation’s GDP and supports nearly 11 million jobs . A fully operational, NextGen air traffic management system will unleash the true economic power of commercial aviation and benefit every industry in this country. Conservative estimates predict that implementation of this system will lead to the creation of more than 150,000 jobs. In reality, the economic impact of this investment in modern infrastructure will be exponentially bigger. The sky is the limit for what this industry can contribute to the economy. Now it is up to our leaders in Washington to provide airlines with the infrastructure needed to compete successfully and support the U.S. in our national ambition to win in the global economy.

The airline industry is key to the economy – gdp. Federal Aviation Administration 11. (Under the Department of Transportation. “The Economic Impact of Civil Aviation on the U.S. Economy.” Accessed: 6/26/12. Full Date: August 2011.

http://www.faa.gov/air_traffic/publications/media/FAA_Economic_Impact_Rpt_2011.pdf)

Table 2 summarizes the total impact of U.S. civil aviation on output, earnings and jobs. Economic activity attributed to civil aviation-related goods and services totaled $1.3 trillion in 2009, generating 10.2 million jobs with $394.4 billion in earnings. Aviation accounted for 5.2 percent of GDP, the value-added measure of economic activity. The impact of the recent recession on civil aviation’s contribution to GDP began in 2008 as the percent of GDP contribution started to drop from previous years. In 2009, the percent of GDP contribution for civil aviation was near 2004 levels, when civil aviation was still recovering from the twin effects of September 11 and the 2001 recession. Overall,

civil aviation’s contribution to U.S. GDP ranged from 4.7 to 5.6 percent over the past decade

Airlines are key to the economy – gdp. Federal Aviation Administration 11. (Under the Department of Transportation. “The Economic Impact of Civil Aviation on the U.S. Economy.” Accessed: 6/26/12. Full Date: August 2011.

http://www.faa.gov/air_traffic/publications/media/FAA_Economic_Impact_Rpt_2011.pdf)

U.S. nominal GDP was $14,119.4 billion in 2009. 37 GDP represents the sum of all value-added activities in an economy, so intermediate goods and services used in the production of goods and services are not included. In the previous section, total output included intermediate goods and services that were purchased as part of the production process. In order to compare aviation’s contribution to GDP, these intermediate goods and services must be subtracted from total output. To estimate civil aviation’s contribution to GDP, each impact type is calculated separately using the newly published BEA RIMS II value-added coefficients. The

results are shown in Table 7. In 2009, aviation-related value-added economic activity totaled $728.2 billion, or 5.2 percent, of total U.S. GDP. The largest contributor to the overall economic impact of civil aviation in 2009 was commercial aviation. Commercial aviation’s total value added to the U.S. economy was $689.3 billion, or 4.9 percent of GDP. Within commercial aviation, the largest share of the total is commercial visitor expenditures, $359.3 billion, or approximately 2.5 percent of GDP. GA contributed nearly $39 billion to the U.S. economy in 2009, a large number by any measure.

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Airlines key to the economy and competitiveness. Federal Aviation Administration 11. (Under the Department of Transportation. “The Economic Impact of Civil Aviation on the U.S. Economy.” Accessed: 6/26/12. Full Date: August 2011.

http://www.faa.gov/air_traffic/publications/media/FAA_Economic_Impact_Rpt_2011.pdf)

In a world of decreasing barriers to trade, the U.S. civil aviation industry remains a unique engine for innovation and technological progress, one that provides infrastructure that keeps the nation competitive. This report found that, once all impacts are identified, civil aviation accounted for 5.2 percent of the U.S. economy in 2009. Aviation contributes to economic growth and to stronger ties to local and global markets for every region in the nation. The total output of civil aviation-related goods and services amounted to $1.3 trillion in 2009 and generated more than 10 million jobs, with earnings of almost $394.4 billion. Specific areas of civil aviation such as air cargo have contributed to more effective networking and collaboration between companies far and wide. Recovery in the wake of the recent recession presents many challenges and opportunities for aviation and the U.S. economy as a whole. There is evidence that the capacity reductions made by airlines and airports as the result of high fuel prices allowed the industry to better weather the storm, yet the prevailing economic winds will lead the industry to continue to innovate and become leaner and more responsive to volatile market conditions. The cost of fuel will likely remain a continuing concern for airlines and those affected by air transportation. Many analysts believe that the price of oil will continue to transform the airline industry for

years to come, just as it will influence the prospects of other sectors of the economy. As it did in the past century, the role of air transportation will continue to grow for the U.S. and global economies. The economic impacts of civil aviation quantified in this report summarize the benefits made possible by a vital and innovative industry. The industry contributes positively to the U.S. trade balance, creates high-paying jobs, helps keep just-in-time business models viable and connects us to friends, family and commercial opportunities. As the role of air transportation evolves and becomes even more integral to our way of life, a safe and efficient air transportation system will continue to be a vital, even essential, component of a strong and healthy American economy in the 21st century.

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Auto Industry

Automobile Industry strongly affects the overall economyRomeo, 10 –staff writer (Jim, “Auto Industry’s Road to Recovery” Area Development Site and Facility Planning Journale v. 45 .5 pgs 33-36 http://www.areadevelopment.com/Automotive/november2010/automotive-industry-road-recovery39902.shtml) Times have been tumultuous for the U.S. auto industry. From December 2008 to March 2009, the Treasury Department initiated programs to bring financial relief to the auto industry and prevent economic disruptions of a potential industry collapse. The government extended bridge loans of $4

billion to Chrysler and $13.4 billion to General Motors as part of the program. While the industry is recovering, it faces challenges in the coming years. The auto industry represents a sizeable portion of the American GDP. The saying, "As the Big Three go, so goes the economy, " alludes to the ties that bind the auto industry to the country's overall economy . Now, new factors will influence the auto industry of the future. Changing Face of an Industry The auto industry is a significant job and capital source for the national

and economies. The sector has rewarded many business owners and employees with prosperity. Industry growth was once concentrained the southern states, where local governments provided attractive incentives and labor pools were mostly nonunion. Large auto facilities have risen in Mississippi, Georgia, South Carolina, and across the South. "There's no question that the focus in the U.S. has shifted to the southern states, and it's likely to continue that way for the foreseeable future," says Robert Geolas, executive director of Clemson University's International Center for Automotive Research in Greenville, South Carolina. "Certainly, there are opportunities for other regions of the country, as there would be in any emerging industry. But there are so many positive factors already at play here in the South - a skilled and affordable work force; excellent infrastructure, including ports and highways; outstanding private and university-affiliated research facilities - that it appears this region will remain extremely competitive for years to come."

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Freight

Freight rail solves the economy and environmentHeintz et al 9 January 2009, *James Heintz: Associate Research Professor & Associate Director, **Robert Pollin: Professor of Economics & Co-Director, ***Heidi Garrett-Peltier: Research Assistant, Political Economy Research Institute, “How Infrastructure Investments Support the U.S. Economy: Employment, Productivity and Growth,” http://americanmanufacturing.org/files/peri_aam_finaljan16_new.pdf, AJ

By 2035, demand for freight rail transportation is expected to double (AAR, 2007). Maintaining adequate infrastructure is essential if freight rail is to continue to provide a more environmentally benign alternative to long-distance trucking. Intercity passenger rail, mostly on trains operated by Amtrak, currently links over 500 cities nationwide and provides a viable alternative to air and road transport (Department of Transportation, 2007). Insufficient capital investment in freight and intercity rail would compromise the future contributions of railroads to the U.S. economy. In turn, these investment gaps would slow down the transition to a clean-energy economy. Unlike road transportation, rail infrastructure is largely financed by private companies. Since

the railroads were deregulated in the late 1970s, securing the funds for ongoing capital improvements has been a challenge. It is unclear to what extent railroad companies will be able to finance future fixed capital requirements from ongoing revenues (ASCE, 2005). If railroads cannot finance sufficient capital improvements, the growth in demand for rail services would shift onto the road system— increasing congestion, road maintenance costs, as well as increasing greenhouse gas emissions. A recent study by the Association

of American Railroads projects that infrastructure investment of $148 billion is required in the next 28 years to be able to meet the projected level of demand (AAR, 2007). This translates into a capital investment need of $5.3 billion per year. The American Society of Civil Engineers estimates that investment needs of freight rail and intercity systems would total $12-13 billion a year over the next 20 years (ASCE, 2005). However, this estimate includes investments that would have taken place anyway, given historical trends. Therefore, we use the $5.3 billion figure as the best available estimate of the need for additional rail infrastructure in the future.

Freight is key to all economic progressBlank, 09 - Ross Distinguished Visiting Professor of Canada-U.S. Business and Economic Relations, Western Washington University, and Co-Chair, North American Transportation Competitiveness Research Council (Stephen “Freight Transportation Infrastructure in North America: Getting Value for (Billions of) Dollars” Jan/Feb 2009, Ivey Business Journal Online http://www.iveybusinessjournal.com/topics/strategy/freight-transportation-infrastructure-in-north-america-getting-value-for-billions-of-dollars) Once the lynchpin of an interdependent, smooth-running North American economy, the freight-transportation infrastructure now stands crumbling, serving as Exhibit A for committing billions to re-building that infrastructure. This author analyzes the decline and consequences of a rotting, dysfunctional system, and outlines what is

needed to get the trains running smoothly again. The deterioration of infrastructure in North America - in

Canada, the United States and Mexico - has reached crisis proportions. It is a crisis because key sectors of our economies depend on deeply integrated, continent-wide production systems. The auto industry and many others rely on smoothly functioning, cross-border supply chains that enable companies to develop economies of scale and combine locally specific resources from regions across the continent,

thereby enhancing their competitiveness and creating jobs. This is what economists call "deep" or "structural" integration. In simple terms: The auto industry is North American. Mexico, Canada and the U.S. do not sell autos to each other. We

make them together. But supply chains depend on efficient, secure and sustainable freight transportation systems. Congestion, poor maintenance, conflicting regulations - whatever creates delay - erode supply chain efficiency and undermine competitiveness. Few would disagree that the unsatisfactory state of the freight-transportation infrastructure is seriously compromising the efficiency of supply chains. For example, the North American Transportation Research Council conducted a review of recent research on freight transportation infrastructure. The review concluded: "The JIT -lean inventory advanced manufacturing system developed since the 1970s that enables North America to compete successfully with Asian and European manufacturers is now reaching its capacity limits. The supporting transportation

infrastructure is now inadequate to handle the projected volume growth of North American supply chains freight flows."1 In its final report, the prestigious U.S. National Surface Transportation Policy and Revenue Study Commission stated that "Applying patches to our surface transportation system is no longer acceptable." And it continues, "We can predict, with some certainty, the consequences of failing to take bold action." The consequences include: "America's economic leadership in the world will be jeopardized when we cannot reliably and efficiently move our goods". The declining performance of the surface transportation network-as a result of both inadequate capacity and inefficient

management-will choke economic progress, preventing the U.S. economy from growing to its full potential. It is not an overstatement to say that the Nation's potential for the creation of wealth will depend in great part on the success of its freight efficiency . Without

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changes, countries such as China and India, with more dynamic policies for transportation and economic growth, will challenge the U.S. in economic power and world influence."2

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Highways

Highway investment is key to growth Eberts 09-[2009 Understanding the Contribution of Highway Investment to National Economic Growth: Comments on Mamuneas’s Study Randall W. Eberts W.E. Upjohn Institute http://research.upjohn.org/cgi/viewcontent.cgi?article=1118&context=reports-jt]

Conceptual Framework of the Relationship between Highways and Economic Growth There is little doubt that highways are a major part of the infrastructure that supports a developed market economy. The majority of the nation’s commodities are shipped by highways. Of the 13 billion tons of products shipped in 2007, 69 percent were shipped by truck. When the value of shipment is used to measure commodity flows, trucks account for transporting 71 percent of the $11.8 trillion of products shipped. Between 1993 and 2007, the use of trucks has increased from 53 percent to 69 percent. Federal, state, and local governments spend about 2 percent of GDP on highway. Before examining these studies, however, it is important to understand the rather complex relationship between transportation and economic growth. These relationships are not well quantified or understood, and many of the econometric studies that estimate this relationship devote little space to laying out the linkages. To establish these linkages, two distinct aspects of the nexus between highways and economic growth should be considered. The first component is the characteristics of the highway system. The idea here is that highway capital stock is a proxy for the services that highways provide. Highway services include getting people or goods from one place to the next with expected speed, reliability, safety, and comfort. Yet, highways cannot produce these services alone; they are only one input in the transportation equation. Highways must accommodate automobiles, trucks and other modes of transportation, which are provided primarily by the private sector, to generate the services. But neither input—highways or vehicles—can generate transportation services without the other. Since the characteristics of highway capital stock vary over time and across regions and this variation affects the flow of services, these differences should be taken into account when estimating highway capital stock. The second aspect is to estimate the effect of the services, as proxied by highway capital stock estimates, on economic outcomes. The first step is basically internal to the highway system, relating the size, type, and condition of the facility to services (or outputs) that the highway system produces. The second step relates the output of the facility to conditions and activities outside the facility.

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Inland Waterways

Inland waterways need increased investmentHeintz et al 9 January 2009, *James Heintz: Associate Research Professor & Associate Director, **Robert Pollin: Professor of Economics & Co-Director, ***Heidi Garrett-Peltier: Research Assistant, Political Economy Research Institute, “How Infrastructure Investments Support the U.S. Economy: Employment, Productivity and Growth,” http://americanmanufacturing.org/files/peri_aam_finaljan16_new.pdf, AJ

Despite the sometimes pronounced difference between individual states, one fact stands out from this overview: rates of public investment have dropped off dramatically compared to the rates that prevailed in the 1950s and 1960s. There are some signs that this has changed in recent years for particular types of infrastructure. Nevertheless, the overall picture is one of diminished support for public investment. This would not be a problem if public investment provided few benefits to the economy and the people living in the U.S. However, as we show in the remainder of the report, this is not the case.

Public investment makes substantial contributions in terms of employment, economic growth, trade competitiveness, and essential services to the U.S. population. Such investments can also become a key driver in building a clean-energy economy. The decline in public investment has left the U.S. with a critical infrastructure deficit. We evaluate the size of this infrastructure investment gap in the next section.

Approximately 2.6 billion short tons of commodities are transported on U.S. navigable waterways each year—an extremely cost-efficient transportation system (Army Corps of Engineers, 2005). The Army Corps of Engineers maintains and operates the inland waterway system which includes 257 lock systems nationwide, the average age of which is 55 years. According to the American Society of Civil Engineers, by 2020 80 percent of the lock systems will be functionally obsolete without new infrastructure investments (ASCE, 2005). The estimated cost of updating all the lock systems is $125 billion. In addition, the Army Corps of Engineers assess the state of the nation’s levees and flood control systems, amounting to 2,000 levees totaling 13,000 miles, which include projects built and maintained by the Corps of Engineers; projects built by the Corps of Engineers and subsequently transferred to a local owner to maintain; and projects built by local communities. In 2007, the Corps identified 122 levees, across the country, which are in need of additional maintenance and repair.4 The investment needed to update the lock system combined with an additional $30 billion to improve the nation’s levees would total $155 billion, or about $6.2 billion annually over the next 25 years.

Inland waterways are key to the U.S. economy – shipping. Cambridge Systematics, Inc 08 (A company dedicated to transportation consulting. Accessed: 6/25/12. Full Date: April, 2008. http://www.nssga.org/government/Reauthorization/00_The_Transportation_Challenge_Full_Study.pdf)Aging Inland Waterway System The inland waterway system also is very important to this industry. For

example, grain harvested in Minnesota is often moved by truck to Duluth for international shipment via the Great Lakes or moved by truck and regional railroads to barge ports on the Missouri and Mississippi Rivers system for domestic and international distribution. The aging inland waterway lock and dam system is affecting system capacity and reliability. The recent collapse of the I-35 bridge in Minneapolis also caused significant disruption to Mississippi River barge movements.

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Marine Transportation

Marine transportation key to economy Ocean Commission 04 “US Commission on Ocean Policy Preliminary Report: Supporting Marine Commerce and Transportation” (Authorized by the US Congress and appointed by the President) April 20 2004. http://www.oceancommission.gov/documents/full_color_rpt/13_chapter13.pdf

The U.S. marine transportation system is the nation’s link to global commerce and an essential and growing component of the national economy. The movement of manufacturing jobs from the

United States to overseas, the nation’s dependence on raw materials from other countries, global competition to provide highquality goods at competitive prices, and consumer demand have combined to increase the nation’s dependence on the import of foreign materials and goods. At the same time, increasing affluence in foreign nations, coupled with worldwide population growth, has stimulated international demand for U.S.

agricultural and manufactured products. Value of the Marine Transportation System The world’s oceans and inland waterways are the highways of choice for the global movement of this vast international trade.

As the world’s largest trading nation, the United States imports and exports more merchandise than any other country (Table 13.1) and has one of the most extensive marine transportation systems in the world. 1 U.S. marine import-export trade accounts for nearly 7 percent of the nation’s gross domestic product. 2 Domestically, coastal and inland marine trade amounts to roughly one billion tons of cargo, worth more than $220 billion a year. 3 The U.S. marine transportation system is a complex public–private partnership with many participants. It consists of state, territorial, local, and privately owned facilities managed, financed, and operated by federal, state, territorial, and local governments.

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Maritime Security

Maritime security is key to the economy – shipping. GAO 10 (Government Accountability Office. Statement of Stephen L. Caldwell, Director Homeland Security and Justice Issues. Full Date: 7/21/10. Accessed: 6/25/12. http://www.gao.gov/new.items/d10940t.pdf)

I am pleased to be here today to discuss port security issues and their related challenges. Ports, waterways, and vessels are part of an economic engine handling more than $700 billion in merchandise annually, according to the Department of Homeland Security (DHS), and an attack on this system could have a widespread impact on global shipping, international trade, and the global economy. Balancing security concerns with the need to facilitate the free flow of people and commerce remains an ongoing challenge for the public and private sectors alike. Within DHS, component agencies have responsibility for securing the maritime environment. The U.S. Coast Guard is responsible for protecting the public, the environment, and U.S. economic and security interests in any maritime region in which those interests may be at risk, including America’s coasts, ports, and inland waterways. U.S. Customs and Border Protection (CBP) is responsible for keeping terrorists and their weapons out of the United States, securing and facilitating trade, and cargo container security.

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Mass Transit

Mass transit needs increased investmentHeintz et al 9 January 2009, *James Heintz: Associate Research Professor & Associate Director, **Robert Pollin: Professor of Economics & Co-Director, ***Heidi Garrett-Peltier: Research Assistant, Political Economy Research Institute, “How Infrastructure Investments Support the U.S. Economy: Employment, Productivity and Growth,” http://americanmanufacturing.org/files/peri_aam_finaljan16_new.pdf, AJ

Despite the sometimes pronounced difference between individual states, one fact stands out from this overview: rates of public investment have dropped off dramatically compared to the rates that prevailed in the 1950s and 1960s. There are some signs that this has changed in recent years for particular types of infrastructure. Nevertheless, the overall picture is one of diminished support for public investment. This would not be a problem if public investment provided few benefits to the economy and the people living in the U.S. However, as we show in the remainder of the report, this is not the case.

Public investment makes substantial contributions in terms of employment, economic growth, trade competitiveness, and essential services to the U.S. population. Such investments can also become a key driver in building a clean-energy economy. The decline in public investment has left the U.S. with a critical infrastructure deficit. We evaluate the size of this infrastructure investment gap in the next section.

Increased usage of public transportation is one of the most efficient ways to promote energy conservation in the United States. It is therefore a positive development that public transportation has been growing steadily in recent years. The increase in demand for public transportation accelerated sharply over 2007-08, as gas prices at the pump rose as high as $4.00 a gallon. But more generally, over the decade 1996-2005, passenger miles traveled with various forms of public transportation increased by over 20 percent (Department of Transportation, 2007) and usage is expected to rise faster in the future. Capital investments in transit have increased in recent years, particularly at the state and local level (Department of Transportation, 2006). Despite these improvements, public investment must increase further if the transit system is to be maintained, and beyond this, if public transportation is to become an increasingly significant means of promoting energy conservation . According to the 2006 Status of the

Nation’s Highways, Bridges, and Transit, transit investments must total $15.8 billion a year just to maintain the current operating system. This would represent an increase of $3.2 billion a year over current levels. But to meet government operational and performance targets by 2024, annual investments must grow to $21.8 billion, requiring an additional $9.2 billion.

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Ports

Ports are key to the United States economy – international trading. Cambridge Systematics, Inc 08 (A company dedicated to transportation consulting. Accessed: 6/25/12. Full Date: April, 2008. http://www.nssga.org/government/Reauthorization/00_The_Transportation_Challenge_Full_Study.pdf)Port access and modernization are important to agriculture and natural resources industries to improve their export capabilities. Industry representatives noted particular problems at the Ports of Los Angeles and Long Beach and at the Port of Houston, where, at times, there can be a three- to five-hour wait to access port terminals. The ports are not adequately configured to handle today’s high volumes and highway and rail access is badly congested. Additionally, the operating hours of many major port terminals—typically 12 to 18 hours per day for five days per week—do not match the 24-hours-per-day and seven-days-per-week work cycles of the

major shippers and receivers. This creates backups and adds to congestion. Shortage of Bulk Shipping Capacity The global demand for breakbulk shipping capacity (e.g., ships designed to carry grains, scrap steel, coal, and other

noncontainerized commodities) has been rising sharply as the economies of India, China, and other developing nations have expanded . Businesses around the world have bid up the cost of breakbulk shipping. For U.S. agriculture and natural resource producers, this has added to the cost of exporting already-expensive U.S. cotton, grains, and other commodities. While the containerization of agricultural shipments is increasing (e.g., cottonseed exports to China), breakbulk is still very important for soybeans and other agricultural products.

Ports are necessary for economic growth – jobs, revenue, and trade benefits Pulidindi, 10 - senior associate, Infrastructure Program Center for Research and Innovation (Julia “Port Infrastructure Transportation for the Economy” 1 November 2010, Nation’s Cities Weekly http://www.nlc.org/news-center/nations-cities-weekly/articles/2010/november/port-infrastructure-transportation-for-the-economy) Earlier this month, 42 construction projects and 33 planning projects were awarded the second round of the Transportation

Investment Generating Economic Recovery (TIGER) grants. About 17 percent of the construction project awards went to port infrastructure, a huge increase from the first round of TIGER grants, where only about 8

percent went to port infrastructure. This increase in funding emphasizes the importance of investment in port infrastructure, not only because of its impact on local economic development, but more broadly speaking, because of its impact on the nation's economic growth. Commodities, finished products, automobiles and people--via the cruise industry--pass through the 300-plus ports in this country. The volume of products and people moving in and out of ports has a variety of direct and indirect impacts on the local, regional and national economies, such as job creation, revenues and a standing in the global market place. According .to 2007. statistics from the American Association of Port Authorities, ports created more than' 13.3 million American jobs , some $3.95 trillion in international trade, and more than $23.2 billion in U.S. Customs duty revenues in that year. Maintaining these centers of trade is vital for economic stability.

Port infrastructure investment is key to economic growth

Kurt No Date [“Port-Related Infrastructure Investments Can Reap Dividends,”• American Associations Port Authority By Kurt Nagle- KURT J. NAGLE, President and Chief Executive Officer Kurt Nagle has over 30 years of experience in Washington, DC, related to seaports and international trade. Mr. Nagle was Director of International Trade for the National Coal Association and Assistant Secretary for the Coal Exporters Association. He worked in the Office of International Economic Research at the U.S. Department of Commerce. Mr. Nagle serves on the Executive Committee of the Propeller Club of the United States and is a former commissioner of PIANC, the International Navigation Congress. Mr. Nagle holds a Master's Degree in Economics from George Mason University<http://aapa.files.cms-plus.com/AAPAArticles/Industry%20Today%20-%20Port-Related%20Infrastructure%20Investments%20Can%20Reap%20Dividends%20-%20Nov%202011%20by%20Kurt%20Nagle.pdf-jt]

THE BURNING QUESTION ON the mind of many US lawmakers, administration officials and others is how best to stimulate the economy and spur job creation. The answer lies in focusing scarce federal resources in areas that will have the greatest impact on economic growth, immediate and long-term job creation, national security, and our current and future competitiveness in the global economy. Enhancements in seaport-related infrastructure should be a high priority among the limited investment options. For centuries, US seaports – and the connecting waterways – have served as a vital economic lifeline, bringing goods and services to people around the world and delivering prosperity to our nation. They facilitate trade and

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commerce, create jobs, secure our borders, support our military and serve as stewards of valuable coastal environmental resources. Seaports are the primary gateway for overseas trade. They’re essential to economic security. As such, federal funding for infrastructure in and around ports pays dividends. Deep-draft coastal and Great Lakes ports are the nexus of critical transportation infrastructure that connects America’s exporters with markets overseas, and they provide access for imports of raw materials, components and consumer goods that are a key part of US manufacturing and help define our standard of living. Investments in America’s port infrastructure and the intermodal connections that serve seaports – both land and waterside – foster prosperity and provide an opportunity to bolster the country’s economic and employment recovery. ECONOMIC IMPACT: HUGE Currently, international trade accounts for more than a quarter of America’s GDP (gross domestic product). Oceangoing vessels that load and unload cargo at US seaports move 99.4 percent of the nation’s overseas trade by volume and 65.5 percent by value. Further, customs collections from seaport cargo provide tens of billions of dollars a year to the federal government, including $23.2 billion in fiscal year (FY) 2007, $24.1 billion in FY 2008, $20.3 billion in FY 2009 and $22.5 billion in FY 2010. The latest economic impacts analyses conducted in 2007 indicated that US seaport activities generated $3.15 trillion in annual economic output, with $3.8 billion worth of goods moving in and out of seaports every day. Impact extends far beyond seaport communities. On average, any given state uses the services of 15 different ports around the country to handle its imports and exports. Also, seaports are a proven job creator. In addition to handling international trade, US seaports – and the waterways that serve them – represent important transportation modes for the movement of domestic freight. Greater utilization of America’s coastal and inland water routes for freight transportation complements other surface transportation modes – providing a safe and secure alternative for cargo while offering significant energy savings and traffic congestion relief. VIEW FROM WATERSIDE As US investment in its waterways infrastructure is trending downward, countries like India, Brazil and the United Kingdom commit the equivalent of billions of US dollars to port and channel modernization. The expansion of the Panama Canal slated for completion in 2014 – the first major expansion in more than a century – is driving ports around the world to deepen navigation channels and improve harbor facilities. Look at what’s happening: • India plans to invest $60 billion – including both public and private funds – to create seven new major ports by 2020. Expect this to have a substantial impact: It will handle the anticipated rapid expansion of merchandise exports, forecasted to triple by 2017. • Brazil expects tonnage at its coastal ports to more than double (to 1.7 billion tons) by 2022. In response, the nation is committing $17 billion to port improvements (including $14 billion from the private sector). • In Great Britain, DP World (the world’s fourth-largest marine terminal operator) plans to spend $2.5 billion on London’s Deep-Water Gateway, the country’s first such development in the last 20 years. Meanwhile, in the United States, public funding for new navigation channel improvements has all but dried up. Lawmakers focus on reducing the deficit and eliminating appropriation “earmarks” that have traditionally funded federal navigation deepening projects. At the same time, funding for projects already approved and underway is slow, incremental and insufficient. Insufficient appropriations make it impossible to maintain most federal navigation channels at their authorized and required dimensions. The US Army Corps of Engineers has been commissioned with the responsibility of improving and maintaining the nation’s water access to ports. But while this charge comes from the US government, the federal government is less than supportive. It spends only about half of the tax that it collects specifically directed toward deep-draft channel maintenance. The rest – more than $6 billion since 1986 – has essentially been “disappeared” into the US Treasury while serious dredging needs remain neglected. This is unfortunate at a crucial juncture. Projects to maintain these critical waterways would create jobs immediately and would provide transportation savings to benefit US businesses. With decreases in the cost of freight transportation, these sectors can enhance their global competitiveness and create more jobs. The American Association of Port Authorities (AAPA) has continually and strongly urged Congress to take action to ensure that 100-percent of the annual amount collected from the Harbor Maintenance Tax (HMT) is utilized to maintain federal navigation channels.

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Rail

Freight transoportation is a large economic indicator and assists a recovering economy

Ambrosia, 11 (John “Freight companies remain relevant and profitable as recovery continues” American Metal Market, December 2011 http://www.congoo.com/news/addstorycomment.aspx?st=174485562&Channel_ID=23&Category_ID=150)Although the freight transportation industry took a hit during the recession, trucking and railroad companies have remained sustainable and profitable. Some companies have even reinvested much

of their earnings back into infrastructure and expansion projects. Recovery from the recession often seemed slow and uncertain at times in 2011, but the freight transportation industry is still managing to continue to move forward, helped in no small measure by shipments from the metals sector. Primary metals, ores, finished products, ferrous and nonferrous scrap and more all saw healthy tonnages moving within the United States in 2011--the bulk of them carried by rail and truck. By the end of the year, these industries had recovered portions of the capacity losses they suffered during the recession, although numbers were still well below where they were before the economic crash. The need for rail investment in people and infrastructure will only increase . The Federal Railroad Administration said that as population levels increase, the rail network will be required to accommodate an additional 400 million tons of freight in the next 25 years and 600 million tons over the next 40 years. So a lot of questions are still on the minds of executives dealing with the overland movement of metals: Where is help for America's deteriorating infrastructure? How are trucking companies finding and retaining qualified drivers? How will the competition between ports affect the steel and scrap markets? How will shale drilling affect crude oil prices? What should a metals firm choose--shorter loading times or lower service costs? "Freight has been going sideways for much of 2011 but it isn't falling, which suggests the U.S. economy just might skirt another recession," American Trucking Associations (ATA) chief economist Bob Costello said. Those on the rail side have a similar assessment. "America has been going through some very difficult economic times, but at some point sustained economic growth will return," a spokesman for the Association of American Railroads (AAR) said. "When that happens, America's demand for freight transportation will continue the upward trend that's been its hallmark for decades." Freight movement is a "derived demand" industry, the AAR said, with demand for service resulting from demand for products elsewhere in the economy. Often, freight movement also serves as a gauge for broader economic activity. Like most industries, overland freight was hit hard by the recent recession, but since then traffic levels have begun to recover.

Rail is key to the economy. Cambridge Systematics, Inc 08 (A company dedicated to transportation consulting. Accessed: 6/25/12. Full Date: April, 2008. http://www.nssga.org/government/Reauthorization/00_The_Transportation_Challenge_Full_Study.pdf)Over the last 20 years, shippers have benefited from rail and trucking deregulation. The price of rail transportation has dropped or been relatively stable as railroads have cut prices to compete with trucking following the economic deregulation of the trucking and rail industries in the 1980s. In

recent years, after decades of decline, rail prices have begun to rise as excess capacity has been absorbed, long-haul rail services have become more competitive with long-haul trucking, and long-term contracts for transportation service expire (see Figure 3.4). The natural resource and electric utility industries are sensitive to transportation prices and service reliability, including rail line capacity, regional bottlenecks, prolonged infrastructure maintenance delays, accidents, and natural events. 34 The railroads have expanded unit car service, hauling massive volumes of coal from the Powder River Basin to Midwest utilities to meet their customers’ needs. Production from the Powder River Basin is expected to increase dramatically through 2030 owing to strong reserves, the hazards of Eastern mining, and a low sulfur content that more easily conforms to

environmental regulations. Powder River coal often must travel more than 1,000 miles to reach power plants in the East. As more clean-burning coal power plants come online, the capacity and efficiency of the nation’s rail network will be instrumental to ensure the availability of this energy source at a cost that is not onerous to consumers and the nation’s industries. The agricultural sector perceives that it is in competition with the coal/electric power industries and the retail industry for space on the rail network, even as railroads make large capital

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investments to expand rail capacity. Agricultural shipments—especially by smaller shippers—are less profitable and more difficult to serve than retail and energy customers. Smaller shippers report difficulty obtaining specialized rail cars, such as bulk hopper cars, and getting reliable and timely service for small-lot shipments. While the containerization of agricultural shipments is increasing (e.g., cottonseed exports to China), agricultural shippers often are outbid by retailers for use of containers. And containerization is not feasible or cost-effective for many commodities, such as bagged soybeans, rolls of newsprint, and lumber. Industry experts anticipate that the price and availability of rail service may even influence where crops are grown in the future. For example, soybean production could shift from northern Minnesota, where rail consolidation has resulted in reductions in service, to locations such as Indiana, which have better and more accessible rail service.

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Ships

Ships are key to the United States economy – trade. CRS 05 (Congressional Research Service. John F. Frittelli Specialist in Transportation Resources, Science, and Industry Division. Port and Maritime Security: Background and Issues for Congress. Full Date: 5/27/05. Accessed: 6/25/11. http://www.fas.org/sgp/crs/homesec/RL31733.pdf)Ships are the primary mode of transportation for world trade. Ships carry approximately 80% of world trade by volume. 12 The United States is the world’s leading maritime trading nation, accounting for nearly 20% (measured in tons) of the annual world ocean-borne overseas trade. Ships carry more than 95% of the nation’s non-North American trade by weight and 75% by value. Trade now accounts for 25% of U.S. Gross Domestic Product (GDP), up from 11% in 1970. Over the next two

decades, the total volume of domestic and international trade is expected to double. Given the importance of maritime trade to the U.S. and world economies, disruptions to that trade can have immediate and significant economic impacts. 13 By one estimate, the cost to the U.S. economy of port closures on the West Coast due to a labor- management dispute was approximately $1 billion per day for the first five days, rising sharply thereafter. 14

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AT: Transportation

Transportation spending doesn’t help the economyStaley 6/15 2012, *Samuel R. Staley, Ph.D., is a senior research fellow at Reason Foundation, and Managing Director at the DeVoe L. Moore Center at Florida State University where he teaches urban economics, land use, and urban planning, “Highway Construction As Stimulus? Not So Fast,” http://reason.org/news/printer/highway-construction-as-stimulus-no, AJ

President Obama is sending strong signals that he wants more stimulus spending to keep the American economy out of recession, even if the White House is not saying it explicitly. The president's "the private sector is fine" moment clearly emphasized a perceived need for state, local, and federal governments to increase spending to pick up the slack in an anemic economy. That means more stimulus money for public works projects like building new firehouses, hiring more cops, and reviving the idea for an infrastructure bank. But let's look at some hard sobering facts before we jump on the public spending bandwagon. Transportation infrastructure is a case on point. The Interstate Highway System is justly lauded as one of the greatest engineering and political achievements of the 20th century. President Obama regularly invokes the nearly three-decade initiative when talking about public works projects that could get the economy

back on track. Unfortunately, the simplified story about the Highway System misses the fact that billions of dollars were likely wasted because we built a system too large to serve its core purposes, and we failed to ensure the investments were in the right place at the right time . As it is, the Interstate

Highway System was wildly over budget. The U.S. Department of Transportation reports that initial estimates put total construction costs at about $27 billion. By the time the system was completed in the 1980s, the federal government had spent more than $114 billion and the total cost accumulated to $129 billion. Changing design standards, environmental review, and inflation all contributed to escalating costs, but another

critical factor was also in play: No incentives existed to prevent overbuilding. This overbuilding may have resulted in tens of billions of dollars in excess federal and state government spending even though many economists suggest that the economic benefits of the system outweighed the costs of its construction. After all, the result of the project was a 46,876 mile long system that knitted together all major U.S. metropolitan areas, and economists have shown that the interstate system was a boon to business as intercity trucking became more efficient and less costly and urban congestion fell dramatically. Nevertheless, billions of dollars were likely wasted because the users - commercial truckers as well as passenger cars - were never required to directly consider the costs and benefits of using these roads with a true user fee such as a toll. In the 1950s, Congress decided to eschew tolls altogether, opting

instead for the politically expedient and administratively efficient (at the time) gas tax. The end result was a system where many roads were built to nowhere, or at the wrong time, and transportation subsidies became endemic. A price sensitive private sector, in contrast, might have otherwise built roads elsewhere and for even more productive purposes. It is this reality of overbuilding that should sober ideas about infrastructure spending "paying for itself" or "filling a need," particularly in an advanced and mature economy

such as the one within the United States. Certain parts of the Highway System certainly showed positive economic

gains, but many other segments were unnecessary - or at least not necessary at the time the government built them. While spending federal dollars on road development is not the only arrow in the quiver of the pro-stimulus argument, a more sophisticated look at our experience with the Interstate Highway System at least suggests that Washington should be careful about simply dropping billions more dollars on the economy without considering the potential inefficiencies they create. A critique of this argument might be that we're just knit picking on price.

However, new research out of China of all places suggests that the waste may well have amounted to more than 20 percent of the total cost. China is a particularly intriguing case study because its economy is going through many of the same challenges, fits, and starts as the U.S. economy in the early and mid-twentieth century.

Roads, rails, bridges, ports, and airports have emerged as critical infrastructure for nurturing a burgeoning

manufacturing economy, and facilitating national mobility. China, however, didn't have the economic tax base to support a sprawling national highway system. While provinces were responsible for building the roads and

expressways, they couldn't levy taxes to finance them. So, they relied on private capital to build their expressways and later established government-controlled toll authorities to fund many more. The model worked reasonably well except that the primary purpose was to collect money to pay off the debt, not optimize the efficiency of the highway network. Tollroads were established based on whether the agencies could float bonds to finance them, not economic analysis of travel demand and willingness to pay. The result? Expressway overbuilding. Economists at the Institute for Regional and Transportation Economy at Chang'an University studied highway investments and toll rates in four provinces - Jiangsu, Hebei, Shaanxi, Jilin - and found that the expressways were overbuilt by about 20 percent. They concluded that road pricing that takes into account travel demand as well as the debt incurred to build the highways would substantially reduce the size of the highway network. In short, by making the true

costs of building highways transparent to users through properly calibrated tolls, the expressway network would have been smaller and less expensive. The implications for U.S. transportation policy and highway finance are important, particularly given the current gridlock over long-term transportation spending in Congress and the intransigence of some Congressman toward public private partnerships. If China managed to overbuild its tolled expressways by 20 percent, the inefficiencies and overbuilding in the unpriced U.S. highway system are likely much larger. At the very least, this makes a strong case for expanding the scope of private involvement in American

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highways. And it should provide a non-ideological pushback on the idea that stimulus spending on infrastructure is a good idea.

Inland waterways need increased investmentHeintz et al 9 January 2009, *James Heintz: Associate Research Professor & Associate Director, **Robert Pollin: Professor of Economics & Co-Director, ***Heidi Garrett-Peltier: Research Assistant, Political Economy Research Institute, “How Infrastructure Investments Support the U.S. Economy: Employment, Productivity and Growth,” http://americanmanufacturing.org/files/peri_aam_finaljan16_new.pdf, AJ

Despite the sometimes pronounced difference between individual states, one fact stands out from this overview: rates of public investment have dropped off dramatically compared to the rates that prevailed in the 1950s and 1960s. There are some signs that this has changed in recent years for particular types of infrastructure. Nevertheless, the overall picture is one of diminished support for public investment. This would not be a problem if public investment provided few benefits to the economy and the people living in the U.S. However, as we show in the remainder of the report, this is not the case.

Public investment makes substantial contributions in terms of employment, economic growth, trade competitiveness, and essential services to the U.S. population. Such investments can also become a key driver in building a clean-energy economy. The decline in public investment has left the U.S. with a critical infrastructure deficit. We evaluate the size of this infrastructure investment gap in the next section.

Approximately 2.6 billion short tons of commodities are transported on U.S. navigable waterways each year—an extremely cost-efficient transportation system (Army Corps of Engineers, 2005). The Army Corps of Engineers maintains and operates the inland waterway system which includes 257 lock systems nationwide, the average age of which is 55 years. According to the American Society of Civil Engineers, by 2020 80 percent of the lock systems will be functionally obsolete without new infrastructure investments (ASCE, 2005). The estimated cost of updating all the lock systems is $125 billion. In addition, the Army Corps of Engineers assess the state of the nation’s levees and flood control systems, amounting to 2,000 levees totaling 13,000 miles, which include projects built and maintained by the Corps of Engineers; projects built by the Corps of Engineers and subsequently transferred to a local owner to maintain; and projects built by local communities. In 2007, the Corps identified 122 levees, across the country, which are in need of additional maintenance and repair.4 The investment needed to update the lock system combined with an additional $30 billion to improve the nation’s levees would total $155 billion, or about $6.2 billion annually over the next 25 years.

Infrastructure investment is riskyde Rugy 11 9/8, *Veronique de Rugy writes for the National Review Online, “Why Infrastructure Spending Is a Bad Bet,” http://www.nationalreview.com/corner/276636/why-infrastructure-spending-bad-bet-veronique-de-rugy, AJ

No one disputes that American public works need improving, and economists have long recognized the value of infrastructure. Roads, bridges, airports, and canals are the conduits through which goods are exchanged. However, whatever its merits, infrastructure spending is unlikely to provide much of a stimulus — and it certainly won’t provide the boost that the president will promise the American people tonight. For one thing, even though Mark Zandi claims that the bang for the buck is significant when the government spends $1 on infrastructure ($1.44 in growth), that’s just his opinion. The reality is that economists are far from having reached a consensus on what the actual return on infrastructure spending is. As economists Eric Leeper, Todd Walker, and Shu-Chum Yang put it in a

recent paper for the IMF: “Economists have offered an embarrassingly wide range of estimated multipliers.” Among respected economists, some find larger multipliers and some find negative ones. (Thanks Matt Mitchell for this great paper). Second, according to Keynesian economists, for spending to be stimulative, it has to be timely, targeted, and temporary. Infrastructure spending isn’t any of that. That’s because infrastructure projects involve planning, bidding, contracting, construction, and evaluation. Only $28 billion of the $45 billion in DOT money included in the stimulus has been spent so far. We know that the stimulus money wasn’t targeted toward the areas that were hit the most by the recession, but even if the funding were targeted, it still might not be stimulative. First, the same level of job poaching from existing jobs would have happened; construction workers tend to be highly specialized, and skilled workers rarely suffer from high unemployment. Many of the areas that were hardest hit by the recession are in decline because they have been producing goods and services that are not, and will never be, in great demand. The overall value added by improving their roads is probably a lot less than that of new infrastructure in growing areas that might have relatively little unemployment but do have great demand for more roads, schools, and other types of long-term infrastructure. As for being temporary — which stimulus spending needs to be to work — what the president

will propose tonight is likely to cost the American people money for a very long time. Infrastructure spending tends to suffer from massive cost overruns, waste, fraud, and abuse. A comprehensive study examining 20 nations on five continents (“Underestimating Costs in Public Works Projects: Error or Lie?” by Bent Flyvbjerg, Mette K. Skamris Holm, and Søren L. Buhl) found that nine out of ten public-works projects come in over budget. Cost overruns routinely range from 50 to 100 percent of the original estimate. For rail, the average cost is 44.7 percent greater than the estimated cost at the time the decision was made. For bridges and tunnels, the equivalent figure is 33.8 percent, for roads 20.4 percent. I should also add that I think it’s a mistake to assume that it is the role of the federal government to pay for roads and highway expansions. With very

few exceptions, most roads, bridges, and even highways are local projects (state projects at most) by nature. The federal

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government shouldn’t have anything to do with them. In fact, I would argue that taxpayers and consumers would be better off if these activities were privatized. And if states aren’t ready for privatization, they can do what Indiana did a few years back when it leased its main highways to a private company for $4 billion. The state was $4 billion richer, and it was still the owner of the highway. Consumers in Indiana were better off, because the deal saved money. Experiences in other countries have also shown that privatization leads to innovation and reduced congestion. (I really like this paper by Randy O’Toole on these issues.) Spending more on infrastructure right now, and expecting miracles from it, is a very risky bet .

It fails and there is a long TFRidenour 12 3/30, *David A. Ridenour is president of the National Center for Public Policy Research, a conservative think tank, “Con: Economic boost from new spending won't come for more than a decade,” http://www.oregonlive.com/opinion/index.ssf/2012/03/con_economic_boost_from_new_sp.html, AJ

WASHINGTON -- They say the definition of insanity is doing the same thing over and over and expecting a different result.

That's [is] what spending more on infrastructure and transportation to improve the economy would be:

insanity. Infrastructure and transportation may have benefits, but turning the economy around isn't one of them. For one thing, major highway projects are S-L-O-W. The Federal Highway Administration says major highway construction projects take 13 years to complete . Any project that won't be finished until today's first

graders are in college is hardly going to jumpstart the economy. Second, it's been tried and it failed. President

Barack Obama's stimulus had $105.9 billion in infrastructure spending. The unemployment rate when it became law in February 2009 was 8.1 percent. In February 2012, it was 8.3 percent. Whatever the stimulus went for, it clearly wasn't jobs . The road to prosperity has been blocked by needless regulations. More government spending on infrastructure and highways isn't the best way forward. There are far more effective routes available.

Spending is unnecessaryGlaeser 12 2/13, *Edward Glaeser, an economics professor at Harvard University, is a Bloomberg View columnist, “Spending Won’t Fix What Ails U.S. Infrastructure: Edward Glaeser,” http://www.bloomberg.com/news/2012-02-14/spending-won-t-fix-what-ails-u-s-transport-commentary-by-edward-glaeser.html, AJ

The U.S. owes its emergence as a great power to magnificent investments in infrastructure. The emerging

giant of today, China (TBBLCHNA), is following that example. Many imagine that we must again build big to stay on top. But success in middle-age -- for people and nations -- requires wisdom and cunning more than pumped-up brawn. America’s infrastructure needs intelligent reform, not floods of extra financing or quixotic dreams of new moon adventures or high-speed railways to nowhere. The spate of bridge and rail construction in China taps into American insecurities and leads many to wonder whether we are falling behind because we aren’t building more. Politicians understand the magical promise of bold new projects, like superfast trains across California or missions to space, but that promise can be false. Spain’s current fiscal woes owe much to its overly ambitious high-speed rail investments. Similar rail projects in China have produced more allegations of corruption and safety problems than economic transformation. Infrastructure investment only makes sense when there is a clear problem that needs solving and when benefits exceed costs. U.S. transportation does have problems -- traffic delays in airports and on city streets, decaying older structures, excessive dependence on imported oil --

but none of these challenges requires the heroics of a 21st century Erie Canal. Instead, they need smart, incremental changes that will demonstrate more wisdom than brute strength. America’s infrastructure has been great and can be great again. But we don’t need vast new projects that we won’t bother to maintain. We need a number of smart, incremental reforms that will enable our system, and our country, to live up to their potential.

More evidence---doesn’t stimulate growthBentley 12 3/14, *Guy Bentley is a writer for the Adam Smith Institute, “Government infrastructure spending won't stimulate growth,” http://www.adamsmith.org/blog/planning-transport/government-infrastructure-spending-wont-stimulate-growth, AJ

Next week the Chancellor will deliver a much-anticipated budget. With calls for tax cuts, tax rises and regulatory reform, the line between politics and economics will be a difficult one to tread. However, many commentators and politicians seem to be in agreement on one thing: that ‘infrastructure investment’ would be a boost to the economy, reinvigorating the construction sector and adding to the nation's productivity. Hence we have projects such as HS2 and £6 billion announced in the last year’s autumn statement for roads and other rail projects. These measures are supposed to create jobs in the short- and the long-term whilst bringing the country's transport infrastructure into the 21st century. In the US, too, President Obama has been keen to point to ‘shovel ready jobs’ available through government infrastructure spending. We should all be worried when politicians start spouting platitudes about the highly unrealistic benefits of these projects. The great myth of the success Roosevelt’s New Deal no doubt lingers in the minds of policy makers. But the truth about

government infrastructure is wildly different from the conventional wisdom. It is a fallacy to believe that the government can allocate resources effectively to meet future economic needs, instead of entrepreneurs. What advocates of state infrastructure spending fail to grasp is that government cannot suddenly acquire the knowledge as to which parts of the UK’s infrastructure either needs repair, replacement

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or, indeed, which new projects should be undertaken. The economy is dynamic and never static. The government cannot predict what it will look like in 30 years time , whether there will be an increase of manufacturing jobs in the northeast or high tech in the midlands. This is simply not possible to anticipate into the next twenty or thirty years. The argument commonly made for infrastructure spending is that it will have a kind of Keynesian multiplier effect. Private construction firms will be employed, idle resources will be put to use and money will start to circulate through the economy as people spend their newly earned wages. But this, again, is untrue. Government infrastructure drains the economy of resources and, even in the short term, stops resources from being used elsewhere. These decisions are difficult even for the private sector, which relies on price signals. Sometimes the private sector fails, sometimes it succeeds, but because it is the investor's money that is on the line it has a reason to act rationally. Government lacks the information to act wisely , and the incentives to act prudently. In Japan, large government infrastructure projects have failed to lift the country out if its

low growth high debt slump. In the UK, many cities have built tramlines, which have almost universally turned out to be loss makers and failed to promote growth. Entrepreneurs, not state bureaucrats, will be best to judge whether a particular project is worth the risk. The history of white elephant infrastructure projects is one that seems to repeat itself with each new administration. Let us hope that the politicians fail to match their rhetoric with our money.

Infrastructure investment doesn’t affect the economyEdwards 11 10/21, *Chris Edwards is the director of tax policy studies at the Cato Institute and the editor, “Infrastructure Projects to Fix the Economy? Don't Bank on It.,” http://www.cato.org/publications/commentary/infrastructure-projects-fix-economy-dont-bank-it, AJ

In a recent television ad for her network, MSNBC host Rachel Maddow stands below the Hoover Dam and asks whether we are still a country that can "think this big" — Hoover Dam big. The commercial is built on the assumption that American greatness is advanced by federal spending on major infrastructure projects. If I had my own television commercial, I'd stand in front of the

wreckage of Idaho's Teton Dam, which, like the Hoover Dam, was built by the federal Bureau of Reclamation. The Teton Dam was based on shoddy engineering and a flawed economic analysis. It collapsed catastrophically in 1976, just a year after it was built. Increased infrastructure spending has bipartisan support in Washington these days. President Obama wants a new federal infrastructure bank, and members of both parties want to pass big highway and air-traffic-

control funding bills. The politicians think these bills will create desperately needed jobs, but the cost of that perceived benefit is too high: Federal infrastructure spending has a long and painful history of pork-barrel politics and bureaucratic bungling, with money often going to wasteful and environmentally damaging projects. For plenty of examples of the downside of federal infrastructure, look at the two oldest infrastructure agencies — the Army Corps of Engineers and the Bureau of Reclamation. Their histories show that the federal government shouldn't be in the infrastructure business. Rather, state governments and the private sector are best equipped to provide it. The Corps of Engineers has been building levees, canals and other civilian water infrastructure for more than 200 years — and it has made missteps the entire time. In the post-Civil War era, for example, there were widespread complaints about the Corps' wastefulness and mismanagement. A 1971 book by Arthur Morgan, a distinguished engineer and former

chairman of the Tennessee Valley Authority, concluded: "There have been over the past 100 years consistent and disastrous failures by the Corps in public works areas ... resulting in enormous and unnecessary costs to ecology [and] the taxpayer." Some of the highest-profile failures include the Great Mississippi Flood of 1927. That disaster dramatically proved the shortcomings of the Corps' approach to flood control, which it had stubbornly defended despite

outside criticism. Hurricane Katrina in 2005 was like a dreadful repeat. The flooding was in large part a man-made disaster stemming from poor engineering by the Corps and misdirected funding by Congress. Meanwhile, the Bureau of Reclamation has been building economically dubious and environmentally harmful dams since 1902. Right from the start, "every Senator ... wanted a project in his state; every Congressman wanted one in his

district; they didn't care whether they made economic sense or not," concluded Marc Reisner in his classic history of the agency, Cadillac Desert. The dam-building pork barrel went on for decades, until the agency ran out of rivers into which it

could pour concrete. Looking at the Corps and Reclamation, the first lesson about federal infrastructure projects is that you can't trust the cost-benefit analyses . Both agencies have a history of fudging their studies to make proposed projects look better, understating the costs and overstating the benefits. And we've known it, too. In the 1950s, Sen. Paul Douglas (D-Ill.), lambasted the distorted analyses of the Corps and Reclamation. According to Reisner, Reclamation's chief analyst admitted that in the 1960s he had to "jerk around" the numbers to make one major project look sound and that others were "pure trash" from an economics perspective. In the 1970s, Jimmy Carter ripped into the

"computational manipulation" of the Corps. And in 2006, the Government Accountability Office found that the Corps' analyses were "fraught with errors, mistakes, and miscalculations, and used invalid assumptions and outdated data." Even if federal agencies calculate the numbers properly, members of Congress

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often push ahead with "trash" projects anyway. Then-senator Christopher Bond of Missouri vowed to make sure that the Corps' projects in his state were funded, no matter what the economic studies concluded, according to extensive Washington Post reporting on the Corps in 2000. And the onetime head of the Senate committee overseeing the Corps, George Voinovich of Ohio,

blurted out at a hearing: "We don't care what the Corps cost-benefit is. We're going to build it anyhow because Congress says it's going to be built." As Morgan noted in his 1971 book, these big projects have often damaged both taxpayers and ecology. The Corps, Reisner argues, has "ruined more wetlands than anyone in history" with its infrastructure. Meanwhile, Reclamation killed wetlands and salmon fisheries as it built dams to provide high-cost irrigation water to farmers in the West — so they could grow crops that often compete with more efficiently grown crops in the East. Taxpayers are double losers from all this infrastructure. They paid to build it, and now they are paying to clean up the environmental damage. In Florida, for example, the Corps' projects, along with federal sugar subsidies, have damaged the Everglades. So

the government is helping to fund a multibillion-dollar restoration plan. In the West, federal irrigation has increased salinity levels in rivers, necessitating desalination efforts such as a $245 millionplant in Yuma, Ariz.

And in a large area of California's San Joaquin Valley, federal irrigation has created such toxic runoff that the government is considering spending up to $2 billion to fix the damage, according to some estimates. When the federal government "thinks big," it often makes big mistakes . And when Washington follows bad policies, such as destroying wetlands or overbuilding dams, it replicates the mistakes across the nation. Today, for instance, Reclamation's huge underpricing of irrigation water is contributing to a water crisis across much of the West. Similar distortions occur in other areas of infrastructure, such as transportation. The federal government subsidizes the construction of urban light-rail systems, for example, which has caused

these systems to spring up across the country. But urban rail systems are generally less efficient and flexible than bus systems, and they saddle cities with higher operating and maintenance costs down the road. Similar misallocation of investment occurs with Amtrak; lawmakers make demands for their districts, and funding is sprinkled across the country, even to rural areas where passenger rail makes no economic sense because of low population densities. When the federal government is paying for infrastructure, state officials and members of Congress fight for their shares of the funding, without worrying too much about efficiency, environmental issues or other longer-term factors . The solution is to move as much infrastructure funding as we can to the state, local and private levels . That would limit the misallocation of projects by Congress, while encouraging states to experiment with lower-cost solutions. It's true that the states make infrastructure mistakes as well, as California appears to be doing

by subsidizing high-speed rail. But at least state-level mistakes aren't automatically repeated across the country. The states should be the laboratories for infrastructure. We should further encourage their experiments by bringing in private-sector financing. If we need more highway investment, we should take notes from Virginia, which raised a significant amount of private money to widen the Beltway. If we need to upgrade our air-traffic-control system, we should copy the Canadian approach and privatize it so that upgrades are paid for by fees on aviation users. If Amtrak were privatized, it would focus its investment where it is most needed — the densely populated Northeast. As for Reclamation and the Corps, many of their infrastructure projects would be better managed if they were handed over to the states. Reclamation's massive Central Valley irrigation project, for example, should be transferred to the state of California,

which is better positioned to make cost and environmental trade-offs regarding contentious state water issues. Other activities of these two agencies could be privatized, such as hydropower generation and the dredging of seaports. The recent infrastructure debate has focused on job creation, and whether projects are "shovel ready." The more important question is who is holding the shovel. When it's the federal government, we've found that it digs in the wrong places and leaves taxpayers with big holes in their pockets. So let's give the shovels to state governments and private companies. They will create just as many jobs while providing more innovative and less costly infrastructure to the public. They're ready.

Investment is not key to the econ

Ridenour 4-2-12-[David A. Ridenour is president of the National Center for Public Policy Research. “Will more federal investment in infrastructure boost economic recovery? No: Here are some better ways”; April 02, 2012 12:00 am; http://azstarnet.com/news/opinion/editorial/will-more-federal-investment-in-infrastructure-boost-economic-recovery-no/article_3c312032-5f5f-5bb7-a2e2-9b748fc8af57.html]

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They say the definition of insanity is doing the same thing over and over and expecting a different result. That's what spending more on infrastructure and transportation to improve the economy would be: insanity. Infrastructure and transportation may have benefits, but turning the economy around isn't one of them. For one thing, major highway projects are slow. The Federal Highway Administration says major highway construction projects take 13 years to complete. Any project that won't be finished until today's first-graders are in college is hardly going to jump-start the economy. Second, it's been tried and it failed. President Obama's stimulus had $105.9 billion in infrastructure spending. The unemployment rate when it became law in February 2009 was 8.1 percent. In February 2012, it was 8.3 percent. Whatever the stimulus went for, it clearly wasn't jobs.

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Infrastructure Investment proven useless while stimulating economyFoster, 12— Norman B. Ture Senior Fellow in the Economics of Fiscal Policy at The Heritage Foundation, worked at the White House's Office of Management and Budget, was Associate Director for Economic Policy, served at the Treasury Department, where he was Senior Adviser in Economics at the department's Office of Tax Policy, was the Legislative Director for Rep. Philip M. Crane (R-IL), then Vice Chairman of the House Ways and Means Committee, was the Executive Director and Chief Economist at the Tax Foundation, and was Chief of Staff to Chairman Michael Boskin at the President's Council of Economic Advisors at the White House, Ph.D (J.D., “WaPo Admitting Keynesian Stimulus Failed?”, The Foundry, 3/6/12, http://blog.heritage.org/2012/03/06/wapo-admitting-keynesian-stimulus-failed/)//JL

Does unprecedented deficit-spending such as on highways stimulate the economy? For the last few years, some have argued it could. Some have argued it might. Some have argued it would if done right. We have consistently argued that deficit spending on highways or anything else intended to lift aggregate demand, and therefore jobs, must and would fail. The economic evidence that we were right has now been joined by the illustrious trio of The Washington Post , the Associated Press, and the esteemed Alice Rivlin, former director of the Congressional Budget Office and the Office of Management and Budget. Monday’s edition of the Post carries a story sourced to the Associated Press entitled, “ Highway bills pitched as by lawmakers as job creators, but are they really? Economists say no. ” Notice especially the subject of the piece: federal highway spending. If ever there was a sympathetic topic for stimulus, it is infrastructure spending, especially highway funding. Remember, these were some of President Obama’s “shovel-ready” projects that turned out to be not so shovel ready, as he later admitted. So what went wrong? Why is this not short-term stimulus? The widely respected Rivlin explained it clearly and succinctly: “Investments in infrastructure, if well designed, should be viewed as investments in future productivity growth.”Exactly right—future productivity growth. She went on to say that if investments in infrastructure “speed the delivery of goods and people, they will certainly do that. They will also create jobs, but not necessarily more jobs than the same money spent in other ways.” Exactly right—a dollar spent is a dollar spent. A job gained here, a job lost there.This speaks to a longstanding flaw of highway spending arguments. Proponents argue that this spending creates tens of thousands of jobs, and they are half right. The other half is the tens of thousands of jobs not created (or saved) by shifting spending to highways from other areas in the economy. The valid argument about infrastructure spending is: If done right, it will lift future productivity growth, not current job growth.The central failing—the essential fiscal alchemy of Keynesian stimulus—is the belief that government can increase total spending in the economy by borrowing and spending. What Keynesians ignore is that we have financial markets whose job in good times and bad is first and foremost to shift funds from savers to investors, from those who have money they do not wish to spend today to those who have a need to borrow to spend as much as they’d like, whether on new business equipment, a home, or a car.There are no vast sums of “excess funds” just sitting around in bank tellers’ drawers waiting for government to borrow and spend them. Government borrowing means less money available to the private sector to spend. So government deficit spending goes up, and dollar-for-dollar private spending goes down. America’s resources are generally speaking spent less wisely, and the federal debt is unequivocally higher.

Common, ineffective transportation investment hurts the economy. Holtz-Eakin et al 11 Douglass Holtz-Eakin (American Action Forum) Bipartisan Policy Center: National Transportation Policy Project: “Strengthening Connections Between Transportation Investments and Economic Growth” 1/21/2011

Different types of expenditures on transportation can have very different long-term economic and short-term jobs impacts—notwithstanding the tendency to invoke simplistic relationships in which a given level of investment are claimed to create a fixed number of jobs. For decades advocates for transportation investment have asserted that each billion dollars of transportation infrastructure investment would generate or “create” more than 30,000 jobs and thus be good for the economy. Such claims, though routinely

asserted, are not well supported by evidence from rigorous analysis and at best represent a hope rather than an assured outcome. While elected officials and advocates often cite job figures in support of increased transportation spending, they rarely make clear that the

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numbers are based on mathematical models, which in turn are heavily driven by so-called “multiplier” effects. The assumption is that money spent on highway construction, and closely associated goods and services such as the provision of supplies and materials, stimulates additional spending in the local and regional

economy and that this spending in turn generates additional jobs. In actuality employment impacts have been far more variable from one project to another, even when one considers only directly-related construction jobs. And while there is great interest in short-term job creation during a deep recession, it is also important to focus on longer-term impacts. Transportation investments can have a more significant and lasting impact on jobs by providing a foundation for overall economic Hastily spending tens of billions of dollars on “shovel-ready” projects for the primary purpose of immediate job creation risks misallocating resources in ways that fail to maximize overall returns to the economy. growth and improved

productivity well into the future. By contrast, hastily spending tens of billions of dollars on “shovel-ready” projects for the primary purpose of immediate job creation risks misallocating resources in ways that fail to maximize overall returns to the economy. Federal legislation should focus future spending on surface transportation in ways that reach well beyond the immediate creation of construction jobs to capture broad, sustainable economic

benefits. Conversely it is possible for transportation investments, judged by this standard, to be unproductive. A transportation policy driven by non-economic criteria will use government’s power to tax, charge fees, and borrow funds to divert resources to projects that are less productive relative to other investment opportunities available to the government or private sector. These projects also attract labor toward the affected sector and away from alternative private investments. Jobs are still created, but others are lost or foregone. In general, the economy as a whole loses when capital and labor shift to less productive economic uses. Returning to our earlier example, suppose the high-speed truck link is not built at the port where it could generate the greatest productivity gains, but instead politics dictate that the funds go to a region where there is no substantial intermodal traffic logjam. Taxes are raised (or debt is incurred) and spending is increased to support a project for which there is no corresponding net national benefit. While employment shifts to the region where the investment is made, employment opportunities in other regions fall. A regional competition for resources is not bad in and of itself, since it can spur all sides to make productivity

improvements, but merely shifting resources from one region to another should not be the aim of national transportation policy unless the opportunity exists to generate net benefits in excess of net losses. That is precisely why building a “bridge to nowhere” will always represent a poor national investment even though it may, at least in the short run, benefit construction workers and others in the state where it is built.\

Studies prove after a transportation infrastructure investment spike spending immediately drops—no long-term solvency. Deskins et al. 07 “Road to Ruin? A Spatial Analysis of State Highway Spending” DONALD BRUCE Associate Professor in the Center for Business and Economic Research (CBER) and the Department of Economics at the University of Tennessee, Knoxville. He specializes in policy research) , DEBORAH A. CARROLL (Assistant Professor in the Department of Public Administration within the School of Public and International Affairs at The University of Georgia.) , JOHN A. DESKINS (Assistant Professor in the Economics and Finance Department at Creighton University. His research is focused primarily on the behavioral effects of state tax policy.), and JONATHAN C. RORK (Assistant Professor in the Department of Economics within the Andrew Young School of Policy Studies at Georgia State University.) Public Budgeting & Finance / Winter 2007 http://web.utk.edu/~dbruce/pbf07.pdf

Table 1 reports the results of our baseline econometric model (equation [2]) of state highway expenditures per capita on lagged state highway expenditures per capita in neighboring states, as well as other control variables. Columns 1–4 present the various models using the four competitor definitions outlined above. The model in column 1 uses contiguity weights, the model in column 2 uses population-contiguity weights, and those in columns 3 and 4 use our distance-based weighting schemes of center and city, respectively. All specifications also contain both state and year fixed effects. Our key finding across all specifications is that our variable of

interest, the lagged weighted average of neighbors’ per capita highway expenditures, has a negative and statistically significant (at the 99 percent level) effect on a state’s own per capita highway expenditures. The coefficient estimates range from a low of 0.455 for the contiguity weights to a high of 0.290 for the population-

contiguity weights. Thus, an increase in neighboring per capita highway expenditures of 10 percent will result in a 3–4.6 percent decrease in the home state’s expenditures the following year.56 It should be noted that this result contradicts what has been found in the extant literature examining other types of state expenditures. Case, Hines, and Rosen found a positive response in state highway expenditures from 1970 to 1985,57 while others have also found a positive response in Medicaid and welfare expenditures to spending by

competitors.58 Our contradictory result suggests that there are positive spillovers to be gained from infrastructure provision in neighboring states. We believe that the potential for positive spillovers in highway expenditures is driving the difference between this spending category and other categories studied previously. We explore the possibility of positive spillovers further in the next section. Several of the remaining control variables in our baseline

models are found to have consistent effects on state highway spending, and those factors relate to both resource availability and public service demand. The percentage of the population that is age 65 and over is estimated to have a large negative impact, indicating that older residents either prefer state spending to be directed to nonhighway purposes or that they prefer less state spending overall. Per capita federal transfers have a positive and significant impact, which is consistent

with the fact that a major source of highway funding comes from the federal government. States with both Republican Governors and Republican legislative majorities spend less on highways than other states, again perhaps reflecting a preference for lower government spending overall. The small but negative effect of the number of vehicle miles traveled may be capturing the geographic size of the state. A final consistent finding is that states with higher interest costs (interest payments as a fraction of total long-term debt) spend much more on highways. While this probably reflects greater interest payments on debt related to the highway projects themselves, it might also reveal that states making higher interest payments are able to spend more on all forms of public

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Investment wont spur economic growth in the long term

ASCE 11-[“Failure to Act The economic impact of current Investment Trends in surface Transportation Infrastructure” American Society of Civil Engineers;http://www.asce.org/uploadedFiles/Infrastructure/Report_Card/ASCE-FailureToActFinal.pdf]

Innovative Surface Transportation Infrastructure Investments. This report focuses on the economic consequences stemming from the expected state of the U.S. surface transportation system under a present trend investment scenario and the levels of investments required for attaining minimum tolerable conditions for highways and bridges and the state of good repair for transit systems. However, other aspects of infrastructure investment fall outside this framework. (For more details on this section’s topic, see the technical appendix.) These include new technologies or innovative remixes of existing technologies. As an example of a new technology, high-speed rail addresses the issue of how investments in both new infrastructure (tracks and re-rationalization of existing railroad rights of way) and new transportation technology (advanced transportation equipment and associated communications) can transform intercity passenger transportation and the economies of the metropolitan areas they connect. Most of America’s major economic competitors in Europe and Asia—including Japan, Germany, France, Spain and Great Britain, as well as rapidly developing and developed countries such as China, Taiwan, and South Korea—have already invested in and are reaping the benefits of improved competitiveness from their intermetropolitan high-speed rail systems. Simply continuing to invest in the nation’s existing transportation infrastructure may not be enough to maintain its standing in the global economy in the long run. A second example of technology change is Magnetic Levitation (maglev) Systems, which have been under development and review in the U.S. and abroad for many years. Both highspeed intercity and low-speed urban systems have been developed and tested—primarily in Germany, Japan, South Korea, and China. A high-speed maglev system has been built and is currently in operation between downtown Shanghai and the Pudong International Airport. Other airport connector systems have been planned for Munich and are under consideration in several Middle Eastern countries. A maglev system is currently being planned between Geneva and Lausanne, and another between Berne and Zurich.

Bad transportation infrastructure constrains the economy Rodrigue 09 (Jean-Paul Rodrigue received a Ph.D. in Transport Geography from the Université de Montréal (1994) and has been at the Department of Economics & Geography at Hofstra University since 1999. In 2008, he became part of the Department of Global Studies and Geography. “The Geography of Transportation” Chapter 7 http://people.hofstra.edu/geotrans/eng/ch7en/conc7en/ch7c1en.html) // CG

Transportation developments that have taken place since the beginning of the industrial revolution have been linked to growing economic opportunities. At each stage of human societal development, a particular transport mode has been developed or adapted. However, it has been observed that throughout history that no single transport has been solely responsible for economic growth. Instead, modes have been linked with the function and the geography in which growth was taking place. The first trade routes established a rudimentary system of distribution and transactions that would eventually be expanded by long distance maritime shipping networks and the setting of the firsts multinational corporations. Major flows of international migration that occurred since the 18th century were linked with the expansion of international and continental transport systems that radically shaped emerging economies such as in North America and Australia. Transport has played a catalytic role in these migrations, transforming the economic and social geography of many nations. Concomitantly, transportation has been a tool of territorial control and exploitation, particularly during the colonial era where resource-based transport systems supported the extraction of commodities in the developing world and forwarded them to the industrializing nations of the time. More recently, port development, particularly container ports, has been of strategic interest as a tool of integration to the global economy as the case of China illustrates. While some regions benefit from the development of transport systems, others are often marginalized by a set of conditions in which inadequate transportation plays a role. Transport by itself is not a sufficient condition for development, however the lack of transport infrastructures can been seen as a constraining factor on development. In developing countries, the lack of transportation infrastructures and

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regulatory impediments are jointly impacting economic development by conferring higher transport costs, but also delays rendering supply chain management unreliable. Investment in transport infrastructures is thus seen as a tool of regional development, particularly in developing countries and for the road sector. The standard assumption is that transportation investments tend to be more wealth producing as opposed to wealth consuming investments such as services. Still, several transportation investments can be wealth consuming if they merely provide convenience, such as parking and sidewalks, or service a market size well below any possible economic return, with for instance projects labeled "bridges to nowhere". In such a context, transport investment projects can be counterproductive by draining the resources of an economy instead creating wealth and additional opportunities. There is also a tendency for transport investments to have declining marginal returns. While initial infrastructure investments tend to have a high return since they provide an entirely new range of mobility options, the more the system is developed the more likely additional investment would result in lower returns. At some point, the marginal returns can be close to zero or even negative, implying a shift of transport investments from wealth producing to wealth consuming. A common fallacy is assuming that additional transport investments will have a similar multiplying effect than the initial investments had, which can lead to capital misallocation. This means quite understandably that the economic impacts of transport investments tend to be significant when infrastructures were previously inexistent or deficient and marginal when an extensive network is already present. Therefore, each development project must be considered independently.

Transportation funding has no effect on the economy Bently 12 (Guy Bently is a member of the Adam Smith Institute which is an independent think tank “Government infrastructure spending won't stimulate growth” Wednesday 14 March 2012 http://www.adamsmith.org/blog/planning-transport/government-infrastructure-spending-wont-stimulate-growth ) // CG

Next week the Chancellor will deliver a much-anticipated budget. With calls for tax cuts, tax rises and regulatory reform, the line between politics and economics will be a difficult one to tread. However, many commentators and politicians seem to be in

agreement on one thing: that ‘infrastructure investment’ would be a boost to the economy, reinvigorating the construction sector and adding to the nation's productivity. Hence we have projects such as HS2 and £6 billion announced in the last year’s autumn statement for roads and other rail projects. These measures are supposed to create jobs in the short- and the long-term whilst

bringing the country's transport infrastructure into the 21st century. In the US, too, President Obama has been keen to point to ‘shovel ready jobs’ available through government infrastructure spending. We should all be worried when politicians start spouting platitudes about the highly unrealistic benefits of these projects. The great myth of the success Roosevelt’s New Deal no doubt lingers in the minds of policy makers. But the truth about government infrastructure is wildly different from the conventional

wisdom. It is a fallacy to believe that the government can allocate resources effectively to meet future economic needs, instead of entrepreneurs. What advocates of state infrastructure spending fail to grasp is that government cannot suddenly acquire the knowledge as to which parts of the UK’s infrastructure either needs repair, replacement or, indeed, which new projects should be undertaken. The economy is dynamic and never static. The government cannot predict what it will look like in 30 years time, whether there will be an increase of manufacturing jobs in the northeast or high tech in the midlands. This is simply not possible to anticipate into the next twenty or thirty years. The argument commonly made for infrastructure spending is that it will have a kind of Keynesian multiplier effect. Private construction firms will be employed, idle resources will be put to use and money will start to circulate through the economy as people spend their newly earned wages. But

this, again, is untrue. Government infrastructure drains the economy of resources and, even in the short term, stops resources from being used elsewhere. These decisions are difficult even for the private sector, which relies on price signals. Sometimes the private sector fails, sometimes it succeeds, but because it is the investor's money that is on the line it has a reason to act rationally. Government lacks the information to act wisely, and the incentives to act

prudently. In Japan, large government infrastructure projects have failed to lift the country out if its low growth high debt slump. In the UK, many cities have built tramlines, which have almost universally turned out to be loss makers and failed to promote growth.

Entrepreneurs, not state bureaucrats, will be best to judge whether a particular project is worth the risk. The history of white elephant infrastructure projects is one that seems to repeat itself

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with each new administration. Let us hope that the politicians fail to match their rhetoric with our money.

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AT: Highways

Investment in highways is not profitable

Shirley and Winston 03 – *Associate with Cornerstone Research, Economist with Econ One Research, and an Associate Economist with the Rand Corporation AND** Senior Fellow at Brookings, (Chad and Clifford, “Firm inventory behavior and the returns from highway infrastructure investments,” November 2, 2003, Journal of Urban Economics http://www.transportationfortomorrow.com/final_report/pdf/volume_3/background_material/26_firm_inventory_behavior_and_the_returns_from_highway_infrastructure_investments.pdf) MSDGiven these enormous sums, it is important to know whether the amount of highway capital is optimal and whether additions to the capital stock are efficient. Public economists and macroeconomists have used cost and production functions to estimate rates of return from transportation infrastructure investments and have at times made dramatic claims about their economic benefits. For instance, using national time series data, Aschauer [1] and Munnell [2] found that infrastructure spending generated returns exceeding 100 percent. However, most studies in the United States and elsewhere suggest more modest returns. Studies using state data and focusing on specific industries (for example, Munnell [3], Nadiri and Mamuneas [4]) found returns to road and highway investments as low as 8 percent, and a few researchers (Hulten and Schwab [5], Holtz-Eakin [6]) even found that returns were negligible. Recently, Nadiri [7], Fernald [8], and Demetriades and Mamuneas [9] have supported the middle ground, finding that by the late 1980s returns were roughly 15 percent to 30 percent. Although recent studies appear to produce plausible rate of return estimates, production and cost function approaches tend to gloss over the mechanism whereby infrastructure spending produces economic benefits. It is therefore difficult to reconcile their estimates with other evidence on the matter. For example, Winston [10] documents that government policy has created large deadweight losses that compromise the returns from highway spending by designing roads inefficiently and maintaining them at excessive cost, charging automobiles and trucks inefficient prices for road use, and preventing highway projects from being optimally managed. Recent research, however, has failed to explain why highway infrastructure investments have yielded a healthy return in the face of significant inefficiencies in highway provision, pricing, and use.

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***ECONOMY UNIQUENESS

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High Now

Recent data of the Housing Market indicates economic riseMemmott, 6-19-12—host of NPR blog “The Two-Way”(Mark, “Signs of Strength in Latest Housing Data”, NPR’s “The Two-Way”, June 19, 2012, http://www.npr.org/blogs/thetwo-way/2012/06/19/155345941/signs-of-strength-in-latest-housing-data)//JL

There was a 7.9 percent jump in the number of construction permits issued to home builders in May, the Census Bureau says. That increase boosted permits to a seasonally adjusted annual rate of 780,000 — the most since September 2008, The Associated Press adds. It's a signal that construction will be strong in coming months. And there's another sign in the Census report that the housing sector may have picked up some strength: There was a 3.2 percent rise in the number of single-family home "starts" last month. Census says construction began on 516,000 such homes (that's another "seasonally adjusted annual rate").

US economy is strong and improving---we’re in the leadJubak 12 3/22, *Jim Jubak has been writing about the capital markets for more than 25 years, including 12 years at MSN Money, “US economy strong as the world falls behind,” http://money.msn.com/top-stocks/post.aspx?post=7b785c7d-3655-4577-9e9a-c346e21e4187, AJ

It seemed like the U.S. was the only strong economy in the world Thursday. Thursday morning, U.S. initial claims for unemployment fell to 348,000 for the week ended March 17 from 353,000 for the prior week. Economists surveyed by Bloomberg had projected a drop to 350,000. That number would be consistent with the U.S. economy adding another net 200,000 jobs in March for a fourth consecutive month of 200,000 new jobs or better. The data out of Europe, for example, show that the region will slip into something deeper than the mild recession the European Central Bank projected back in January for the first two quarters of 2012. And the bad news is pretty much all over Europe. In the United Kingdom, retail sales fell by 0.8% in February from January. (Expected decline was 0.4%.) Year-to-year sales were up 1% versus an expected

gain of 2.6%. In Portugal, the government announced that its budget deficit almost tripled to $600 million in the first two months of the year. Higher tax rates put in place as part of the country's austerity package were offset by a 4.3% drop in government revenue as the economy slowed. In Ireland, the eurozone's austerity "success" story, the economy slipped back into recession with a drop of 0.2% in first quarter GDP . In the fourth quarter of 2011, revised figures show the economy contracted by 1.1%. In Germany, the Markit Economics flash Purchasing Managers Index for March showed a drop to 48.1 for manufacturing from 50.2 in February. That's a four-month low. Remember anything above 50 shows a sector is expanding; below 50 and a sector is contracting. Unlike manufacturing, services stayed above 50 at 51.8 but that was still a drop from 52.8 in February and also a four-month low for the index. For the European Union as a whole, the Purchasing Managers Index dropped to 48.7 in March. That was down from 49.2 in February and a projected 49.2. Not surprisingly, prices on Spanish bonds fell, pushing the yield on the country's 10-year bonds above 5.5% for the first time since January. And I hope that you're not looking for good news from China Thursday. The preliminary Purchasing Managers Index survey by HSBC came in at 48.1 in March, down from a final survey reading of 49.6 in February. The HSBC preliminary survey tends to be more bearish than the final survey, since it contains a higher proportion of smaller companies that have had a tough time raising capital recently and I expect the final reading will be higher. Still, the trend is pointing in the wrong direction. No one should be surprised that China's economy is slowing . The important question remains by how much.

Squo solves---clean tech industry solves the economy, offshoring, competitiveness, environmental problems, and oil dependenceHall 6/20 2012, *Chad Hall is a founder and vice president of sales at Ioxus, Inc., focusing on European sales. He also writes for Environmental & Energy Management News, “Cleantech Industry Powers US Economy with Job Creation,” http://www.environmentalleader.com/2012/06/20/cleantech-industry-powers-us-economy-with-job-creation/, AJ

Green technology not only helps to sustain the environment , but it also helps to sustain the US economy by providing new jobs. A Brookings Institution report estimates that between 2008 and 2011, the number of green jobs in the US grew 260 percent from 750,000 to 2.7 million. Much of this job creation stems from the increased awareness of, and demand for, green technology by the consuming public. With an increased focus on job creation during this election year, one particular sector has seen ongoing growth: manufacturing. According to the US Bureau of Labor Statistics’ April 2012 Employment Situation

Summary, the manufacturing industry added 489,000 jobs in the US since January 2010. With the high demand for green technology and sustainable energy solutions comes the growth of jobs in the cleantech manufacturing industry. The Brookings Institution also reports more jobs in the green technology and renewable energy industries than in the fossil fuel sector, with 26 percent of cleantech

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jobs being in manufacturing. An increase in job creation will directly impact the domestic economy and job market—so long as we make manufacturing advancements in the US and create and sustain the jobs. Developing and manufacturing energy storage technology domestically results in national profit from cost savings, environmental benefits, increased job availability and national competitive advantage. According to a recent report by the US Small Business Administration, small businesses outperformed large

companies in net job creation by about 75 percent from 1992-2010. This growth coupled with the nation’s entrepreneurial spirit contributes to the United States’ competitive advantage by innovating, creating jobs and stimulating economic recovery. Another study by the US Small Business Administration finds small businesses responsible for much of the green technology innovation. Small businesses hold 14 percent of all US green technology patents. Given the job creation by small businesses coupled with the innovation within the green technology space, it only makes sense that opportunities with small businesses in green technologies will abound. In addition to creating new jobs in the clean technology manufacturing space, we’re also witnessing increases in American companies reshoring and bringing jobs back home . While offshoring was once popular due to the reduced operational costs in overseas markets, reshoring has a growing appeal due to such factors as high fuel prices raising shipping and transport costs. A survey conducted by

engineering professor and supply-chain expert, David Simchi-Levi of the Massachusetts Institute of Technology, found that 39 percent of U.S. manufacturers were contemplating moving some of their manufacturing operations back to the US. By reshoring various business operations and not just manufacturing jobs, companies not only help the American job market, but also gain better quality control. There is value and pride in having a product labeled as both a green technology and “made in America.” Domestic manufacturing of clean technology improves a company’s image with both internal and external stakeholders, creating pride among employees and a strong reputation with the public and customers. Not only that, but it taps into a sense of patriotism for having impacted the U.S. economy by producing more exports and more domestic jobs. If the US fails to take the initiative to design and manufacture innovations in renewable energy, we will miss out, and our foreign competitors will reap the benefits. We will move from a dependency on foreign oil to a dependency on foreign energy storage. President Obama echoed this sentiment in his State of the Union address in January, proposing tax incentives for companies bringing their operations back to the U.S. and tax penalties for those who do not. He declared, “It’s time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America.” Cleantech manufacturing provides the necessary support to increase the nation’s renewable energy output . Cost- efficiency, savings and a greater number of jobs are great perks resulting from the growth of the cleantech industry, but the main goal of clean technology remains the widespread adoption of renewable energy applications for a cleaner, more sustainable environment.

Econ slowly risingMcMillan 6-18-12 president of McMillan Analysis Corp. He is an experienced trader and money manager and is the author of the best-selling book,“Options as a Strategic Investment”and editor of the“MarketWatch Options Trader”newsletter – (Lawrence, “Strong buy signals are in place,”Market Watch WSJ, http://www.marketwatch.com/story/strong-buy-signals-are-in-place-2012-06-18?Link=obnetwork) MSDIn addition, the Total put-call ratio has given a confirmed buy signal. There has been extremely heavy put buying in the past two months, as traders have been worried about events in Europe and the like. This extreme pessimism eventually leads to buy signals, such as we are seeing now. The Total ratio encompasses all options that trade. Most of the time, that ratio is of little interest. But occasionally there is so much put buying that the 21-day moving average of that Total ratio gets extremely high. That’s what has happened, and now that moving average has peaked and begun to fall — a confirmed buy signal for the Total put-call ratio. This type of signal generally projects a 100-point rise for SPX. Market breadth hasn’t been particularly stellar in the market rise of the past two weeks, but it is beginning to gather strength. Any new bullish breakout, such as we are seeing now, needs to have extremely positive breadth in order to fuel the advance. In one sense, that makes the market immediately overbought, but that is acceptable in the early stages of an advance. For the record, the breadth indicators that we follow are officially on buy signals, and have been for a week or so. Volatility indexes VIX -9.66% XX:VXO -8.39% have stubbornly remained elevated — until today. VIX has been in an uptrend, which was generally bearish for stocks. Even when VIX stopped going up, it refused to moved below the 21 level. So that became a sort of demarcation line. It seemed that as long as VIX remained above 21, that was bearish enough, and stocks couldn’t generate enough momentum to break out over resistance. But now that SPX has moved above 1,340, VIX has fallen with a resounding thud — collapsing over 13% in a single day, to close just above 18. This is another bullish confirmation. The construct of the VIX futures can also be a useful market indicators. There are two factors that are important: 1) the amount of premium (or discount) on the VIX futures, and 2) the term structure of the futures (their relationship to each other, in price). Both of these factors are bullish at the current time. The futures all have a large premium. In fact, those premium levels increased considerably today. Moreover, the term structure slopes steeply upward (that is, each successive VIX futures contract is more expensive than its immediate predecessor in time). So, all of the

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above indicators are in a bullish mode now. Furthermore, there has been a voracious appetite for protection in the form of put buying, volatility hedging, and so forth. For example, the daily volume on volatility ETFs, such as Barclays iPath S&P 500 VIX Short-Term Futures VXX -8.93% , has skyrocketed in recent months. When so many traders are willing to pay almost any price for protection, it is probably a sign that protection isn’t necessary. In summary, we expect the market to be able to work its way higher over the intermediate term. If the 100-point target of the Total put-call ratio buy signal is accurate, then we’d be looking at SPX rising above 1,440, which would be a new high for the post-2008 bull market. It certainly seems to be within reason now. Things can always change, of course, but for now, this is the first time since last Thanksgiving that these various indicators have all aligned bullishly.

Public positive about Obama economyLoGiurato 6/19/12 - is a political reporter for Business Insider, (Brett, “SURPRISE: Americans Actually Do Think Things Have Gotten Better Under Obama.” Business Insider, June 19, 2012, http://www.businessinsider.com/obama-romney-economy-better-jobs-bloomberg-2012-6#ixzz1yjcVBy7N) MSD

President Barack Obama finally got some cheery economic news in this Bloomberg poll released Wednesday : At least now, in June, people are looking up at their own personal economic situations. The Bloomberg survey found that 45 percent of Americans say they're better off than they were four years ago, compared with 36 percent that say they're worse off. Seventeen percent said "about the same." Here's a look: The poll appears to be the outlier of other recent national polls. But Ann Selzer, the president of Selzer & Co., which conducted the poll for Bloomberg, defended its results in a phone interview. "It's different from other things that we've done and it's different from other polls that are out there," Selzer told Business Insider. "We took a look at the results of the poll — it's our same methodology. There isn't anything we changed in terms of that. The demographics aligned almost identically. "This is far from settled. Polls have been volatile. We were comfortable with it." Selzer pointed out that the firm found good and bad news for both candidates. For instance, 49 percent of respondents picked Obama's economic vision, compared with 33 percent for Romney. And more people thought Mitt Romney's private-equity background at Bain Capital does not make him better prepared to be president. But there's also a flurry of news that should make Obama cautiously optimistic. Forty-eight percent of respondents are cautious about the economy because "nothing is really happening." And here's the kicker: "People are having a sense that, in their personal economy, things are getting better," Selzer said. "In terms of the national mood, if you look at the right track-wrong track question, things are as pessimistic as ever. "That's part of the fragility of any lead that we might be showing for Obama right now. You question, 'How can you vote for the guy if you think things are headed in the wrong direction?' I think that has to do with some of the dynamic of Romney, and that the affirmative case on both sides has yet to be made." If this is any indication, though, voters right now are answering Ronald Reagan's "better off than you were four years ago" question with a "Yes" for perhaps the first time in the 2012 election cycle.

Housing Market RecoveringLange 6/19/12- covered the economy in Mexico, from exports to economic policy set by the country's politicians and central bank. Based in Mexico City, previously covered Mexican financial markets for Reuters. (Jason,” Data suggests U.S. housing recovery on track” Reuters, June 19, 2012 http://www.reuters.com/article/2012/06/19/us-housing-starts idUSBRE85I0RC20120619?feedType=RSS&feedName=everything&virtualBrandChannel=11563)WASHINGTON -- U.S. housing starts fell in May from a 3-1/2 year high, although permits to build new homes rose sharply, suggesting a nascent housing recovery remains on track. The Commerce Department said on Tuesday that groundbreaking on new homes dropped last month to an annual rate of 708,000 units, falling short of analysts' expectations. However, upward revisions to data for March and April put starts above 700,000 for five straight months, a first since 2008. This highlights a big turn of events that is under way: while the broader U.S. economy appears to be losing steam, housing is gaining traction and has become a relative bright spot. Despite a sharp slowdown in hiring, home prices appear to be stabilizing and homebuilder sentiment has risen to a five-year high. "The incipient recovery in housing market activity, in short, seems not to have been affected by the recent softening in much of the other economic data," said Ian Shepherdson, an economist at High Frequency Economics in Valhalla, New York. The decline in starts in May was entirely due to a 21.3 percent drop in groundbreaking for multi-family buildings, a volatile reading that is prone to substantial revisions. Starts for single-family homes, which account for most of the market, increased 3.2 percent. In another positive sign, new building permits jumped 7.9 percent in May to a 780,000-unit pace. That was the highest since September 2008 and well above analysts' forecasts. "Several aspects of the report paint a somewhat brighter picture than the headline suggests," said Peter Newland, an economist at Barclays in New York. For example, April's starts were revised up to a 744,000-unit pace from a previously reported 717,000 unit rate. That was the highest reading since October 2008. Many economists now predict home building will add to economic growth this year for the first time since 2005. At the same time, Europe's debt crisis and planned belt-tightening by the U.S. government loom heavily over the

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economy. A downturn would imperil President Barack Obama's hopes of re-election in November. The hiring slowdown has raised expectations the Federal Reserve could ease monetary policy when it concludes a two-day policy review on Wednesday. U.S. stocks extended early gains as traders hoped for central bank stimulus measures.

Econ on rack to grow

Senator Portman 6/13/12 – Ohio Senator, went to Dartmouth (Rob, “We Can Do Better on Economy,” Politico, June 13, 2012, http://www.politico.com/news/stories/0612/77389_Page2.html#ixzz1yvGCBDLU) MSD Rather than follow Obama’s 1970s-era vision of ever-rising taxes to chase ever-rising spending, we need a pro-growth, pro-jobs agenda. We should pursue pro-growth tax reform by lowering marginal tax rates and pay for it by closing loopholes that only complicate the Tax Code and slow growth. We should also provide regulatory relief to small businesses, open up more export markets to better reach the 95 percent of the world’s consumers who live abroad and encourage domestic energy production to create jobs and lower prices. We should replace the president’s health care law with a policy that lowers costs by putting consumers in control of their health care and forcing insurance companies to compete for our business. We must also rein in runaway spending to close this staggering budget deficit before we have a fiscal crisis. We can do better. These pro-growth policies would unshackle the economy and encourage hiring. They would bring long-term sustainability to the budget and new revenues through growth. There is no reason the economy cannot return to the higher growth that occurred in past recoveries. We have the blueprint; we just need the will.

Fed will help Econ if continued downturn

Boak and Reis 6/20/12 - economics reporter for POLITICO, Chicago Tribune and the Toledo Blade. Educated at Princeton and Columbia AND reporter on economics and finance for POLITICO, (Josh and Patrick, “Fed: 267B more to Operation Twist,” POLITICO, June 20, 2012, http://www.politico.com/news/stories/0612/77640.html#ixzz1yvIOoHbk) MSDThe Fed now projects the unemployment rate will remain above 8 percent through the end of 2012, downgrading previous predictions that it could fall as low as 7.8 percent. The Fed also revised its expectation for growth of the nation’s gross domestic product, saying GDP will increase by a mere 1.9 percent to 2.4 percent this year — down from April projections of between 2.4 percent and 2.9 percent. After the Fed released new, increasingly pessimistic forecasts on economic growth and unemployment Wednesday, Chairman Ben Bernanke was repeatedly pressed during an afternoon press briefing on why the bank hadn’t done more. Bernanke conceded that the economic recovery appears to be slowing, citing a series of dismal jobs reports and the ongoing debt chaos in Europe, but cautioned that it’s unclear whether recent negative news represents a trend or seasonal factors. Should a negative trend emerge, Bernanke said the Fed stands ready for further intervention. “If we don’t see continued improvement on the labor market, we’ll be prepared to take more action if appropriate,” Bernanke said. “It’s our intention to do all we can to make sure that [the recession] doesn’t go on indefinitely.” Bernanke said new steps could include a third round of quantitative easing, a controversial move that in two previous rounds purchased bonds from banks with hundreds of billions of dollars created by computer keystrokes. But he said the bank was not yet prepared to take those steps.

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Low Now/On BrinkEconomic collapse is inevitable---laundry listWashington Post 6/21 2012, “Weak job market weighs on US economy and shows little sign of improving,” http://www.washingtonpost.com/business/economy/weak-job-market-weighs-on-us-economy-while-showing-little-sign-of-accelerating/2012/06/21/gJQAPlo7sV_story.html, AJ

WASHINGTON — The sluggish job market is weighing on the U.S. economy three years after the Great Recession ended. And the signs suggest hiring may not strengthen any time soon . A measure of the number of people applying for unemployment benefits over the past month has reached a six-month high, the government said Thursday. The increase suggests that layoffs are rising and June will be another tepid month for hiring. Sales of previously occupied homes fell in May. And manufacturing activity in the

Philadelphia region contracted for the second straight month in June. The gloomy economic data echoed a more pessimistic outlook from the Federal Reserve issued Wednesday. The reports also contributed to a sharp decline in stock prices. The Dow Jones industrial average fell 251 points to close at 12,574. The Standard

& Poor’s 500 index and the Nasdaq composite both ended the day down more than 2 percent. “It appears the slow-growth expansion will be slower,” said John Silvia, chief economist at Wells Fargo Securities, in a note to clients.

Thursday’s raft of economic reports showed: — Applications for unemployment benefits dipped last week to 387,000 , from an upwardly revised 389,000 the previous week , the Labor Department said. The four-week

average, a less volatile measure, rose to 386,250. That is the highest level since December. When applications for unemployment benefits top 375,000, hiring generally remains too weak to rapidly lower the unemployment rate. — Home sales fell 1.5 percent in May from April to a seasonally adjusted annual rate of 4.55 million, the National Association of Realtors said. Sales are up 9.6 percent from a year ago.

That suggests that the housing market is slowly improving. But the annual sales rate is well below the 6 million that economists consider healthy. — The Philadelphia Federal Reserve Bank said its index of regional manufacturing activity fell sharply to -16.6 from -5.8. That’s the lowest level in nearly a year. A reading below zero

indicates contraction. Measures of new orders and shipments also plummeted. Hiring slowed sharply in April and May, raising concerns about the strength of the recovery . Employers have added an average of only 73,000 jobs a month in April and May. That’s much lower than the average of 226,000 added in the first three months of this year.

Economic collapse is comingSeaman 5/5 2012, *David Seaman is a contributing writer for Business Insider, “The Coming Economic Collapse Is More Real Than You Think,” http://articles.businessinsider.com/2012-05-05/home/31587324_1_debt-huffington-post-alien-species, AJ

"Governments worldwide have borrowed 100 trillion last ten years . Defaults inevitable sometime soon.

Means crash, hurting rich and poor," News Corporation CEO and Chairman Rupert Murdoch recently tweeted. "Of course markets stay high with central banks printing huge sums, inflating everything except jobs," he had pointed out in a prior tweet. And Rupert Murdoch isn't the only "elite" "insider" hinting at something unpleasant down the road if governments continue their spending (which they are doing, unabashedly). Hedge funder David Einhorn recently opined over at Huffington Post: "I believe that stocks are depressed because there is a pervasive feeling that something awful is going to happen. What is this enormous tail-risk? It's the intersection of reckless fiscal policy with Jelly Donut monetary policy. There is a fear that our Fed Chairman is an academic willing to take great systemic risks in an experiment to prove out his thesis as to how we should have fought the last Great Depression." And yes, the federal government really has been spending a LOT lately . CBS News last year reported that the Obama administration has effected " the most rapid increase in the debt under any U.S. president," bringing us more than $4 trillion in fresh public debt since he took office. Is there some top-secret

war being waged against an alien species on Mars? No, the truth is far more mundane: hapless military excursions in the Middle East, never-ending entitlements, declining revenues (due to declining economic growth), and outlandish police state expenses like a $2 billion data center in the Utah desert to spy on American citizens' online communications -- sadly this list explains much of our debt. Automated data centers aren't exactly the

best way to boost [human] employment, by the way. Other debt icebergs, perhaps far more pernicious, lurk just below the surface: student loan debts have reportedly surpassed the $1 trillion mark, and with more than 1 in 2 new graduates unable to find gainful employment, this is a huge class of borrowers that appear less capable than ever of repaying their debts. 2012 should be interesting after the summer malaise subsides, giving way to real fear .

Economic decline is imminent---qualified researchers predict the next depression by 2030Johnson 12 4/5, *Victor Johnson is a writer for The Inquisitr, “Global Economic Collapse Imminent: MIT Researchers Predict Next Great Depression By 2030,” http://www.inquisitr.com/215867/global-economic-collapse-imminent-mit-researchers-predict-next-great-depression-2030/, AJ

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According to a study released by researchers at Jay W. Forrester’s institute at MIT, the world is headed for a “global economic collapse” if humans around the planet do not waver in their consumption of natural resource. Not only is global economic collapse imminent at the current rate of resource consumption and population growth, “precipitous population decline” will also occur. “ The world is on track for disaster .” According to the report which was produced for The Club of Rome,

the researchers conjured a computing model in order to forecast various scenarios based upon the current models of global resource consumption and population growth. A computing model is a mathematical model of a complex process or system which requires conditions for testing. The majority of the computer scenarios processed indicated imminent economic collapse would occur right around the year 2030 . Unlimited economic growth potential is still a possibility , however,

governments around the world would have to enact policies to limit the expansion of our ecological footprint (human demand on the Earth’s ecosystems) in addition to investing in green technologies. Twelve million copies of the recently published report were distributed in thirty-seven different languages around the world. While there are those, such as former governor of the Federal Research Board and Yale economist Henry Wallich, who strongly disagree with the findings detailed in both the Limits to Growth as well as the more recent MIT study conveying similar findings. Wallich believed that the regulation of economic growth would be equivalent to “consigning billions to permanent poverty.”

Collapse is likelyKoenig 6 *Don Koenig is a writer on Bible Prophecy and has been writing on economics since 2000, “Total economic collapse in the U.S - Imminent danger to the U.S. # 3,” http://www.thepropheticyears.com/comments/Imminent%20Danger%203%20-%20Economic%20collapse.htm, AJ

The U.S. economy is growing again and it has been for several years but the national deficit last year was the largest ever in the history of the world . It will exceed 500 billion dollars. The trade imbalance was 700 billion dollars . If the U nited States is running these kinds of deficits in a growing economy can you imagine the deficits that would occur if the U.S. economy once again took a downturn turn? Pray

that this will not happen because if it does the United States and the world will see times on earth worse than the great depression of the 1930's. It will also reduce the United States to less than a superpower as the recent depression in Russia reduced her superpower status. It is almost certain that the U.S. economy will crash because of the debt load it carries before 2025 AD. I would have to make the likelihood of a depression occurring in the next two decades as 9.9 on a scale of 1 to 10 . We have 70 trillion dollars in unfunded liabilities coming due in the next few decades. The only hope of avoiding an economic collapse and a depression is twenty-five years of growth without a downturn along with twenty-five years of low inflation. Even moderate inflation would make the servicing of the debt much more expensive and cause higher interest rates. That in itself itself would bring in a inflationary depression. Contrary to what the government is

telling the American people The United States is already in economic decline because inflation and the falling dollar is eroding the buying power of Americans faster then the earnings of the American people are rising.

More evidence---economic collapse and trade war are comingKoenig 11 *Don Koenig is a writer on Bible Prophecy and has been writing on economics since 2000, “The coming economic crash caused by world debt,” http://www.thepropheticyears.com/reasons/World%20debt.HTM, AJ

In the U.S. we cannot keep living like we have twice the income that we really have. Just trying to throw more money at the problem like our government has been doing will just make matters worse in the long run because this nation cannot afford to take on more debt. Passing the costs of this downturn to some future generation is simply not possible. No future generation can possibly pay this huge rapidly increasing debt and soon nobody will be stupid enough to continue to finance our increasingly risky debt at

abnormally low interest rates. Another reason for the high unemployment is that the government cannot institute a policy to buy American or they risk a trade war with other nations in the global economy that are also

living beyond their means. The trade war probably is coming anyway because unemployed people of nations will demand that their government do something to protect their jobs and all thier government can do to keep jobs at home is to allow protectionism. That happened in the 1930's and it made a bad recession into a decade long world depression. That now seems to be our future and along with the deflation depression or hyperinflationary depression that is bound to come, it will allow the rise of populist demigods who will convince people that they have the answers. In other words, we are now repeating the same mistakes of the 30's that led to the nationalist socialistic movements and the start of World War II. It will not be different this time except the stakes for the world will be much higher. The largest economy in the world is the United States. The US government is currently more than 14 trillion dollars in debt and I project that to go to 20 - 25 trillion by 2020 . Paying the interest on that huge debt in future years will cost as much as what is now spent on national defense (using modern historical interest rates and the cost of defense under normal peace time

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conditions). The United States is now by far the biggest debtor nation in the world . For many years we have been importing hundreds of billions more dollars in goods and services than we are exporting each year. In 2005 through 2008 the trade imbalance averaged well over 700 billion dollars per year! Trillions of US dollars are now in the hands of foreign investors who at any time could dump the dollar causing a devaluation of the currency . If taxes are raised, it will kill the economy and the debt load will get worse and not better. Spending will not be drastically cut because these types of cuts would never get through the

political system. Therefore, massive deficit spending will take place. The monetary system will be inflated so that this

debt can be paid by using a dollar worth only a fraction of what it is today. This means a much weaker dollar in the future and much higher prices for all goods and services imported to the United States (in short it means we should expect hyper-Inflation). The catalyst for a crash can come in any number of ways. One likely scenario is that confidence in the US dollar will falter. When this happens interest rates will have to rise dramatically to try to lure foreign investors to re-service our debt. Higher interest rates will then shut down our economy and less tax money will be raised. The debt will still have to be paid at the higher interest rate so the government will print even more money and deficit spending will increase. The dollar will fall in value against other currencies bringing about an inflation spiral in the U nited States and even more dumping of US dollars for a more stable currency. The fall of the US economy will have a domino effect and bring about a worldwide depression that will further depress the US economy and bring a full fledged inflationary depression worse than the great depression of the 1930's . When this happens most companies will go bankrupt and will be nationalized .

Economic collapse inevitable – military spending, police expenses, student loan debt and more ensure soSeaman, 5-5-12—journalist for “Huffington Post,” host of the DL Show, and founder of the credit card deals web site, Outlaw (David, “The Coming Economic Collapse Is More Real Than You Think”, Business Insider, Inc., May 5, 2012, http://articles.businessinsider.com/2012-05-05/home/31587324_1_debt-huffington-post-alien-species)//JL

"Governments worldwide have borrowed 100 trillion last ten years. Defaults inevitable sometime soon. Means crash, hurting rich and poor," News Corporation CEO and Chairman Rupert Murdoch recently tweeted. "Of course markets stay high with central banks printing huge sums, inflating everything except jobs," he had pointed out in a prior tweet. And Rupert Murdoch isn't the only "elite" "insider" hinting at something unpleasant down the road if governments continue their spending (which they are doing, unabashedly). Hedge funder David Einhorn recently opined over at Huffington Post : "I believe that stocks are depressed because there is a pervasive feeling that something awful is going to happen. What is this enormous tail-risk? It's the intersection of reckless fiscal policy with Jelly Donut monetary policy. There is a fear that our Fed Chairman is an academic willing to take great systemic risks in an experiment to prove out his thesis as to how we should have fought the last Great Depression." And yes, the federal government really has been spending a LOT lately. CBS News last year reported that the Obama administration has effected "the most rapid increase in the debt under any U.S. president," bringing us more than $4 trillion in fresh public debt since he took office. Is there some top-secret war being waged against an alien species on Mars? No, the truth is far more mundane: hapless military excursions in the Middle East, never-ending entitlements, declining revenues (due to declining economic growth), and outlandish police state expenses like a $2 billion data center in the Utah desert to spy on American citizens' online communications -- sadly this list explains much of our debt. Automated data centers aren't exactly the best way to boost [human] employment, by the way. Other debt icebergs, perhaps far more pernicious, lurk just below the surface: student loan debts have reportedly surpassed the $1 trillion mark, and with more than 1 in 2 new graduates unable to find gainful employment, this is a huge class of borrowers that appear less capable than ever of repaying their debts. 2012 should be interesting after the summer malaise subsides, giving way to real fear.

Global Economy Showing Signs of Mass StruggleWiseman, 6-4-12—economics writer from “Associated Press”(Paul, “Global Economy at Risk as US, Europe and Asia Slow”, Bloomberg Business Week- Associated Press, June 4, 2012, http://www.businessweek.com/ap/2012-06/D9V6BG0G0.htm)//JL

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The global economy's foundations are weakening, one by one. Already hobbled by Europe's debt crisis, the world now risks being hurt by slowdowns in its economic powerhouses. The U.S. economy, the world's largest, had a third straight month of feeble job growth in May. High-flying economies in China, India and Brazil are slowing, too. Fears of a global economic downturn have sent investors rushing toward the safest possible investments: U.S. and German government bonds. As a result, the interest rate on the 10-year U.S. Treasury note has hit a record-low 1.46 percent. The rate on the German 10-year bond is even lower: 1.17 percent. "Treasurys are at 1.46 because people are freaking out," says Mark Vitner, senior economist at Wells Fargo Economics. The gravest fear is Europe. The most urgent threat is that in mid-June, Greek voters will reject the terms of a $170 billion bailout -- which called for painful budget cuts -- and abandon the euro. The move could ignite economic and financial chaos as Greek debts shift from denominations in euros to Greek drachmas of uncertain value. Yet the global economy's troubles go well beyond Greece.

US Economy on the brinkWiseman, 6-4-12—economics writer from “Associated Press”(Paul, “Global Economy at Risk as US, Europe and Asia Slow”, Bloomberg Business Week- Associated Press, June 4, 2012, http://www.businessweek.com/ap/2012-06/D9V6BG0G0.htm)//JL

American employers added just 69,000 jobs in May. Since averaging a healthy 252,000 a month from December through February, job growth has slowed to a lackluster average of 96,000 a month. On Friday, after the government issued the May jobs report, the Dow Jones industrial average sank 275 points. It was the Dow's biggest loss since November, and it's now down 0.8 percent for the year. The dismal news suggested that the U.S. economy is enduring a midyear slump just as in 2010 and 2011. Unemployment rose to 8.2 percent from 8.1 percent in May as 642,000 more Americans poured into the work force, and only 422,000 more people got jobs. The jobs report came out a day after the government said the U.S. economy grew at just a 1.9 percent annual rate in the first three months of 2012. That's a meager pace nearly three years after the recession officially ended in June 2009. And it's too slow to generate many jobs or to lower the unemployment rate. In good economic times, the rate would be below 6 percent. Many U.S. companies are finding it more efficient to invest in machinery, not people. "We're not hiring, and we're not replacing" workers who leave, says Joe Glenn, who runs Glenn Metalcraft in Princeton, Minn. His sales jumped 40 percent last year. Yet Glenn's shop has kept employment flat at about 35 workers. He's added more computer-controlled metalworking machines and robots to load the raw material into them. "We're producing as much as we were with a lot less manpower," Glenn says. "And I don't foresee that those jobs are going to come back." Other companies are reluctant to hire until they feel more confident that their customer demand will keep growing. Adding to their uncertainty are Europe's troubles and America's dysfunctional politics. For now, some key sectors of the U.S. economy remain positive. Americans are buying more homes, suggesting that the housing market is on the mend. U.S. builders have increased their spending on home and commercial construction. Auto sales just posted their best May since 2008. Manufacturing activity continues to grow, and so does consumer spending, which drives about 70 percent of the economy. Borrowing rates for consumers and businesses have never been lower. Tame inflation has given the Federal Reserve leeway to keep interest rates low. And gasoline prices have been sinking. The national average is now $3.61, and experts predict further drops in coming weeks. Still, unless Congress and the White House reach an agreement by year's end, federal taxes will jump and deep spending cuts will kick in. Should that happen, the Congressional Budget Office says, the economy would likely fall into another recession. Given the size of the U.S. economy, further weaknesses could worsen the slowdowns in European and Asian countries that depend on sales to American consumers.

Global economic slowdowns in countries dependent on one other indict crisisWiseman, 6-4-12—economics writer from “Associated Press”(Paul, “Global Economy at Risk as US, Europe and Asia Slow”, Bloomberg Business Week- Associated Press, June 4, 2012,

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http://www.businessweek.com/ap/2012-06/D9V6BG0G0.htm)//JL

EUROPE Unemployment in the 17 countries that use the euro is already at 11 percent, the European Union's Eurostat office reported Friday. It's the highest rate since the euro was introduced in 1999. European countries have been struggling with their debt crisis for three years. Three nations -- Greece, Ireland and Portugal -- have already required bailouts because of unsustainable levels of debt. Austerity has been the main prescription for the crisis. But spending cuts and tax hikes are causing economies to shrink across the eurozone. In a blunt warning, European Central Bank chief Mario Draghi last week called the euro currency union "unsustainable" without stronger political and financial ties among eurozone countries. The fear is that Greece will drop the euro, and other weak countries, such as Spain and Portugal, will be forced to follow. Financial chaos could rage across Europe. Spain is facing punishing borrowing costs on bond markets because investors fear it won't be able to pay its debts. Prime Minister Mariano Rajoy declared Saturday that his government will stick with harsh austerity measures as long as necessary. But Spain's unemployment is already 24.4 percent. For those under age 25, unemployment is 51.5 percent. Businesses are being crushed. "This shop has been here for close to 100 years, and I've worked here for 48 years," says Manuel Cabrejas, a salesman at a cushion store in Madrid whose shop windows were covered in signs saying, "Closing down sale, big discounts, everything must go." "For the last two years, we have only just been covering running costs," Cabrejas said. "It's time to let go." -- ASIA AND SOUTH AMERICA Since the global recession ended in 2009, the world economy has been fueled by rising powers in the developing world led by China, India and Brazil. Now, all three are running into trouble. China's manufacturing weakened in May, according to surveys out Friday. Factory output was the weakest in three months. Some economists say China's economic growth will fall to an 8 percent rate in the April-June quarter. That's high by Western standards, but it would be the weakest growth for China in nearly three years. In response, China is rolling out an economic stimulus program. Having rebounded strongly from the recession of 2007-2009, China's economy grew a sizzling 10.4 percent in 2010 and 9.2 percent in 2011. For the past two years, it's helped drive global growth. Australia and other Asian countries have come to rely on Chinese markets for their exports. India is suffering an even sharper slowdown. Its economic growth slowed to a 5.3 percent annual rate in the January-March quarter, the lowest in nine years. Output from India's factories has declined. Its consumers have seen inflation -- which has averaged 9.2 percent a year since the start of 2010 -- devour their wages. "It's beyond anything that we would have imagined," said Samiran Chakraborty, head of research at Standard Chartered in Mumbai. "Real wages are falling ... The consumption slowdown along with the investment slowdown has been a double-whammy for the GDP number." As recently as last year, Indian politicians were claiming their economy could rival China's and surge into double-digit growth, lifting hundreds of millions out of poverty in the process. Instead, India is mired in a deepening crisis of confidence. Asia's third-largest economy is widely regarded as performing below its potential. Indians are losing hope that their country's fractious political system will deliver the policies that might unlock a rebound -- investments in roads, ports and other projects and lighter regulations to attract more foreign investment. One encouraging corner of Asia has been Japan's economy, the world's third largest. It grew at an annual rate of 4.1 percent in the first quarter of 2012 as it recovered from last year's earthquake and tsunami. But factors that could crimp expansion, such as weaker European demand for Japanese exports, have raised fears that Japan's growth will slow or even stall. In Brazil, the economy practically stalled in the first quarter of 2012. It grew at just a 0.2 percent annual rate from the final three months of 2011, the government said Friday. That was below expectations of 0.5 percent growth. Flooding punished farmers. But Brazilian officials, like analysts in China, also pointed to another culprit, one that shows how problems in one part of the world cause problems in another: The ongoing trouble in Europe is taking a toll on exports. -- THE MIDDLE EAST The region's trade is being hurt by the weakening global economy, particularly in Europe. The United Arab Emirates' top economic official said Monday that the Gulf federation's economy will likely grow only about 3 percent this year amid a drop in oil prices. That would represent a slowdown from 4.2 percent growth in 2011. The seven-state UAE federation is the largest Arab economy after Saudi Arabia. The United Arab Emirates said

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it's less optimistic about growth because of the oil exporter's close links to the slowing world economy.

US Economic Downfall Rapidly OccurringCensky, 6-20-12—economic reporter for CNNMoney(Annalyn, “Federal Reserve sees weaker recovery ahead”, CNNMoney, June 20, 2012, http://money.cnn.com/2012/06/20/news/economy/bernanke-press-conference/index.htm?iid=SF_E_Lead)//JL

NEW YORK (CNNMoney) -- The Federal Reserve announced lower expectations for the job market and the broader economy, following its meeting Wednesday. The central bank raised its forecast for the unemployment rate , predicting it will end the year between 8% and its current 8.2%. Just two months ago, the Fed was more optimistic, predicting the jobless rate could fall as low as 7.8%. "Growth in employment has slowed in recent months, and the unemployment rate remains elevated," the Fed said in an official statement. That's not surprising, after the government's latest jobs report showed employers added only 69,000 jobs in May, the weakest hiring in a year. The Fed also sees a broader weakness ahead, predicting the economy will grow between 1.9% and 2.4% this year. When the Fed met back in April, it had forecasted that the economy would grow as much as 2.9%.

Economic disaster is inevitable at the current rateEtzioni, 6-5-12— professor of international relations and director of the Institute for Communitarian Policy Studies at George Washington University(Amitai, “US Economy Heading Straight For The Cliff”, CNN, June 5, 2012, http://www.cnn.com/2012/06/05/opinion/etzioni-economy-deadlines/index.html)//JL

Mohamed El-Erian, the highly regarded CEO of the investment management firm Pimco, wrote recently in an article in The Washington Post headline "The Fiscal Cliff Cometh" that, "In the next few months, possibly within weeks, markets here and abroad will be looking for signals that our politicians understand the severity of the situation and are able and willing to act appropriately. If clear signals are not forthcoming, markets could react early to the looming trouble, compounding the uncertainties that weigh on the U.S. economy." The Economist changed the metaphor but not the point. Under the title "cliff diving," it predicts that Congress is unlikely to pass a "grand bargain" before the end of the year and that "[c]redit-rating agencies may well lose patience" before lawmakers get their act together. This in turn would lead to higher interest rates that might well push the fragile economy into another recession. The main reason Bernanke and other financial and political observers are worried is that by the end of the year, we will face what might be called a triple witching hour. At that time, the Bush tax cuts will expire and the payroll tax holiday will end. Additionally, Congress has committed itself to cutting spending by about $100 billion next year and more than $1 trillion over the next decade. If the Bush tax cuts and payroll tax holiday are extended, and Congress wriggles its way out of its commitment to cut spending, the deficit will swell to the point where alarmists see us going the way of Greece. If the Bush tax cuts and payroll holiday are not extended, and Congress lives up to its commitment to cut spending, the drag on the economy will be severe. The economy is expected to decline by 3.5% to 5% ; that is, it will be pushed back into a serious recession. No wonder some predict "Taxmageddon."

Econ falling nowGibson 6-21-2012 – (Kate, “U.S. stocks end second-worst session of the year” Market Watch WSJ, http://www.marketwatch.com/story/us-stocks-end-second-worst-session-of-the-year-2012-06-21?Link=obinsite) MSDNEW YORK (MarketWatch) -- U.S. stocks fell sharply Thursday, with equities taking their second-hardest hit of

the year after U.S. economic data largely disappointed, increasing worry about a global slowdown. Other economic

reports had euro-area manufacturing slowing and a gauge of Chinese output also contracting. " We're entering summer,

in politics this used to be called the 'silly season,' but I don't think there is a lot of focus on economic fundamentals

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right now. Some of the economic data is a little on the weak side, but to me the most important thing is the U.S.

economy is not very vulnerable to recession right now ," said David Kelly, chief market strategist at J.P. Morgan Funds. The Dow Jones Industrial Average DJIA +0.60% fell 250.82 points, or 2%, to 12,573.57. The S&P 500 SPX +0.71% lost 30.18 points, or 2.2%, to 1,325.51. The Nasdaq Composite COMP +0.95% retreated 71.36 points, or 2.4%, to 2,859.09.

No growth, unemployment high and Econ lowCRUTSINGER 6/21/12 - AP Economics Writer (Martin, “Fed message: Economy unlikely to improve this year.” San Francisco Chronicle, June 21, 2012, http://www.sfgate.com/business/article/Fed-message-Economy-unlikely-to-improve-this-year-3646832.php) MSDWASHINGTON (AP) — The economy we've got today is more or less the economy we've got for the rest of the year. That's the message from the Federal Reserve, which has sharply reduced its forecast for U.S. growth. It sees unemployment barely budging in the rest of 2012. The Fed also says the economy is under threat from Europe's debt crisis and from the prospect of sharp spending cuts and tax increases that will kick in at year's end unless Congress acts. None of which is comforting for companies, job seekers or President Barack Obama , whose re-election hinges in part on whether the economy improves between now and November. Until recently, many economists were hopeful that the economy would strengthen in the second half of the year. But optimism is fading as hiring and growth have slowed for a third straight spring. To prod businesses and consumers to borrow and spend more, the Fed said at the end of a two-day policy meeting Wednesday that it would extend a program designed to drive down long-term interest rates. It also reiterated plans to keep short-term rates at record lows until at least late 2014. And it said it's ready to do more to jolt the economy if necessary. "If we're not seeing a sustained improvement in the labor market, that would require additional action," Bernanke said in his quarterly news conference.

Fed says Unemployment will stay highCRUTSINGER 6/21/12 - AP Economics Writer (Martin, “Fed message: Economy unlikely to improve this year.” San Francisco Chronicle, June 21, 2012, http://www.sfgate.com/business/article/Fed-message-Economy-unlikely-to-improve-this-year-3646832.php) MSDPeople looking for work aren't expected to enjoy much better opportunities in the rest of 2012. The Fed thinks the unemployment rate will fall no lower than 8 percent by year's end. It's now 8.2 percent. American employers have become wary of hiring. They added just 69,000 jobs in May. Since averaging a healthy 252,000 a month from December through February, job growth has slowed to a lackluster 96,000 a month. And Fed officials and other economists don't think hiring will accelerate in coming months.

Investment in Econ will stay lowCRUTSINGER 6/21/12 - AP Economics Writer (Martin, “Fed message: Economy unlikely to improve this year.” San Francisco Chronicle, June 21, 2012, http://www.sfgate.com/business/article/Fed-message-Economy-unlikely-to-improve-this-year-3646832.php) MSDThe Fed's continued plan to keep short-term rates super-low through 2014 isn't happy news for people who depend on investment income. When the Fed keeps the rates it controls at record lows, rates throughout the economy generally stay low, too. That's why money market funds are paying rates barely above zero — well below inflation. Anyone willing to lend money to the U.S. government over the next 10 years stands to receive about 1.6 percent interest. That's just about what the consumer inflation rate has been for the past 12 months. In exchange for buying long-term U.S. Treasurys , these investors will manage merely to run in place.

Econ will not help Obama reelectionCRUTSINGER 6/21/12 - AP Economics Writer (Martin, “Fed message: Economy unlikely to improve this year.” San Francisco Chronicle, June 21, 2012, http://www.sfgate.com/business/article/Fed-message-Economy-unlikely-to-improve-this-year-3646832.php) MSDObama's re-election bid is getting no help from the economy — the core issue in the presidential campaign. The president's political team has been hoping the unemployment rate would drop by Election Day well below the roughly 8 percent level where the Fed thinks it will be at year's end. With job growth slumping, the president must make the tough case that it would improve in a second Obama term. Still, unemployment might not be quite the threat to Obama that it appears. Unemployment rates in seven of the 10 battleground states that will likely determine the election are lower than the national average. That trend could blunt Republican candidate Mitt Romney 's effort to capitalize on weak job growth

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to defeat Obama.

Unemployment highSolis 6/24/12 - writes for poughkeepsiejournal (Marie, “Grads face a tough job market Young people struggle to enter the workforce,” poughkeepsiejournal, June 24, 2012, http://www.poughkeepsiejournal.com/article/20120624/BUSINESS/306240071/millennials-jobs-economy-graduate?odyssey=tab%7Ctopnews%7Ctext%7CPoughkeepsieJournal.com) MSDJob searches have always been a long process, but with unemployment rates, national student debt and competition steadily increasing, there is added pressure for graduates to start making money immediately after moving their tassel to the other side. The odds are not in their favor. The unemployment rate reported this week in the Hudson Valley region rose from 6.9 percent to 7.6 percent in just a year, according to the State Department of Labor. In the seven-county region, there were 86,200 unemployed people in May. These numbers do not bode well, especially after national student loan debt hit $1 trillion in April, according to Consumer Reports.

Housing Killed the EconomyNew York Times 6-23-12 (“Still Depressed, After All These Years,” New York Times, June 23 2012, http://www.nytimes.com/2012/06/24/opinion/sunday/housing-still-depressed-after-all-these-years.html) MSDWith Europe suffering under self-destructive austerity and the United States facing its own prospect of punishing budget cuts, it is easy to forget that the housing bust has been the biggest drag on the economy over the past five years. Even with recent housing market improvements, sales and construction are still at very low levels, while prices are still falling in most areas. Worse, those signs of improvement may not be sustainable. One reason is that millions of foreclosures were delayed from late 2010 until this year, as banks wrangled — and eventually settled — with government officials over foreclosure abuses. With the legal issues now out of the way, foreclosures have resumed, with another five million expected between now and 2015, in addition to more than five million homes already lost, according to Moody’s Analytics. If the economy were strengthening, the price declines from more foreclosures could be limited by an influx of first-time buyers and real-estate investors. But with the economy slowing again, housing could also relapse, with falling prices provoking more defaults, foreclosures and distress sales, and ever-lower prices. That dark scenario was a factor last week when the Federal Reserve downgraded its economic outlook, citing a housing market that “remains depressed.”

Economy bound to recover despite all crisisPlosser, 12—President and Chief Executive Officer, Federal Reserve Bank of Philadelphia (Charles I., “Resilient Communities in a Resilient Economy”, Federal Reserve Bank of Philadelphia, May 9, 2012, http://www.philadelphiafed.org/publications/speeches/plosser/2012/05-09-12_reinventing-older-communities.cfm)//JL

The past few years have been an extraordinary period for all of us. We have endured a financial crisis and the worst global recession of the post-war era. This period has served as a striking reminder of how economic forces and decisions — both large and small — can influence events on Main Streets and neighborhoods across our District and our nation. Yet the economy has now grown for 11 consecutive quarters. To be sure, growth is not robust. But growth in the past year has continued despite significant risks and external and internal headwinds. Natural disasters in Japan, a sovereign debt crisis and banking problems in Europe, turmoil in North Africa and the Middle East that led to a steep increase in oil prices, and our own debt ceiling fiasco, all made growth difficult. But I also remind you that the U.S. economy has a history of being remarkably resilient. These shocks held GDP growth to less than 1percent in the first half of 2011, and many analysts were concerned that the economy was heading toward a double dip. Yet, the economy proved resilient and growth picked up in the second half of the year.

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***ECONOMY ANSWERS

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No War

No escalationApps 10 6/8, *Peter Apps: Political Risk Correspondent and writer for Reuters, “Crisis fuels unrest, crime, but war risk eases,” http://in.reuters.com/article/2010/06/08/idINIndia-49123220100608, AJ

(Reuters) The global financial crisis has made the world less peaceful by fuelling crime and civil unrest, a

worldwide study showed on Tuesday, but the risk of outright armed conflict appears to be falling . Perhaps

as a result of the more cash-strapped times, defence spending as a percentage of gross domestic product was down to its lowest in four years with countries also showing generally better relations with their

neighbours. "In most areas of the world, war risk seems to be declining," he said. "That is very important." A 25 percent reduction in violence would save about $1.7 trillion a year, enough to pay off Greece's debt , fund the United Nations millennium development goals and pay for the European Union to reach its 2020 climate and carbon targets. The struggling euro zone economies of Portugal, Ireland, Italy, Greece and Spain showed a particular rise in unrest risks, while Africa and the Middle East were the only two regions to have become safer since the survey began in 2007. Africa had seen a drastic fall in the number of armed conflicts and an improvement in relations between neighbours, he said, overshadowing the impact of greater crime. Better ratings for the Middle East and North Africa came primarily from improving relations between nations.

Empirically denied---your predictions are wrongNaim 10 January/February 2010, *Moisés Naím is editor in chief of Foreign Policy, “It Didn't Happen,” http://www.foreignpolicy.com/articles/2010/01/04/it_didnt_happen?page=full, AJ

Just a few months ago, the consensus among influential thinkers was that the economic crisis would unleash a wave of geopolitical plagues. Xenophobic outbursts, civil wars, collapsing currencies, protectionism,

international conflicts, and street riots were only some of the dire consequences expected by the experts. It didn't happen. Although the crash did cause severe economic damage and widespread human suffering, and though the world did

change in important ways for the worse -the International Monetary Fund, for example, estimates that the global economy's new and permanent trajectory is a 10 percent lower rate of GDP growth than before the crisis - the scary predictions for the most part failed to materialize . Sadly, the same experts who failed to foresee the economic crisis were also blindsided by the speed of the recovery. More than a year

into the crisis, we now know just how off they were. From telling us about the imminent collapse of the international financial system to prophecies of a 10-year recession, here are six of the most common predictions

about the crisis that have been proven wrong: The international financial system will collapse. It didn't. As Lehman Brothers, Bear Stearns, and Fannie Mae and Freddie Mac crashed, as Citigroup and many other pillars of the financial system teetered on the brink, and as stock markets everywhere entered into free fall, the wise men predicted a total system meltdown. The economy has "fallen off a cliff," warned investment guru Warren Buffett. Fellow financial wizard George Soros agreed, noting the world economy was on "life support," calling the turbulence more severe than during the Great Depression, and comparing the situation to the demise of the Soviet Union. The natural corollary of such doomsday scenarios was the possibility that depositors would lose access to the funds in their bank accounts. From there to visions of martial law imposed to control street protests and the looting of bank offices was just an easy step for thousands of Internet-fueled conspiracy theorists. Even today, the financial system is still frail, banks are still failing, credit is scarce, and risks abound. But the financial system is working, and the perception that it is too unsafe to use or that it can suddenly crash out of existence has largely dissipated. The economic crisis will last for at least two years and maybe even a decade. It didn't. By fall of 2009, the economies of the United States, Europe, and Japan had begun to grow again, and many of the largest developing economies, such as China, India, and Brazil, were growing at an even faster pace . This was surely a far cry from the doom-laden -and widely echoed

-prophecies of economist Nouriel Roubini. In late 2008 he warned that radical governmental actions at best would prevent "what will now be an ugly and nasty two-year recession and financial crisis from turning into a systemic meltdown and a decade-long economic depression." Roubini was far from the only pessimist. "The danger," warned Harvard University's Kenneth Rogoff, another distinguished economist, in the fall of 2008, "is that instead of having a few bad years, we'll have another lost decade." It turned out that radical policy reactions were far more effective than anyone had expected in shortening the life of the recession. The U.S. dollar will crash. It didn't. Instead, the American currency's value increased 20 percent between July 2008 and March 2009 , at the height of the crisis . At first, investors from around the world sought refuge in the U.S. dollar. Then, as the U.S. government bailed out troubled companies and stimulated the economy with aggressive public spending, the U.S. fiscal deficit skyrocketed and anxieties about a dollar devaluation mounted. By the second half of 2009, the U.S. currency had lost value. But devaluation has not turned out to be the catastrophic crash predicted by the pessimists. Rather, as Financial Times columnist Martin Wolf noted, "The dollar's correction is not just natural; it is helpful. It will lower the risk of deflation in the U.S. and facilitate the correction of the global 'imbalances' that helped cause the crisis." Protectionism will surge. It didn't. Trade flows did drop dramatically in late 2008 and early 2009, but they started to grow again in the second half of 2009 as economies recovered. Pascal Lamy, director-general of the World Trade Organization, had warned that the global financial crisis was bound to lead to surges in protectionism as governments sought to blame foreigners for their problems. "That is exactly what happened in the 1930s when [protectionism] was the virus that spread the crisis all over the place," he said in October 2008, echoing a widely held sentiment among trade experts. And it is true that many governments dabbled in protectionism, including not only the U.S. Congress's much-derided "Buy American" provision, but also measures such as increased tariffs or import restrictions imposed in 17 of the G-20 countries. Yet one year

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later, a report from the European Union concluded that "a widespread and systemic escalation of protectionism has been prevented." The protectionist temptation is always there, and a meaningful increase in trade barriers cannot be ruled out. But it has not happened yet . The crisis in rich countries will drag down developing ones. It didn't. As the economies of America and Europe screeched to a halt during the nightmarish

first quarter of 2009, China's economy accelerated, part of a broader trend in which emerging markets fared better through the crisis than the world's most advanced economies. As the rich countries entered a

deep recession and the woes of the U.S. financial market affected banking systems everywhere, the idea that emerging economies could "decouple" from the advanced ones was widely mocked. But decouple the y did. Some emerging economies relied on their domestic markets, others on exports to other growing countries (China, for example, displaced the United States last year as Brazil's top export market). Still others had ample foreign reserves, low exposure to toxic financial assets, or, like Chile, had taken measures in anticipation of an eventual global slowdown. Not all developing countries managed to escape the worst of the crisis -and many, such as Mexico and

Iran, were deeply hurt -but many others managed to avoid the fate of the advanced economies. Violent political turmoil will become more common. It didn't. Electorates did punish governments for the economic hard times. But this was mostly in Europe and mostly peaceful and democratic. "There will be blood," prophesied Harvard historian Niall Ferguson last spring. "A crisis of this magnitude is bound to increase political [conflict] ... It is bound to destabilize some countries. It will cause civil wars to break out that have been dormant. It will topple governments that were moderate and bring in governments that are extreme. These things are

pretty predictable." No, it turns out: They aren't.

No risk of economic collapse or loss of competitivenessKoba 11 9/12, *Mark Koba is a Senior Editor at CNBC.com, “American Economic Decline? Exaggerated,” http://www.cnbc.com/id/44271677/American_Economic_Decline_Exaggerated, AJ

With a recent ratings downgrade, chronic unemployment, a growing budget deficit and a political system that seems determined

to self-destruct, it might appear that the U.S. is losing its grip as the world's top economic power. But analysts say that despite the laundry list of troubles—and predications of an American decline— the

country is far from losing its ranking as the number one economy on the globe . "The U.S. economy is the largest in the world , and the country has one of the highest average incomes in the world," says Matthew Rafferty, professor of economics in the Quinnipiac University School of Business. "There are few countries that are likely to rival the U.S. in the near future." "I don't see U.S. power being eclipsed in the short term or even medium term," says Usha Haley, professor of international business at Massey University in

Auckland, New Zealand. "The U.S. has problems of course, but the demise of the USA is much exaggerated ." What's keeping the U.S. afloat in a sea of economic woes, analysts say, is what's kept it upright in

the past—innovation and the ability to produce. "Silicon Valley is still the world leader in technology , and Wall Street is still the center of the financial world and of capitalism itself," says Charles Sizemore, CFA and editor of the

Sizemore Investment Letter. "And we're manufacturing more today than we did in the 1970s. It's just with less labor." Even in spite of a slowing economy, as shown in the gross domestic product (GDP), the U.S. is still ahead of other countries. Compared to the U.S., most of the major industrialized nations' percentage of GDP is less than half that of the U.S. "The U.S. has a gigantic economy , even with a growth rate of slightly less than 3 percent," says Kamran Dadkhah, associate professor in economics at Northeastern

University. "But that 3 percent increase in GDP is more than the entire GDP of many countries."

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Econ Resilient

Economy is resilientZumbrun & Varghese 5/9 2012, *Joshua Zumbrun and Romy Varghese are writers for Bloomberg Businessweek, “Fed’s Plosser Says U.S. Economy Proving Resilient to Shocks,” http://www.businessweek.com/news/2012-05-09/fed-s-plosser-says-u-dot-s-dot-economy-proving-resilient-to-shocks, AJ

Philadelphia Federal Reserve Bank President Charles Plosser said the U.S. economy has proven “ remarkably resilient ” to shocks that can damage growth, including surging oil prices and natural disasters . “The economy has now grown for 11 consecutive quarters ,” Plosser said today according to remarks

prepared for a speech at the Philadelphia Fed. “Growth is not robust. But growth in the past year has continued despite significant risks and external and internal headwinds .” “The U.S. economy has a history of being remarkably resilient,” said Plosser, who doesn’t have a vote on policy this year. “These shocks held GDP growth to less than 1 percent in the first half of 2011, and many analysts were concerned that the economy was heading toward a double dip. Yet, the economy proved resilient and growth picked up in the second half of the year.”

More evidence---US economy is resilient and improvingSchnurr & Bruce 11 12/15, *Leah Schnurr and **Andy Bruce are writers for Reuters, “U.S. resilient, Europe debt woes touch Asia,” http://www.reuters.com/article/2011/12/15/us-global-economy-wrapup-idUSTRE7BE0X120111215, AJ

(Reuters) - An improvement in the U.S. employment picture last week and a rise in regional factory activity suggested an emerging divide between resiliency in the U.S. economy and faltering growth in Europe and Asia . The better-than-expected U.S. data boosted optimism the economy has momentum heading into the new year and was further evidence it is, so far, weathering the festering sovereign debt crisis in Europe, which is starting to crimp growth in emerging trade partners like China. As well, two factory activity surveys for the U.S. Northeast showed growth accelerated as new orders improved, and manufacturers were more optimistic about the months ahead. That leaves the United States as perhaps the only major Western power currently making a significant contribution to global economic growth . "It seems the U.S. economy is continuing to improve and is finishing the year on a very strong note ," said Alex Hoder, economic analyst at FTN Financial in New York. The U.S. data helped boost Wall Street stocks in early trading. The New York Federal Reserve's "Empire State" general business conditions index rose to a seven-month high at 9.53 from 0.61 the previous month.

The Philadelphia Federal Reserve Bank said its business activity index jumped to 10.3 from 3.6 the previous month, rising to its highest level since April. The survey covers factories in eastern Pennsylvania, southern New Jersey and Delaware, while the Empire State data covers New York state.

Econ resilient despite Europe and housing marketDelisile, 12 (James R, “It’s All About Timing: Spring Forward or Fall Back” The Appraisal Journal V. 80 1 pgs 8-20 2012 http://jrdelisle.com/market_update/finviews/AU_In general, the US economy has demonstrated remarkable resiliency, especially in tight of the headwinds spilling over from the European debt crisis, the housing market hangover, and political wrangling in Washington. Despite these and other negative forces, gross domestic product (GDP) growth has been fairly solid, although the growth is tempered when compared to other post-

recessionary cycles. Revised estimates for real GDP growth in the 2011 fourth quarter revealed a 2.8% increase on a seasonally adjusted basis after a disappointing 1.8% increase in the previous quarter. For the year as a whole, GDP grew at a rather disappointing rate, which was about half of the 3% growth in 2010 and far below the level necessary to reflect a sustainable recovery.

Economy is resilient the financial crisis made business more sustainableBowers, 12 - manager of the Franklin US Opportunities fund (Grant, “Sustainable expansion in the US economy” 26 March 2012 http://www.ftadviser.com/2012/03/26/investments/north-america/sustainable-expansion-in-the-us-economy-4Nh7fLE0XaBedNBGUIzsuL/article.html) US economic data continues to be more resilient and improved than many people expected , in

spite of the headlines The negativity and fear that characterised markets in 2011 led to almost all asset classes moving in the same direction in reaction to macroeconomic events. Although some

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investors viewed this situation as an unfavourable environment for investing in US equities, we saw it as a buying opportunity for

high-quality growth companies that were being sold along with the overall market. There will be continued periods of volatility in the US equity market as we move through 2012, but in general we are constructive on US equities for a variety of reasons. The US economy has been doing surprisingly well, in our view, and

this has been drowned out by macroeconomic headlines. When looking at the details, US economic data continues to be more resilient and improved than many people expected. Whether it is gross domestic product growth being revised upward, unemployment falling to 8.3 percent in January according to the US Bureau of Labor Statistics, or consumer spending on the rise, we view the economy as transitioning to a sustainable expansion in 2012. The housing market is close to a bottom and may start to show some modest improvement over the next few years. This market is very important to overall economic growth in the US as the turnover of homes is tied to numerous areas of the economy from construction employment to durable goods sales. Stabilisation in housing prices may allow potential buyers and sellers to feel more comfortable when entering the market. The deceleration in energy prices in 2011 from 2010 levels has helped support consumer spending, according to the Bureau of Labor Statistics' consumer price index report in January. The combination of moderating energy prices

and historically low interest rates has helped US consumers to repair their balance sheets and raise their rates of saving. US consumers are in better financial condition than they were in 2007, and there is an underlying sense of confidence developing among these consumers as well as investors, which is helping to drive performance in the US equity market. Many US companies also have very strong balance sheets - stronger

than in 2007. We believe many companies are also well positioned for growth even in a difficult growth environment, as they emerged from the global financial crisis leaner and more competitive. This is being reflected in improved profit margins amid modest growth in revenues. We are also seeing strong

earnings power and free cash-flow generation. Overall, cash on the balance sheets of US corporations is at an all-time high, which may start to translate into increased merger and acquisition activity. Lastly, valuations of US stocks are historically reasonable and we believe current valuations reflect much of the headline global risk but very little of the potential improvement. Without minimising the global economic risks we are currently facing, there is potential for a healthy market if the downside risks to the global economy turn out to be not as bad as expected. In summation, the US economy is doing surprisingly well in our view. We remain focused on investing in high-quality growth companies we believe offer sustainable long-term growth prospects.

US economy resilientBeason, 12— member of the Alabama State Senate (Scott, “Restoring Confidence To Revive the Economy and Create Jobs”, scottbeason.com, 2/17/12, http://scottbeason.com/2012/02/17/restoring-confidence-to-revive-the-economy-and-create-jobs/)//JL

As President Obama continues his half-hearted attempts to revive this nation’s tepid economic recovery, many middle-class families continue to struggle to provide for their families. Instead of spending taxpayer money on failed stimulus plans, President Obama should reconsider the harmful economic and regulatory policies his administration has pursued. These policies have so dampened business confidence and created so much uncertainty that the economy has become a hostile environment for growth-inducing, job-creating entrepreneurial activities. But the American economy is resilient and with the right leadership can be put back on track. President Obama’s stimulus plan and other efforts to boost the economy through federal spending have failed. More deficit spending will not improve the economy because more spending means more borrowing, which means there is less money in the private sector. In fact, the out-of-control spending has served only one purpose–to create more uncertainty and less confidence in the market. Rebuilding both consumer and investor confidence is a key ingredient of a strong economic recovery. Aside from the obvious issue of cutting deficit spending, how do we increase confidence? First, we have to realize that our deficits are not caused by lower tax revenue and that raising taxes is not the answer to reducing those deficits. In fact, the opposite is true. Lowering taxes across the board and eliminating double taxation like the capital gains tax and the death tax would go a long way toward creating a pro-growth environment. Next, we must repeal Obamacare. This unprecedented overhaul of our nation’s health care system has frozen hiring across the country as businesses wait to see what the law’s

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new regulations will do and what effect they will have. Finally, we have to repeal harmful regulatory policies. From the unconstitutional provisions of the Dodd-Frank act to the EPA’s attempt to regulate carbon dioxide under the Clean Air Act, economically harmful regulations stifle investment and growth.History has shown us the answer to pulling ourselves out of the economic doldrums: lowering taxes and minimizing regulatory impediments to entrepreneurs and economic growth. The strength of our recovery is directly correlated to the amount of freedom and efficiency we allow the market to have. What we need is not for the government to do more to create jobs, but for the government to get out of the way of private enterprise.

Econ is resilient to shocks

Bloomberg 5-9-12[“Fed’s Plosser Says U.S. Economy Proving Resilient To Shocks” By Joshua Zumbrun and Romy Varghese - May 9, 2012 9:00 AM PT http://www.bloomberg.com/news/2012-05-09/fed-s-plosser-says-u-s-economy-proving-resilient-to-shocks.html]

Philadelphia Federal Reserve Bank President Charles Plosser said the U.S. economy has proven “remarkably resilient” to shocks that can damage growth, including surging oil prices and natural disasters. “The economy has now grown for 11 consecutive quarters,” Plosser said today according to remarks prepared for a speech at the Philadelphia Fed. “Growth is not robust. But growth in the past year has continued despite significant risks and external and internal headwinds.” Plosser, who did not discuss his economic outlook or the future for monetary policy, cited shocks to the economy last year, including the tsunami in Japan that disrupted global supply chains, Europe’s credit crisis that has damaged the continent’s banking system and political unrest in the Middle East and North Africa. “The U.S. economy has a history of being remarkably resilient,” said Plosser, who doesn’t have a vote on policy this year. “These shocks held GDP growth to less than 1 percent in the first half of 2011, and many analysts were concerned that the economy was heading toward a double dip. Yet, the economy proved resilient and growth picked up in the second half of the year.” Plosser spoke at a conference at the Philadelphia Fed titled, “Reinventing Older Communities: Building Resilient Cities.”

Economy is resilient-rapid factory growth

Fox News 5-1-12[“US factory growth shows economy more resilient” Published May 01, 2012; Associated Press;http://www.foxnews.com/us/2012/05/01/us-manufacturing-grows-at-fastest-pace-since-june/]

WASHINGTON – U.S. manufacturing grew last month at the fastest pace in 10 months, suggesting that the economy is healthier than recent data had indicated. New orders, production and a measure of hiring all rose. The April survey from the Institute for Supply Management was a hopeful sign ahead of Friday's monthly jobs report and helped the Dow Jones industrial average end the day at its highest level in more than four years. The trade group of purchasing managers said Tuesday that its index of manufacturing activity reached 54.8 in April, the highest level since June. Readings above 50 indicate expansion. The sharp increase surprised analysts, who had predicted a decline after several regional reports showed manufacturing growth weakened last month. The gain led investors to shift money out of bonds and into stocks. The Dow Jones industrial added 66 points to 13,279, its best close since Dec. 28, 2007. Broader indexes also surged. The ISM manufacturing index is closely watched in part because it's the first major economic report for each month. April's big gain followed a series of weaker reports in recent weeks that showed hiring slowed, applications for unemployment benefits rose and factory output dropped. "This survey will ease concerns that the softer tone of the incoming news in recent months marked the start of a renewed slowdown in growth," Paul Dales, an economist at Capital Economics, said in a note to clients. "We think the latest recovery is made of sterner stuff, although we doubt it will set the world alight." The latest reading is well above the recession low of 33.1 and above the long-run average of 52.8. But it's still below the pre-recession high of 61.4. Dan Meckstroth, chief economist at the Manufacturers' Alliance, notes that in the past 20 years, the index has been at or above 54.8 only one-third of the time. A measure of employment in the ISM's survey rose

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to a 10-month high. That indicates that factories are hiring at a solid pace. A gauge of new orders jumped to its highest level in a year. That could signal faster production in the coming months. Export orders also rose, offsetting worries that weaker economies in Europe and China could drag on U.S. exports. A separate report showed China's factory sector is still growing. A survey of purchasing managers in China found that the manufacturing sector expanded for the fifth straight month in April. Rich Bergmann, managing director of Accenture's global manufacturing practice, said large manufacturers are driving U.S. growth. They are pushing their suppliers to boost output, which has led many to hire more workers. Large companies are also helping smaller companies in their supply chain, Bergmann said, by guaranteeing a certain level of orders or helping smaller companies obtain financing to expand. "There's just a tremendous trickle-down effect in these industries," Bergmann said. "That's a very positive trend that we think will continue." Boeing reported a 58 percent jump in profit in the January-March quarter. Orders for its more-fuel-efficient 737 jetliner soared. The company added 11,000 employees last year. The global airplane manufacturer's growth has benefited companies like Charlotte, N.C.-based Goodrich Corp., which makes aircraft components. Its sales to large aircraft makers jumped 27 percent in the first quarter. Caterpillar, the world's largest manufacturer of construction and mining equipment, last week reported that its profit grew 29 percent in the January-March quarter. The company said it is boosting its manufacturing capacity to handle a record backlog of orders. Small companies are also reporting big gains. Boston-based Spreadshirt.com, which prints custom T-shirts, other clothing and accessories, plans to start production at a new plant in Las Vegas in July. The company's revenue doubled in the first three months of this year. The company is about to sign a five-year lease for the Las Vegas factory and has purchased about $1 million in new printing equipment. The company plans to hire nearly 100 people by the end of this year, on top of its current work force of 150. "I'm pretty confident that we can sustain this growth," said Mark Venezia, vice president for global sales and marketing. "We're opening up a new facility banking on that." Factories account for only about 9 percent of total payrolls but added 13 percent of the new jobs last year. Manufacturers have added 120,000 jobs in the past three months, about one-fifth of all net gains. Economists predict manufacturers added 20,000 jobs in April, according to a survey by FactSet. Still, manufacturing represents only about 12 percent of economic activity. Other areas continue to struggle. A separate report showed U.S. builders barely increased their spending on construction projects in March after two straight months of declines. A pickup in single-family home construction and commercial projects offset a steep drop in state and local government building. The 0.1 percent gain left construction spending at a seasonally adjusted annual rate of $808.1 billion, the Commerce Department said. That's roughly half the level of what economists consider to be healthy.

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AT: Solves Hegemony

Economic growth is not key to U.S mlitary Hegemony Dymski 02- [Post-Hegemonic U.S. Economic Hegemony: Minskian and Kaleckian Dynamics in the Neoliberal Era Gary A. Dymski*;http://economics.ucr.edu/papers/papers02/02-13.pdf]

Hegemony here means a nation’s ability to determine the terms and conditions on which cross-border exchanges of goods, services, and financial assets are made. A global hegemon can dictate these terms and conditions globally. A nation that achieves economic hegemony over a given sphere must stand ready to stabilize financial flows in that sphere when these become disorganized. A hegemon is not responsible for maintaining prosperity in its sphere of influence; but to continue as hegemon it must at least prevent other nations from replacing it—and this depends largely on military power. Until 1971, the U.S. enjoyed global economic hegemony because it underwrote the Bretton Woods system of fixed exchange rates. It was hegemonic in the sense defined by Kindleberger (1973, 1974)—it underwrote the system of fixed exchange rates, and operated as a lender of last resort within that system. After 1971, the U.S. has been a global economic hegemon in the sense defined above, though not in Kindleberger’s sense: it has been a posthegemonic hegemon. This hegemony has rested on the U.S. economy’s importance in global trade, the U.S. dollar’s role as a reserve currency and unit of global exchange, and the dominance of U.S. markets and institutions in global finance. This recent period, an era of great instability and recurrent crashes, has seen a step-by-step global deregulation of financial markets and a relaxation of controls on cross-border capital movements. In this period, global growth has been slower and more unstable; but U.S. military hegemony has, if anything, become stronger. With fewer restrictions on cross-border capital movements, a slower pace of global economic growth, and continued U.S. military power, the U.S. has increasingly been a “safe harbor” magnet for globally mobile wealth. These changes in the character of U.S. global economic hegemony are root cause of changes in the character and timing of U.S. cyclical fluctuations. 2.

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Alt Cause – Europe Economy

Alt cause---EuropeKoenig 11 *Don Koenig is a writer on Bible Prophecy and has been writing on economics since 2000, “The coming economic crash caused by world debt,” http://www.thepropheticyears.com/reasons/World%20debt.HTM, AJ

Debt is at a point in Europe where there will either be a full fledged debt write down that will bring a full fledged depression or where governments just prints more money for bailouts of the banks causing hyperinflation. Which one happens is hard to say, it may be out of our control and it makes little

difference anyway. Either path will bring the worst living standards in modern times to most of the developed world.

Euro collapse will spark a global financial crisis---plan doesn’t affect itElliot et al 6/16 2012, *Larry Elliott, *Helena Smith, and *Julia Kollewe are writers for The Guardian, “World Bank warns that euro collapse could spark global crisis,” http://www.guardian.co.uk/business/2012/jun/16/world-bank-euro-collapse-crisis#start-of-comments, AJ

The outgoing head of the World Bank, Robert Zoellick, will warn the G20 summit that Europe runs the risk of sparking a Lehman-style global crisis that will have dire consequences for developing nations. The election of an anti-austerity government would spark the most serious crisis for the euro so far, following the apparent failure of a Spanish bank bailout last week. German chancellor Angela Merkel yesterday ruled out renegotiating Greece's bailout, saying the country must stick to its deals with international lenders. Unofficial polls suggest the conservative New Democracy party is ahead of the anti-austerity Syriza by four percentage points — though as much as 15% of the electorate remains undecided. As all eyes focus on Athens, Zoellick said: "Europe may be able to muddle through but the risk is rising." He added: "There could be a Lehmans moment if things are not properly handled." The bankruptcy of Lehman Brothers in September 2008 proved to be the trigger for the deepest slump in the global economy since the 1930s, and Zoellick said developing countries needed to "prepare for the uncertainty coming out of the eurozone and the wider financial markets". He added: "It will be better if they can avoid piling up short-term debts that can come due in volatile periods and look to the fundamentals of future growth – infrastructure and human capital." Zoellick, whose five years at the bank has coincided with the financial and economic crisis,

retires at the end of the month. Fearing that Europe's sovereign debt problems could have spillover effects , he said the bank had been increasing its lending to support Bulgaria's banking system and acting to prevent a credit crunch in south-east Europe. Steps were also being taken to protect countries in north Africa that were vulnerable to Europe's debt crisis and trade finance facilities were being strengthened for francophone west Africa. "Uncertainty in markets is now starting to increase costs for developing countries," he said. "The ripple effects are making everybody's life harder." Zoellick said his organisation was concentrating on helping developing countries to prepare projects that could go ahead with the right investment and to protect the most vulnerable if there was a second leg to the global downturn. "Given the volatility in the world economy, there is a big emphasis on helping developing countries to develop social safety nets that don't bust the budget," he said. Countries such as Mexico and Brazil, he added, had shown they could do this using low-cost, effective targeting, information technology and the right incentives. As the former US trade representative, Zoellick said he was concerned that the prolonged crisis was starting to lead to pressures for protectionism and economic nationalism . "This is not just an economic crisis but a political threat as well," he said. "We must make sure we keep markets open and beware against creeping protectionism. We are starting to see some increase in the use of trade restrictions."

Prospects for a depression are increasing---Euro crisisStrauss 6/19 2012, *Steven Strauss was founding Managing Director of the Center for Economic Transformation at the New York City Economic Development Corporation (NYCEDC). He is an Advanced Leadership Fellow at Harvard University for 2012. He has a Ph.D. in Management from Yale University and over 20 years' private sector work experience, “Euro Crisis: If We're Heading Towards a 1930s-Style Depression -- Why Is the Stock Market So Bullish?” http://www.huffingtonpost.com/steven-strauss/euro-crisis-stock-market_b_1608305.html, AJ

We seem to be heading towards an economic downturn equivalent to the Great Depression of the 1930s. This isn't a secret. The synthesis below is derived from: Lawrence Summers, Nouriel Roubini, Simon Johnson,

Niall Ferguson, Paul Krugman to name just a few. This crisis is not happening quickly. It's more of a slow-motion train wreck -- Greece's crisis started in 2009. But that leaves a puzzle -- why is the American stock market not reacting to obvious warning signs? Greece and Spain already have unemployment rates exceeding 20 percent. If that isn't a depression -- what is? Greece is in very deep trouble . Spain (the Euro's fourth largest

economy) just needed a $125 billion bank bailout. The weaker economies (Portugal, Ireland, Italy, Greece, Spain) face severe credit crunches as local banks lose deposits (withdrawn because of credit concerns and fear of forced

devaluations following a Euro exit). Serious discussion is already taking place about the demise of the Euro, or even worse the break-up of the European common market -- in which case unemployment rates

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across Europe will exceed 20 percent . National incomes will decline sharply, resulting in large- scale corporate insolvencies, with the crisis spilling over into the U.S. and Asia. Europe's economies provide little reason for optimism.

Weak European economy hampers U.S growth

Beutler 6-19-12--[Brian Beutler is TPM's senior congressional reporter. Since 2009, he's led coverage of health care reform, Wall Street reform, taxes, the GOP budget, the government shutdown fight and the debt limit fight.;“What Euro Crisis Outcomes Mean For The American Economy” by BRIAN BEUTLER JUNE 19, 2012, 8:13 AM 2605;http://tpmdc.talkingpointsmemo.com/2012/06/europe-economic-crisis-greece-germany.php]

The political and economic dynamics threatening the European monetary union are complicated enough on their own. But there’s tremendous uncertainty about which choices European voters and leaders will make, and each hypothetical outcome there prefigures even more difficult-to-forecast consequences in the United States. Still, economists and analysts have examined a range of scenarios — from ongoing recession in Europe, to a disorderly dissolution of the Euro and ensuing depression. And even the least bad of likely outcomes across the Atlantic will continue to put downward pressure on already-sluggish U.S. economic growth. Late last year, Reuters looked at the consequences for the U.S. of a mild European recession, a protracted Euro recession, and a full-on meltdown. The upshot is that the American recovery can weather the Euro crisis even if leaders there insist on muddling through instead of taking the sorts of politically difficult actions experts say would be required to fix the problems there. That was November 2011. Since then the U.S. economy has cooled down. But the same basic threat assessment holds up today, according to Dean Baker, co-founder of the Center for Economic and Policy Research. “[E]xports to the region are only about 2 percent of U.S. GDP,” he said. “If exports are down by 10 percent because of the crisis (a huge falloff), this only knocks around 0.2-0.3 [percentage points] from U.S. GDP.” Mitigating that loss are some hidden, salutary side effects. Energy prices have fallen. And the crisis there has actually pushed exceptionally low U.S. interest rates down a little further, providing what amounts to the sort of monetary stimulus the Federal Reserve engaged in at earlier points in the U.S. downturn. But it’s a real, existing risk, and not just a situation President Obama and other incumbents are using to explain current economic woes. “The problems in Europe are serious,” admitted House Speaker John Boehner, one of Obama’s top political adversaries. “Their recession is affecting our economic growth today.” It’s the full collapse we have to fear. Analysts see the consequences of a Euro cataclysm playing out in different ways, but all of them are dire, particularly given the existing problems in the U.S. “Such turbulence in Europe, with the massive wealth destruction, bankruptcies and a collapse in confidence in European integration and cooperation, would most likely result in a deep depression in both the exiting and remaining euro area countries, as well as in the world economy,” the Organisation for Economic Co-operation and Development said last year. Big U.S. financial institutions have taken steps to protect themselves from direct exposure to a European financial collapse. But the falloff in demand, and a worldwide financial flight-to-safety, would likely lead to a significant decline in U.S. GDP, which would be exacerbated if European countries and the United States didn’t quickly abandon the austerity programs baked into their current budgets. “The spillover effects, the chain of consequences are very difficult to assess,” said International Monetary Fund President Christine Lagarde last month. “We can certainly assume that it would be quite messy.” Outgoing World Bank president Robert Zoellick warned this weekend that the risk of full collapse is rising and scenario like the 2008 collapse of Lehman Bros, which triggered a worldwide financial crisis, could happen if “proper” steps aren’t taken to avoid it. But the Lehman collapse caused a massive economic contraction in the U.S. and a “Lehman-like” moment in Europe isn’t likely to send us back into a crisis that deep, Baker says. “All bets are off if we get a full-fledged collapse of the euro. That would lead to a much sharper falloff in Eurozone GDP. It would also likely to lead to a world-wide flight to safety which could impair the ability of even U.S. companies to get capital. In this

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case, the effect would certainly be negative, although not as severe as the crisis following the collapse of Lehman,” Baker said.

Euro Crisis Affects the Global EconomyCBS NEWS 6-24-12 (“The euro crisis: Everybody’s problem, http://www.cbsnews.com/2102-3445_162-57459463.html?tag=contentMain;contentBody)Europe is in the midst of its greatest financial crisis since the Second World War, and nowhere is that more apparent than in Greece. When Achilleas Mourtzouchos joined the family business, the popular Greek clothing chain Raxevsky, he had big plans for the brand. Now, he's just trying to stay afloat. He told Ward that three years ago, before the crisis hit, his warehouse would have been a lot more hectic: "Yes, there were a lot more clothes coming in, and there were a lot more clothes coming out!" But when the crisis hit, credit lines disappeared and customers - hit hard by austerity measures - cut back on their spending. Plans for international expansion were shelved. Nobody wanted to touch anything to do with Greece. "It's actually pretty remarkable to see how they backed off when the crisis started," said Mourtzouchos, "and even though everything was just smoothly and forward, suddenly they say, 'OK, we have to think about it. Things are not looking well for Greece, are you going be there next year? Next week? Next, probably tomorrow?'" The outlook for Greece is not good. The country has been in recession for five straight years. Twenty-two percent of Greeks are out of work. Thousands are out on the streets. So how did this idyllic vacation destination - tourism is the leading industry - spark a crisis that now threatens the world's largest economy? Economists call it contagion. When one country, like Greece, cannot pay its bills, it pushes up the cost of borrowing in another country - Spain, for example, which then forces Spain to ask for a loan so that it can keeps its banks liquid. And that money has to come from richer, northern European countries, like Germany, putting a strain on those economies as well, and eventually threatening the economic health of all of Europe. "By definition, each one of these events is everybody's problem," said John Kornblum, the former American Ambassador to Germany. "There may have been a time a year or so ago when they may have thought it was Spain's problem or Ireland's problem, but since then everybody's understood that this is everybody's problem." But finding a solution won't be easy. Seventeen European countries use a single currency, the euro, which is not backed by a government or central bank; and each of those countries runs its economy independently. It is increasingly clear that the system is not working. Many believe that for the euro to succeed, countries would have to give up some of their autonomy, just as states do to the U.S. federal government. "The real question is, is this crisis deep enough and frightening enough to convince populations and governments to really give up sovereignty and to become federal?" asked Kornblum. "Or is it going to become just another episode, and they'll go back to being nations in their own way? I personally am skeptical that this is going to be deep enough to do it, but, you know, it's a nice hope, and I hope it happens." For now, that's all it is - a hope. Europe has yet to announce any decisive plans for how it will move forward. And the longer it waits to do so, the tougher it gets for businesses like Raxevsky to stay afloat. Up to this point, Mourtzouchos has managed to keep most of his people. Every one of the 280-strong staff agreed to a 12 percent pay decrease. But nine of the chain's 69 stores have closed down. "Do you think you'll have to close more?" Ward asked. "We have made plans for the worst-case scenario, yes," he replied. Politicians and businesses across the globe are doing the same. But with a question mark hanging over the future of the eurozone, nobody knows how bad a worse-case scenario could get.

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Alt Cause – Greece

Alternative causes to economic decline, Euro crisis and GreeceSamuelson, 10 –staff writer (Robert J. “Why Greece Matters” Washington Post, May 10, 2010 http://www.washingtonpost.com/wp-dyn/content/article/2010/05/09/AR2010050902443.htmlWhat we're seeing in Greece is the death spiral of the welfare state. This isn't Greece's problem alone, and that's why its crisis has rattled global stock markets and threatens economic recovery. Virtually every advanced nation, including the United States, faces the same prospect. Aging populations have been promised huge health and retirement benefits, which countries haven't fully covered with taxes. The reckoning has arrived in Greece, but it awaits most wealthy societies. Americans dislike the term "welfare state" and substitute the bland word "entitlements." Vocabulary doesn't alter the

reality. Countries cannot overspend and overborrow forever. By delaying hard decisions about spending and taxes, governments maneuver themselves into a cul-de-sac. To be sure, Greece's plight is usually described as a European crisis -- especially for the euro, the common money used by 16 countries -- and this is true. But only to a point. Euro coins and notes were introduced in 2002. The currency clearly hasn't lived up to its promises. It was supposed to lubricate faster economic growth by eliminating the cost and confusion of constantly converting between national currencies. More important, it would promote political unity. With a common currency, people would feel "European." Their identities as Germans, Italians and Spaniards would gradually blend into a continental identity. None of this has happened. Economic growth in the countries using the currency averaged 2.1 percent annually from 1992 to 2001 and 1.7 percent from 2002 to 2008. Multiple currencies were never a big obstacle to growth; high taxes, pervasive

regulations and generous subsidies were. As for political unity, the euro is now dividing Europeans. The Greeks are rioting. The countries making $145 billion in loans to Greece -- particularly Germany -- resent the costs of the rescue. A single currency could no more subsume national identities than drinking co*ke could make people American. If other euro countries (Portugal, Spain, Italy) suffer Greece's fate -- lose market confidence and can't borrow at plausible rates -- there would be a wider crisis. But the central cause is not the euro, even if it has meant Greece can't depreciate its own currency to ease the economic pain. Budget deficits and debt are the real problems; they stem from all the welfare benefits (unemploymentinsurance, old-age assistance, health

insurance) provided by modern governments. Countries everywhere already have high budget deficits, aggravated by the recession. Greece is exceptional only bydegree. In 2009, its budget deficit was 13.6 percent of its gross domestic product (a measure of its economy); its debt, the accumulation of past deficits, was 115 percent of GDP. Spain's deficit was 11.2 percent of GDP, its debt 53.2 percent; Portugal's figures were 9.4 percent and 76.8 percent. Comparable figures for the United States -- calculated slightly differently -- were 9.9 percent and 53 percent. There are no hard rules as to what's excessive, but financial markets -- the banks and investors that buy government bonds-- are obviously worried. Aging populations make the outlook worse. In Greece, the 65-and-over population is projected to go from 18 percent of the total in 2005 to 25 percent in 2030. For Spain, the increase is from 17 percent to 25 percent. The welfare state's death spiral is this: Almost anything governments might do with their budgets threatens to make matters worse by slowing the economy or triggering a recession. By allowing deficits to balloon, they risk a financial crisis as investors one day -- no one knows when -- doubt governments' ability to service their debts and, as with Greece, refuse to lend except at exorbitant rates. Cutting welfare benefits or raising taxes all would, at least temporarily, weaken the economy. Perversely, that would make paying the remaining benefits harder. Greece illustrates the bind. To gain loans from other European countries and the International Monetary Fund, it embraced budget austerity. Average pension benefits will be cut 11 percent; wages for government workers will be cut 14 percent; the basic rate for the value-added tax will rise from 21 percent to 23 percent. These measures will plunge Greece into a deep recession. In 2009, unemployment was about 9

percent; some economists expect it to peak near 19 percent. If only a few countries faced these problems, the solution would be easy. Unlucky countries would trim budgets and resume growth by

exporting to healthier nations. But developed countries represent about half the world economy; most have overcommitted welfare states. They might defuse the dangers by gradually trimming future benefits in a way that reassures financial markets. In practice,

they haven't done that; indeed, President Obama's health program expands benefits. What happens if all these countries are thrust into Greece's situation? One answer -- another worldwide economic collapse -- explains why dawdling is so risky.

Euro crisis creates a drag on the world Economy preventing sustained growthSamuelson, 11 –staff writer (Robert J “World Economy Adrift: It’s Time for U.S., Others to Look at a Different Plan for Economic Recovery” Washington Post, November 5, 2011 http://www.washingtonpost.com/opinions/the-world-economy-is-adrift/2011/11/03/gIQAXpe4iM_story.html)

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WASHINGTON -- There was something fitting about Greek Prime Minister George Papandreou's reckless call for a referendum on the latest rescue package for his country. World leaders gathering in Cannes for a G-20 summit face stark realities. The global economy is faltering, and no country has assumed leadership in organizing recovery. There is a loss of control, a vacuum of power. Papandreou's disruptive decision - now apparently withdrawn - symbolizes this larger erosion of collective purpose. The world economy is adrift. We are moving from Globalization 1.0 to Globalization 2.0. In Globalization 1.0, countries benefited from expanded trade and worldwide technology transfers. From 1980 to 2010, global trade volumes grew fourfold. Countless millions were lifted from poverty; new middleclassesarose in Asia and Latin America. In Globalization 2.0, the economic interconnections among countries are breeding instability and nationalistic rivalries. Time was when the United States automatically assumed the leadership role. Beginning in 1948, the Marshall Plan provided Europe with the equivalent of $850 billion - needed desperately to buy food, raw materials and machinery - to recover from World War II. In the 1980s, the United States took the lead in defusing the Latin American debt crisis; in the late 1990s, it did the same with the Asian financial crisis. The architecture of the postwar global economy was largely a product of American leadership. But under President Barack Obama - possibly no one else could have done differently - America's capacity and desire to lead have flagged. The 2007-09 financial crisis, having started in the United States, discredited American ideas and competence. The sluggish economy, heavy government debts and constant partisan haggling sap the nation's financial power and political will to aid others. The United States hasn't much helped Europe with itsdebt problems. Europe represents a fifth of world economic output, about equal with the United States. It might have filled the leadership void; of course, it hasn't. Instead, Europe has aggravated global instability, struggling with its own anemic growth and indebtedness. Even before Papandreou temporarily torpedoed the latest debt package - intended to aid Greece and shield Spain and Italy from default - there were doubts whether it was large enough. To protect Italy and Spain, Europe's rescue fund (the European Financial Stability Facility, or EFSF) needs 2.5 trillion euros to 3 trillion euros (from $3.5 trillion to $4.2 trillion), Willem Buiter, Citigroup's chief economist, wrote recently in the Financial Times. The higher figure is nearly seven times the EFSF's existing size. Where will all that money come from? Probably not Europe. Even Germany isn't wealthy enough to assume all that extra debt. China is one obvious answer, along with other Asian nations and oil producers with hugeforeign exchange reserves. (At last count, reserves totaled $3.2 trillion for China, $516 billion for Russia and $484 billion for Saudi Arabia.) They have a clear interest in helping Europe avoid a full-fledged debt andbankingcrisis. Europe is a major market for their products. But China has resisted a larger role, which many Europeans also oppose. "It's shocking," Martine Aubry, head of France's socialist party, said recently of one modest effort to raise Chinese money fordebt relief. "The Europeans, by turning to the Chinese, are showing their weakness. How will Europe be able to ask China to stop undervaluing its currency?" Others ask: If China is Europe's lender, how can Europe criticize China's human rights policies? Good questions. A world of increasingly interconnected economies requires greater cooperation. But everywhere there is a growing fragmentation of power and purpose. Of course, no one country or group of countries can engineer a global recovery; economics is not yet (and may never be) such a precise and potent discipline. But leaders can emphasize policies that encourage recovery and reject policies that retard it. Demonstrated leadership instills confidence that accelerates economic expansion. The Marshall Plan built confidence. After Lehman Brothers' failure in 2008, cooperation seemed to flourish. Countries saw it in their mutual interest to adopt "stimulus" packages of spending increases and tax cuts to prevent a deeper economic collapse. Since then, the tide has reversed. Weak economies have made countries more protective. In 2012, the U.S. economy will grow only 1.8 percent and the euro area (the 17 countries using the euro) 0.3 percent, forecasts the Organization for Economic Cooperation and Development. High joblessness tempts unpopular leaders to make risky gestures that, regardless of international consequences, aim to improve their domestic standing. See Papandreou, above. Differing political systems and values frustrate cooperation. See China, above. The danger is a slow slide into currency wars and protectionism. The United States and Europe are retrenching from too much debt. China and many developing countries pursue export-led growth. This seems a formula for rising strife and economic stagnation

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Alt Cause – Housing

Housing Market and Job decline indicate slow EconSchmit 6-20-12 – (Julie, “Tighter supplies holding back home sales,” USA Today, June 20, 2012, http://www.usatoday.com/money/economy/housing/story/2012-06-21/existing-home-sales-may/55734044/1) MSDMay's decline in the pace of existing home sales was not surprising, given the recent slowdown in job creation, and serves as a reminder that housing demand remains "mired in a tug of war" between sluggish job and credit growth and improved housing affordability, says Alistair Bentley, an economist with TD Economics.

Housing is key to the economy allows consumer spending and creates jobsMcCoy, 12 - Director of the Benecki Center for Real Estate Studies and Lecturer at Kelley MBA & JDdegreesfrom Indiana University (Douglas M. “Housing Market Outlook for 2012” Indiana Business Review v. 86 .4 pgs. 8-9 http://www.ibrc.indiana.edu/ibr/2011/outlook/housing.html)Yun points out that the housing market is being excessively constrained because "a combination of weak consumer confidence and continuing tight lending criteria held back homebuyers even though the private sector added nearly 2 million net new jobs in the past 12 months."3 So has the U.S. housing industry reached bottom? Yun suggests it has when he presents the U.S. homeownership rate since 1965 (see Table 1). He reasons that since we are now at 1998 levels where there was no mention of bubbles or unsustainability, the figures may indicate a stable level for the U.S. market. Moreover, he argues that if we do stabilize at around 66 percent homeownership, the natural increase in the U.S. population (3 million a year) and households (about 1.1 million a year) will generate approximately 700,000 additional homeowners each year in addition to the turnover realized from the approximately 75 million homeowning

families. The U.S. housing market is an important contributor to the U.S. economy. For most homeowners, their home is their largest investment and serves as a source of money from refinancing. This money means consumer spending to an economy that is largely driven (around 70 percent) by personal consumption . Moreover, the housing industry employs thousands of workers through the labor, material and services it requires. Therefore, it is very important to reach dry ground and to start walking forward at a tolerable pace rather than continuing to slug through mud made especially deep from an inflated economy fueled by the irresponsible use of leverage.

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Alt Cause – Laundry List

Multiple alt causes---economic collapse is inevitableNY Times 6/19 2012, “Mid-Year Outlook from BlackRock’s Russ Koesterich: Turmoil in Europe, Prospect of “Fiscal Cliff” in U.S. Will Keep Investors on “Rocky Road” for Rest of 2012,” http://markets.on.nytimes.com/research/stocks/news/press_release.asp?docTag=201206190800BIZWIRE_USPRX____BW5584&feedID=600&press_symbol=62690, AJ

SAN FRANCISCO--(BUSINESS WIRE)--Jun. 19, 2012-- In 2012’s second half, investors will face “a rocky road” compared with the year’s first few months, with the potential “fiscal cliff” in the U.S. as well as Europe’s ongoing turmoil both posing risk to a still weak global recovery, according to Russ

Koesterich, Global Chief Investment Strategist for BlackRock’s (NYSE:BLK) iShares business. “At mid-year, the global economy is in roughly the same position as it was six months ago – an anemic recovery threatened by a European crisis,” Koesterich said, in a just-released update to his “iShares Market Perspectives 2012 Outlook” originally published in December. As he did in December, Koesterich currently assigns a two-thirds probability to continuing global expansion, albeit at a below-trend pace, and a one-third probability to Europe provoking another global downturn. At the same

time, he noted, “a number of risks have the potential to cause a global double-dip recession ,” including Greece’s continuing problems, weakness in the Spanish banking system, and the potential hit of simultaneous tax hikes and spending cuts in the U.S. at year-end. In particular, Koesterich said, investors might be underestimating the possible impact of the U.S. fiscal cliff. “Investor behavior suggests that the risk is not currently discounted into asset prices,” he said. Europe remains the major risk, Koesterich noted. “While it appears, following the June 17 elections, that a Greek exit from the eurozone is not as imminent as some had feared back in May, the election results do not change the underlying fundamentals,” he said. “There is still a significant tail risk that Greece may eventually decide to exit the euro. Even if Greece remains in the euro, a bolder plan for tighter fiscal integration is proving frustratingly elusive. “Due to Europe’s issues and the uncertainty surrounding U.S. fiscal policy, we expect volatility to remain elevated,” he said. “We continue to advocate for a relatively conservative portfolio composed of high-dividend paying stocks and U.S. ‘spread products,’ such as investment grade and municipal bonds.” Koesterich’s mid-year outlook, “What’s in Store for the Second Half of 2012,” outlines the major factors likely to shape market directions for the next six months and provides a near-term outlook for key global regions and asset sectors, with details of related iShares investment products. Absent a worsening of the crisis in Europe, economic growth in 2012’s second half should be broadly in line with the first quarter—positive but subpar

– with U.S. growth around 2% and global growth from 3% to 3.5%, Koesterich believes. “The U.S. is on marginally firmer footing and emerging market growth should begin to stabilize in the second half as the impact of 2011’s monetary tightening wanes,” he said. While investors enjoyed a temporary lull in Europe’s problems in early 2012, courtesy of the European Central Bank’s (ECB’s) massive injection of liquidity, the focus is once again on the Continent, Koesterich noted. Koesterich believes that the Greek banking system, Spanish banks, and political developments in Germany – Europe’s ultimate creditor – will be among the key factors shaping Europe’s fortunes as 2012 proceeds. “If the Greek banks continue to bleed deposits, the ECB will need to

provide more emergency assistance to prevent a collapse of the Greek banking system,“ Koesterich said. “An even larger threat to Europe is Spain’s need to recapitalize its banking system, which is likely to cost at least €50 billion. To date, there is no credible plan .” Germany also represents a critical swing factor for the European markets, Koesterich noted, because that nation is under increasing pressure to accept a plan for mutualizing

European debt. “Germany’s leadership has opposed such a move to date, but any development toward the pooling of at least some of Europe’s debt obligations would be a positive for the markets,” he said.

Uncertainty will yield continued stress in the financial system, Koesterich believes. “We don’t see another

recession or a Greek exit as foregone conclusions,” he said. “But Europe is no closer to a political, economic or financial resolution to its problems. “If Greece cannot abide by the terms of its austerity package, or if the Spanish banking bailout proves inadequate or unwieldy, then Europe’s chronic stress is likely to erupt into a crisis,” he said. In the U.S., potential year-end tax hikes and spending cuts could create more than $600 billion in “fiscal drag,” or the equivalent of roughly 4% of GDP . “Growth in the U.S. is unlikely to be better than 2%, so if the fiscal drag were to occur, we believe a double-dip recession becomes much more likely,” he said. “A compromise that would avoid the fiscal drag is by no means assured,

yet investors are placing a very low probability on the drag actually occurring, partly evidenced by the fact that 2013 growth forecasts have remained remarkably stable over the past nine months.” Absent a

clear consensus coming out of this year’s elections, November and December are likely to be marked by heightened volatility as investors grapple with the odds of a last-minute compromise, Koesterich believes.

Markets are likely to remain “on edge” throughout the remainder of 2012, Koesterich said. “We prefer the relatively low beta of high dividend stocks—both in developed and emerging markets—and using any market weakness as an opportunity to add to longer-term positions in emerging markets.”

Multiple alternative factors influence economy, Euro crisis, housing, election year

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Delisile, 12 (James R, “It’s All About Timing: Spring Forward or Fall Back” The Appraisal Journal V. 80 1 pgs 8-20 2012 http://jrdelisle.com/market_update/finviews/AU_TAJ_WI12_FinancialViews.pdf)There are a number of positive signs that suggest the economic recovery has begun to gain some traction and should be able to overcome some of the headwinds it will face during this election year. This situation is a fairly significant improvement from early in the 2011 third quarter when there was a 50/50 risk the United States would slip back

into a recession. However, the improved forecast does not mean the country will face smooth sailing. Indeed, the economy will be rocked by a series of waves that will push it forward as well as swells that will make it seem

like it has been buoyed down and stuck in a lull. These forces will come from a number of economic forces, both global (e.g., uncertainty surrounding the Greek bailout) and domestic (e.g., the hangover from the housing debacle). Given the tenuous nature of the global economy and the high degree of economic integration across developed and emerging nations, the turmoil is expected to continue. It will be amplified by the lack of unified leadership on the domestic front. The recovery will also be rocked by growing parochialism as we focus on our domestic problems. Although the parochialism is somewhat understandable, it will not protect the

United States from the impact of economic and geopolitical events occurring offshore. Indeed, recognition that we are not in a position to exert much political influence over the global economy will hang over our own economic recovery and, by extension, the global recovery upon which our long-term success will ultimately depend. On the real estate front, market fundamentals are expected to mirror the overall economic recovery, with periods of improvement followed by periods of disappointment However, pent-up demand for investments is likely to provide some insulation against the downside of such cyclical fluctuations, as investors continue to take a longer-term view of the asset class. That said, some of the commoditization that has occurred will give way to greater price differentiation. Consequently, the improvement in economic conditions will benefit solid assets with strong underlying market fundamentals and leave other product in the wake. In addition to greater integration between the economy and real estate markets at the national level, an even stronger alignment will be struck at the local and regional levels, creating near-term winners and losers. That is, markets with diversified economic bases in

employment concentrated in growth sectors will outperform markets that will depend on the spillover effects from a broad-

based economic recovery. Even then, some markets will be left behind, which will place additional pressure on investors to target markets and expand their investment horizon beyond the gateway cities in search of higher returns that compensate for the risks associated with investing in the relatively inefficient, somewhat illiquid asset class. This is especially true as the economy picks up and other asset classes benefit from higher returns that will take time to trickle down to the real estate market. Economic Environment Before discussing the economic environment, it is important to recognize that election years introduce a number of challenges for prognosticators whose crystal balls can become clouded by the rhetoric and political posturing that typically occurs. This year, the situation is more volatile than in recent history; innuendoes and vilification in Washington have threatened to create a stalemate that prevents us from addressing the key issues that cloud the economic, capital market, and real estate outlooks. With ratings of congressional performance at all-time lows and the stakes higher than ever, voters, businesses, and consumers can expect a barrage of increasingly visceral ads and negative campaigning. As this continues, the collective psyche of the nation may be in play, creating some downside risk for the economy. The result may be a nagging anxiety that hangs over the country as we focus on the political scene instead of on moving the economy forward. During much of 2011, congressional leaders seemed to be satisfied with calling timeouts and adopting interim agreements, but these merely postponed the resolution of problems that need to be reckoned with. While the general tone of political discussions will likely be contentious, there are signs politicians might be willing to take more collaborative approaches to avoid a meltdown and the risk of incurring the wrath of voters. The recent preliminary deal to extend payroll tax cuts, extend unemployment benefits, and modify Medicare payment rules is an example of some of the progress that may be made on critical issues. Thus, debates surrounding many critical topics over the next three quarters will no doubt be heated and acrimonious; however, there is some hope more rational minds will prevail on critical decisions. If that does not occur, all bets will be off and the

country will be in for a rough ride. In some respects, the impending problems in Washington pale in comparison to the challenges in the euro zone. While those with a parochial view of global issues might take solace in the problems faced offshore, the reality is globalization has caused unprecedented economic integration among most countries. Thus, although the pressure US voters place on office seekers and their parties will provide a modicum of control

domestically, global issues will remain beyond the control of American voters and politicians. The recent and ongoing economic battles surrounding Greece and other countries on the brink of bankruptcy punctuate the vulnerability the United States faces on the global stage. Despite some progress, the underlying structural problems in the euro zone and individual countries are far from being resolved. Thus, 2012 will clearly be an interesting year with twists and turns coming from a number of fronts.

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Alt Cause – Manic Culture

Manic Culture causes Econ declineWood – 6/9/12 Associate News Editor of Psych Central, Peer reviewed by John M. Grohol, Psy.D (Janice, “Worldwide Economic Collapse a Result of Shared Manic Behavior.” Pscyh Central, June 9, 2012, http://psychcentral.com/news/2012/06/10/worldwide-economic-collapse-a-result-of-shared-manic-behavior/39870.html) MSDBankers, economists and politicians displayed the same kind of manic behavior as psychologically disturbed

individuals in the years running up to the 2008 financial collapse , according to a new study . And the study warns it could happen again. While bankers in the West saw the warning signs from the collapse of the Japanese economy in 1991 and the 1998 crisis in Southeast Asia, they didn’t heed the warnings, according to Dr. Mark Stein, an award-winning scholar from the University of Leicester School of Management. Instead, there was a “shared manic culture,” with those

responsible for the financial collapse going into an overdrive of denial, escalating risky and dangerous lending and

insurance practices , he said. Stein, who was just awarded the iLab prize for innovative scholarship, has studied group dynamics from a psychoanalytic perspective at the renowned Tavistock Institute. He described this manic behavior in the 20-year runup to the credit crisis in a paper published in the Sage journal Organization. Stein argues that the financial world was suffering from a kind of collective mania in the two decades running up to the events. “Unless the manic nature of the response in the run up to 2008 is recognized, the same economic disaster could happen again,” he said. According to Stein, four characteristics define the manic culture: denial, omnipotence, triumphalism, and overactivity. “A series of major ruptures in capitalist economies were observed and noted by those in positions of economic and political leadership in Western societies,” he said. “These ruptures caused considerable anxiety among these leaders, but rather than heeding the lessons, they responded by manic, omnipotent and triumphant attempts to prove the superiority of their economies.” The massive increase in credit derivative deals, industrializing credit default swaps and the removal of regulatory safety checks, such as the repeal in the United States of the landmark Glass-Steagall banking controls, were a manic response to the financial crises within capitalism, he says. He says that this behavior was also strengthened by “triumphant” feelings in the West over the collapse of Communism. “Witnessing the collapse of Communism, those in power in the West developed the deluded idea that capitalist economies would do best if they eschew any resemblance to those Communist economies, thereby justifying unfettered financial liberalization and the destruction of the regulatory apparatuses of capitalism,” he said. “The consequences of this manic response have been catastrophic, with the ongoing Eurozone crisis being — in many ways — a result of this.”

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Advantage CP

TEXT: The United States federal government should increase user fees and implement congestion pricing.

CP solves the affGlaeser 12 2/13, *Edward Glaeser, an economics professor at Harvard University, is a Bloomberg View columnist, “Spending Won’t Fix What Ails U.S. Infrastructure: Edward Glaeser,” http://www.bloomberg.com/news/2012-02-14/spending-won-t-fix-what-ails-u-s-transport-commentary-by-edward-glaeser.html, AJ

LET USERS PAY: More than two centuries ago, Adam Smith wrote that “When the carriages which pass over a highway or a bridge, and the lighters which sail upon a navigable canal, pay toll in proportion to their weight or their tonnage, they pay for the maintenance of those public works exactly in proportion to the wear and tear which they occasion of them,” and “it is scarce possible to imagine a more equitable way of maintaining such works.” He then wisely noted that “when high-roads, bridges, canals, etc., are in this manner made and supported by the commerce which is carried on by means of them, they can be made only where that commerce

requires them, and, consequently, where it is proper to make them.” User fees support the maintenance of aging infrastructure . Like all prices, they allocate scarce resources to the people who value them most. Perhaps most importantly, as Smith emphasized, user-fee financing discourages white elephants, because projects that can pay for themselves are practically guaranteed to deliver plenty of value. In the early days, we paid for infrastructure, such as the Erie Canal and the Brooklyn Bridge, by charging tolls. That was easy to do, as demand for these improvements was enormous. But our fondness for big projects gradually and dangerously

moved us away from this ideal. The Highway System is meant to be funded with gas taxes paid into the Highway Trust Fund, but funding formulas mean that the taxes each state pays into the fund rarely match the money received. The stimulus delivered a dollop of highway spending provided with general tax dollars, and

the Congressional Budget Office projects that the Trust Fund will be broke by 2014. Yet Congress is now promoting a vast new road spending bill. The budget the president presented yesterday supports paying for infrastructure with “current user-financed mechanisms,” but also proposes tapping “part of the savings from ending the war in Iraq and winding

down operations in Afghanistan,” which just means using general tax revenue to pay for highways. Given our energy problems, we shouldn’t be bribing anyone to drive. We should make sure that users pay for their travel. Ideally, this should be done with electronic tolling that ties the revenue to the road, but failing that,

at least we should ensure that gas taxes are high enough to cover our highway costs. IMPLEMENT

CONGESTION PRICING: We should expect drivers to pay for more than just the physical costs of their travel. We should also expect them to pay for the congestion that they impose on other road users. If you have a scarce commodity, whether groceries or roads, and you insist on charging prices below market rates, the result will be long lines and stock outs, like those that bedeviled the Soviet Union decades ago. Yet U.S. roads are still running a Soviet-

style transport policy, where we charge too little for valuable city streets. Traffic congestion is the urban equivalent of a stock out. The idea of congestion pricing was advanced by the economist William Vickrey 50 years ago. He wanted to charge enough so that streets would move fluidly. Singapore adopted the proposal in 1975, and it now has an electronic system that keeps the roads in the world’s second-densest country moving quickly. London is a more recent example of a congestion-pricing system, and that city has also become more livable as a result. Congestion pricing should have been allowed in Manhattan years ago, and it could help many U.S. cities.

Our highways could become more efficient if they raised tolls during peak commuting hours, which would encourage alternative means of travel and commuting during off-peak hours . Airports, too, could make traffic delays rarer by charging higher fees, especially during peak periods. We could build more roads to deal with traffic, but the work of Gilles Duranton and Matthew Turner casts cold water on that approach. They devised a “Fundamental Law of Road Congestion”: highway miles traveled increase almost one-for-one

with highway miles built. If you build it, they will drive. The better approach to ensure that a scarce resource is used efficiently is to charge higher prices during peak use periods.

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***COMPETITIVENESS

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Competitiveness Low US is falling behind---multiple warrantsPorteous 6 2/26, *RUCE PORTEOUS is currently Head of Financial Risk with Standard Life Bank in Edinburgh, Scotland. He has a degree in Mathematical Statistics from Edinburgh University, Scotland, and postgraduate degrees, including a PhD, in Mathematical Statistics from Cambridge University, England, “The Coming Economic Collapse,” http://www.rense.com/general69/econm.htm, AJ

The reason why America has such large trade and current deficits is because of the expansion of its money supply, without the corresponding expansion of its productive capacity to produce the wealth to sustain the increase in money in circulation . The lack of domestic savings to provide the investment capital into new manufacturing capacity is also a contributing factor. The cost of maintaining a large military establishment and the decline in the social fabric of society are also significant contributing factors, both of which consume resources that should be invested in the manufacturing sector for a nation to remain internationally competitive . The region in the world

which will fill the vacuum from the coming collapse of the $US will be the Eurozone. The Euro will replace the dollar as the world's reserve currency , propelling the Eurozone nations into the most influential global economic power. To support filling the monetary vacuum following the collapse of the dollar, Europeans will have to resolve their constitutional differences and form a political union. Those nations that accept the EU Constitution will form a United States of Europe, but it is unlikely that all existing EU members will agree to be a part of such a political union. Meanwhile, America's over-stretched military will no longer have the financial resources to continue its futile Middle East wars, and to sustain its bases that circumnavigate the globe, will be forced to with-draw back to the USA.

Multiple countries are catching upLai 11 December 2011, *DAVID LAI is Research Professor of Asian Security Studies at the Strategic Studies Institute (SSI) of the U.S. Army War College. Before joining the SSI, Dr. Lai was on the faculty of the U.S. Air War College. His teaching and research interests are in international relations theory, war and peace studies, comparative foreign and security policy, U.S.-China and U.S.-Asian relations, and Chinese strategic thinking and operational art. He holds a bachelor’s degree from China and a master’s degree and Ph.D. in political science from the University of Colorado, “THE UNITED STATES AND CHINA IN POWER TRANSITION,” pdf, AJ

This analysis holds the following propositions. First, as a result of its genuine development and the impact of its expanding influence on the international system, China and the United States are inescapably engaged in a power transition process, which is, on top of all other issues, about the future of international relations. Second, the history of power transition is filled with bloodshed; yet China and the United States are willing to blaze a new path out of this deadly contest. Third, although China and the United States have exchanged goodwill for a peaceful future, the two nations nevertheless have many contentious and unsettled conflicts of

interest that are further complicated by the power transition process and, if not properly managed, can force the two to stumble into unintended war against each other, hence repeating the history of power transition tragedy.

Finally, the next 30 years will be a crucial stage for China’s development and the evolution of the U.S.-

China power transition. Unfortunately, these titanic changes are overshadowed by the inherently conflicting relations between China and the United States. It will take these two great powers extraordinary efforts to come to terms with the emerging new realities. Today, we are witnessing the rise of China, India, and Brazil. The European Union (EU ) is also becoming a formidable actor on the world stage. In addition, one has to take a resurgent Russia into account . Finally, a “normalized” Japan (presumably so with expected modifications to its government and military apparatus) will be a full-fledged great power in international security and political affairs. If we accept that the post-Cold War international system is like the one depicted in Figure 2-1 with the United States at the top of the pyramid, how do we see, and how does the United States determine, which one of these rising great powers is a serious contender?

Other countries are gaining capability---new advances are critical to catching upZarate 12 1/12, *Juan C. Zarate is a senior adviser at the Center for Strategic and International Studies in Washington, D.C, “Needed: A National Economic Security Lens,” http://csis.org/publication/needed-national-economic-security-lens, AJ

Last October, a U.S. intelligence report to Congress revealed that foreign economic espionage worth billions of dollars is being

driven by China and Russia and represents a “significant and growing” threat to the nation’s prosperity and security . In the interconnected global environment, economic power , access to resources,

and cutting-edge technologies are defining both power and vulnerabilities . China and Russia have already demonstrated their willingness to engage in a new geo-economic game. The resulting transfer of technology and marginalization of multinational companies has allowed Chinese companies to take larger chunks of the global solar, wind turbine, and high-speed rail markets. At the same time, Chinese infrastructure and extraction projects in Africa, Central Asia, and Latin America are facilitating

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Chinese access to both raw materials and political influence. It’s one the United States needs to learn to play quickly. In the 21st century, economic security underpins the nation’s ability to project its power and influence . The U nited States must remain true to its values but start playing a new, deliberate game of geo-economics to ensure its security and take advantage of rapidly emerging vulnerabilities and opportunities.

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Competitiveness Defense

Competitiveness theory is flawedPorteous 6 2/26, *RUCE PORTEOUS is currently Head of Financial Risk with Standard Life Bank in Edinburgh, Scotland. He has a degree in Mathematical Statistics from Edinburgh University, Scotland, and postgraduate degrees, including a PhD, in Mathematical Statistics from Cambridge University, England, “The Coming Economic Collapse,” http://www.rense.com/general69/econm.htm, AJ

It has become popular by American politicians to blame China for the decline in America's production base.

This is totally unfair, and shows both their ignorance and a failure to accept responsibility by the American leadership. Actually, it is through China being able to supply America with cheap consumer goods, and lend the capital to purchase these goods which has allowed the US to contain inflation, benefiting the American consumer . Germany , which is now the world's number one export nation and which has a wage structure higher than the US, has had to cope with a rising currency, but has still been able to expand its exports between 10-20% per annum, and continues to have an expanding large trade and current account surpluses. German manufactures also have to compete with their Asian competitors just as those from America, yet have a 160.5 billion trade surplus. So it would appear in the short-term, the loose monetary policies of America and Japan appear to have benefited everyone. Expanding the money supply has provided the capital to support the growth of the expanding Asian economies, especially those of India and China. Inflation (if you exclude property) has been contained (normally a consequences of a loose money policy) because of China and India being able to produce consumer goods and services cheaply for the global markets , preventing manufactures in the Anglo-Saxon economies from raising their prices.

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***DEFICIT SPENDING GOOD/BAD

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Good – Transportation Specific

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Transportation Stimulus good Rugy and Mitchell 11 “Working Paper: Would More Infrastructure Spending Stimulate the Economy?” Veronique De Rugy (senior research fellow at Mercatus Center at George Mason University. Her primary research interests include the U.S. economy, federal budget, homeland security, taxation, tax competition, and financial privacy issues) and Matthew Mitchell (Matthew Mitchell is a senior research fellow at the Mercatus Center at George Mason University. His primary research interests include economic freedom and economic growth, government spending, state and local fiscal policy, public choice, and institutional economics. ) No. 11-36 September 2011. Mercantus Center: George Mason University.

According to Keynesian economic theory, recessions are caused by a fall in economy-wide (―aggregate) demand. Since one person‘s spending is another‘s income, a fall in demand makes the nation poorer. When the now poorer nation cuts back on spending, it sets off yet another wave of falling income. So, according to this view, a big shock to consumer spending or business confidence can set off waves of job losses that ripple through the economy. Can anything stop this ripple

effect? Keynesians say yes. Government spending can take the place of private spending during a crisis. This spending can take a number of forms: public service employment, cash transfers, state revenue sharing, or

infrastructure projects. To combat the current recession, the U.S. government has already undertaken a number of large discretionary stimulus measures. These include $152 billion in tax rebates in early 2008, $862 billion in the American Recovery and Reinvestment Act (ARRA) of 2009 (which included over $130 billion for infrastructure), and $20 billion in more infrastructure spending in the Hiring Incentives to Restore Employment Act of March 2010. Infrastructure spending also appears to be a focus of

the latest round of stimulus. A vital measure of the effectiveness of a stimulus is the government purchases multiplier (the ―multiplier‖). The multiplier measures the amount by which the economy expands when the government increases its purchases of goods and services by $1.00. It is important to remember that when it measures the size of the economy, the Bureau of Economic Analysis automatically counts a $1.00 increase in government purchases and gross investments as a $1.00 increase in measured GDP. 4 Therefore, the key question is whether this increase in public sector GDP enhances (―multiplies‖) private sector GDP or displaces (―crowds out‖) private sector GDP. If the multiplier is smaller than 0, stimulus displaces enough private sector activity to offset any increase in public sector activity, i.e., stimulus actually shrinks the entire economy. However, if the multiplier is between 0 and 1, then stimulus displaces private-sector economic activity, but not by enough to counteract the increase in public sector economic activity. If the multiplier is larger than 1, then stimulus spending not only increases public-sector economic activity, it also increases private-sector economic activity. Notwithstanding the confidence of stimulus advocates, there is no academic consensus regarding the size or even the sign of the multiplier. As a recent International Monetary Fund (IMF) working paper puts it, ―Economists have offered an

embarrassingly wide range of estimated multipliers.‖ 5 The largest recent estimate is by Northwestern University economists Lawrence Christiano, Martin Eichenbaum, and Sergio Rebelo. They estimate that the multiplier may be as large as 3.7, implying that $1.00 in government purchases stimulates another $2.7 in private sector economic activity. 6 On the other end of the spectrum is an estimate by University of Chicago economists Andrew Mountford and Harald Uhlig. They find that the multiplier may be as small as -2.88, implying that $1.00 in government purchases displaces $3.88 in private sector economic activity. 7 A wide range of estimates exists, in part, because there is a wide range of circ*mstances in which stimulus might be applied. We now turn to the particular circ*mstances of the United States to see how infrastructure stimulus might impact the current economic situation. Stimulus with low interest rates and distortionary taxation: Some studies obtain larger multipliers than others because they assume that stimulus will be applied when interest rates

are at or near zero percent. 8 Theoretically, low interest rates make stimulus more potent because the government is able to employ idle resources by borrowing funds at a low cost. At least for the time

being, interest rates are indeed historically low, so this may be a reasonable assumption.

Spending would stimulate the economy and create new solutions, empirics proveBlackwater 2012 – Freelance Writer and Journalist (Bill, Two Cheers for Environmental Keynesianism,Capitalism Nature Socialism, 23:2, 51-74, http://dx.doi.org/10.1080/10455752.2012.675232)A major element of this approach relates to the idea of the multiplier effect, as originated by Keynes’s follower Richard Kahn. This states that a rise in investment will lead to a multiplied rise in income, because those who receive payments as a result of the initial investment will spend a proportion of it on other goods and services, with the recipients of that income spending a proportion of it, and so on down the chain. The multiplier fits into Keynesian ideas principally in the context of economic recession, when, as Keynes saw it, a reduction in private investment ought to be made up by government spending in order to maintain the flow of demand throughout the economy. This was the key principle at work in the national stimulus plans various governments have adopted in

recent years, as seen notably in the American Recovery and Reinvestment Act of 2009. One of the main ideas of environmental Keynesianism has been to take advantage of such proposals for stimulus spending, by seeking to direct it to programs that would simultaneously lead to environmental benefits. A further element of environmental Keynesianism has been to concentrate on the long-term objects and effects of investment. In this it is harking back to the (Keynesinfluenced) policies of Franklin Roosevelt. Public investment in the New Deal

aimed not simply to provide short-term economic stimulus, but to build infrastructure* highways, bridges, dams*that would accelerate growth in a future recovery, more than paying back the money borrowed to invest in them. The principle here is different to the multiplier effect; it is not just a case of increasing the flow of money such that the economy reaches its potential productive capacity in the present, but of expanding that capacity in the

future. Environmental Keynesianism draws on this to argue that investments in green

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infrastructure would expand the economy (or at least save it from collapsing beneath environmental pressures), and thus that these, too, would more than pay back the debt acquired to finance them. More widely, there is a general argument that, irrespective of any short-term recession, government ought to invest in environmental industries because of a general shortfall in such investment from the private sector, and that this itself would be a means of increasing future income. This might widely be perceived as a Keynesian argument,

although it is unclear whether this can be read out of Keynes himself (Holland 2009). For the purposes of this essay, such arguments are being treated as examples of environmental Keynesianism. The most intelligent versions of the ideas under discussion here were developing not just in response to financial crisis, which broke out in August 2007 when the interbank money market dried up following the bursting of the U.S. house price bubble (Evans 2009), which then prompted a truly global crisis with the collapse of Lehman Brothers in September

2008. Ideas promoting environmental Keynsianism were developed in anticipation of the financial crisis*in response to the recognition that the character of growth and activities of the financial industry were themselves unsustainable. In the U.K., for instance, in early 2007 a collection of progressive economists and environmentalists formed the Green New Deal Group, publishing a report in July 2008 (New Economics Foundation 2008). In the U.S., Susan George of the Transnational Institute delivered a high-profile speech in September 2007 that made an explicit call for ‘‘environmental Keynesianism.’’ Around the same time, Robert Pollin and others at the University of Massachusetts-Amherst began work on what would become an influential report for the Center for American Progress, entitled Green Recovery (Pollin, et al. 2008). Following the collapse of Lehman Brothers, these ideas rapidly gained a new prominence in

the political mainstream. In October 2008, the United Nations Environment Program (UNEP) called for a ‘‘Global Green New Deal,’’ a call echoed by Ban Ki-moon at the UN climate change conference in Poznan that December (United Nations 2008a, 2008b). In March 2009, UNEP recommended a global expenditure of 1 percent Gross Domestic Product (GDP) on green initiatives,

to come mainly from G20 nations (Barbier 2010, 832). Green jobs and green stimulus were much talked-about issues during the U.S. presidential election, helped by the success of books such as Thomas Friedman’s Hot, Flat

and Crowded and Van Jones’ The Green Collar Economy (both 2008). From late 2008 a variety of governments responded to these calls for action with a number of national green stimulus plans. Notably, one of the first things Barack Obama did on becoming president-elect was announce a multi-billion dollar green recovery plan, full of pledges to double the production of renewable energy, retrofit three-quarters of all government buildings, weather-proof 2 million homes, and create half a million new jobs (Goldenberg 2009).

Blackwell Concludes NegativeBlackwater 2012 – Freelance Writer and Journalist (Bill, Two Cheers for Environmental Keynesianism,Capitalism Nature Socialism, 23:2, 51-74, http://dx.doi.org/10.1080/10455752.2012.675232)

Simultaneously, environmental Keynesianism promises three things: to inject demand into the economy, accelerate the development of technologies that will lead to a new wave of growth, and reduce the impacts of economic activity on the environment. Behind these explicit goals lies its unspoken promise, that it is a means by which capitalism can save itself*from declining growth in mature sectors of the economy, from the effects of the bubbles of financial speculation that insufficient growth in the real economy forces it into, and from

exhausting the natural resource base it depends upon. While environmental Keynesianism (in common with more conventional stimulus programs) is capable of supplying a boost to the economy in the shortterm, there is no convincing evidence to suggest it can simultaneously stimulate longterm growth and transform the character of economic activity so as to fit it within environmental limits. The implication of this is that much harder thinking is required. Harder, as in the effort required to develop genuinely new ideas; harder, too, as in facing up to the reality that there are no simple solutions, no means for all to get richer and save the planet

at the same time. To an extent, environmental Keynesianism (and all related boosterism for investment in the low-carbon economy) is unhelpful, since its very promise of ‘‘winwin’’ solutions helps to forestall such hard thinking. For this reason, those on the environmental wing of this movement ought to review their position carefully. The strategy of selling environmental programs on their economic merits appears on its face to be eminently sensible; a way of broadening support, of harnessing the selfinterest of those in pursuit of profit and thereby, as one might say, greening the fingers of the invisible hand. But the underlying message of such an approach is one of reassurance and complacency; it works against the more radical aspects of its own arguments. And so long as the appeal is to private economic gain, then support for environmental objectives may become broad, but will remain shallow. What is more, it will always be prone to being overshadowed by other proposals that promise higher and faster growth*all the more so, the longer economic times remain tough. To face up to the flaws of environmental Keynesianism is to be reminded of the fundamental unsustainability of our current

economic system. Capitalism has not found in it the means to save itself; there is no squaring of the circle of continuous growth in a finite world. Transformative programs that would put our societies on a genuine path towards long-term environmental sustainability are not good economic investments, not in the sense that investors would

understand them today. But by the same token, no conventional, market-driven investments are good investments, since if growth continues, it will go on to breach a succession of increasingly

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important environmental limits, in turn fatally undermining its own basis. Investments in climate change mitigation and adaptation are, however, necessary. They are thus, in general, good uses of our current resources, even if (in the developed world) they cannot lead to an overall expansion of wealth. Some other mechanism for directing these resources is required. It might be tempting to turn back to Keynes at this point, in the expectation that his call for ‘‘a comprehensive socialisation of investment’’ might offer us the solution required today (1936, 378). In reality, these remarks referred to something much more circ*mscribed than they suggest. Keynes was still talking about conventional investment, in the sense of its leading to long-term expansion of the economy. As for its ‘‘socialization,’’ this meant that the state should step in to channel savings into investments when private investment was weak (as during a recession). It did not mean that the state should always act to increase the level of investment, nor that it should direct investment itself through taking ownership of sectors of the economy (Holland 2009). What is required at this moment is something that might be called ‘‘socialized investment,’’ but which

would mean something quite different from the Keynesian version. What is required is a mechanism for directing a significant proportion of the surplus resources of the present into projects designed to provide for the future needs of society (i.e., its material basis, in terms of access to environmental resources), but one not based around earning an economic return. This will necessarily mean government investment; and yet it cannot be financed conventionally, since this still depends on private investors giving money to the state in the expectation of returns to be gained via an expanded economy. If this suggestion appears ill-defined, that’s because it is. Working out an alternative theory of investment, and with it a coherent alternative theory of macroeconomics with expectations of long-term growth taken away, is quite a project. What else does it imply but the unraveling of the very capitalist system itself? This

is some way beyond the scope of this essay, the job of which is to highlight the impossibility of capitalism’s saving itself through the greening of public investment, and thus the necessity of facing up to the task of developing alternative theories. Or as we might conclude: Humanity is heading towards uncharted waters. Keynesianism is not the answer; boosting demand adds to the long-term problem. The current system cannot be saved. More radical thought is required.

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Prodict – Keynes

Keynesian economics are needed nowKrugman 11 12/29, *Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed Page and continues as professor of Economics and International Affairs at Princeton University. He received his B.A. from Yale University in 1974 and his Ph.D. from MIT in 1977. He has taught at Yale, MIT and Stanford. At MIT he became the Ford International Professor of Economics, “Keynes Was Right,” http://www.nytimes.com/2011/12/30/opinion/keynes-was-right.html, AJ

“The boom, not the slump, is the right time for austerity at the Treasury.” So declared John Maynard Keynes in 1937, even as F.D.R. was about to prove him right by trying to balance the budget too soon, sending the United States economy

— which had been steadily recovering up to that point — into a severe recession. Slashing government spending in a depressed economy depresses the economy further ; austerity should wait until a strong recovery is well under way. Unfortunately, in late 2010 and early 2011, politicians and policy makers in much of the Western world believed that they knew better, that we should focus on deficits, not jobs, even though our economies had barely begun to recover from the slump that followed the financial crisis. And by acting on that anti-Keynesian belief, they ended up proving Keynes right all over again. In

declaring Keynesian economics vindicated I am, of course, at odds with conventional wisdom. In Washington, in particular, the failure of the Obama stimulus package to produce an employment boom is generally seen as having proved that government spending can’t create jobs. But those of us who did the math realized, right from the beginning, that the Recovery and Reinvestment Act of 2009 (more than a third of which, by the

way, took the relatively ineffective form of tax cuts) was much too small given the depth of the slump.

And we also predicted the resulting political backlash. So the real test of Keynesian economics hasn’t come from the half-hearted efforts of the U.S. federal government to boost the economy, which were largely offset by cuts at the state and local levels. It has, instead, come from European nations like Greece and Ireland that had to impose savage fiscal austerity as a condition for receiving emergency loans — and have suffered Depression-level economic slumps, with real G.D.P. in both countries down by double digits. This wasn’t supposed to happen, according to the ideology that dominates much of our political discourse. In March 2011, the Republican staff of Congress’s Joint Economic Committee released a report titled “Spend Less, Owe Less, Grow the Economy.” It ridiculed concerns that cutting spending in a slump would worsen that slump, arguing that spending cuts would improve consumer and business confidence, and that this might well lead to faster,

not slower, growth. They should have known better even at the time: the alleged historical examples of “expansionary austerity” they used to make their case had already been thoroughly debunked. And there

was also the embarrassing fact that many on the right had prematurely declared Ireland a success story, demonstrating the virtues of spending cuts, in mid-2010, only to see the Irish slump deepen and whatever confidence investors might have felt evaporate. Amazingly, by the way, it happened all over again this year. There were widespread proclamations that Ireland had turned the corner, proving that austerity works — and then the numbers came in, and they were as dismal as before. Yet the insistence on immediate spending cuts continued to dominate the political landscape, with malign effects on the U.S. economy. True, there weren’t major new austerity measures at the federal level, but there was a lot of “passive” austerity as the Obama stimulus faded out and cash-strapped state and local governments continued to cut. Now, you could argue that Greece and Ireland had no choice about imposing austerity, or, at any rate, no choices other than defaulting on their debts and leaving the euro. But another lesson of 2011 was that America did and does have a choice; Washington may be obsessed with the deficit, but financial markets are, if anything, signaling that we should borrow more. Again, this wasn’t supposed to happen. We entered 2011 amid dire warnings about a Greek-style debt crisis that would happen as soon as the Federal Reserve stopped buying bonds, or the rating agencies ended our triple-A status, or the superdupercommittee failed to reach a deal, or

something. But the Fed ended its bond-purchase program in June; Standard & Poor’s downgraded America in August;

the supercommittee deadlocked in November; and U.S. borrowing costs just kept falling. In fact, at this point,

inflation-protected U.S. bonds pay negative interest: investors are willing to pay America to hold their money. The bottom line is that 2011 was a year in which our political elite obsessed over short-term deficits that aren’t actually a problem and, in the process, made the real problem — a depressed economy and mass unemployment — worse. The good news, such as it is, is that President

Obama has finally gone back to fighting against premature austerity — and he seems to be winning the political battle. And one of these years we might actually end up taking Keynes’s advice, which is every bit as valid now as it was 75 years ago .

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Bad – Transportation Specific

Transportation Stimulus fails—generic Rugy and Mitchell 11 “Working Paper: Would More Infrastructure Spending Stimulate the Economy?” Veronique De Rugy (senior research fellow at Mercatus Center at George Mason University. Her primary research interests include the U.S. economy, federal budget, homeland security, taxation, tax competition, and financial privacy issues) and Matthew Mitchell (Matthew Mitchell is a senior research fellow at the Mercatus Center at George Mason University. His primary research interests include economic freedom and economic growth, government spending, state and local fiscal policy, public choice, and institutional economics. ) No. 11-36 September 2011. Mercantus Center: George Mason University.

Four years into the deepest recession since World War II, the U.S. economy expanded at a rate of only 0.7 percent in the first half of

2011. This means that the economy is growing at a slower pace than the population and that capita output continues to fall. 2 In response, the president has announced a plan for yet more deficit-financed stimulus spending. 3 Like the two previous stimulus bills, this one focuses on infrastructure spending. The president‘s plan is rooted in the belief that stimulus spending and deeper deficits will give the economy the lift it needs to create more jobs. The hope is that, eventually, the economy will grow fast enough to allow the government to begin to pay down the national debt. There are three problems with this approach. First, despite the claims of stimulus proponents, the evidence is not at all clear that more stimulus would be helpful right now. Second, even if one adheres to the idea that more

government spending can jolt the economy, spending—particularly infrastructure spending—cannot be implemented in the way Keynesians say it ought to be. This greatly undermines its stimulative effect. Third, while no one disputes the value of good infrastructure, this type of spending typically suffers from massive cost overruns, waste, fraud, and abuse. This makes it a particularly bad vehicle for stimulus. In sum, further stimulus would be a risky short-term gamble with near-certain negative consequences in the long term

Stimulus Bad—multiple refutations Rugy and Mitchell 11 “Working Paper: Would More Infrastructure Spending Stimulate the Economy?” Veronique De Rugy (senior research fellow at Mercatus Center at George Mason University. Her primary research interests include the U.S. economy, federal budget, homeland security, taxation, tax competition, and financial privacy issues) and Matthew Mitchell (Matthew Mitchell is a senior research fellow at the Mercatus Center at George Mason University. His primary research interests include economic freedom and economic growth, government spending, state and local fiscal policy, public choice, and institutional economics. ) No. 11-36 September 2011. Mercantus Center: George Mason University.

Unfortunately, if temporary stimulus spending turns into permanent spending, then when interest rates eventually return to normal, the government will have to finance its spending at a higher cost. This will make the actual multiplier significantly smaller than these studies suggest. What‘s more, not all studies that incorporate this low interest-rate assumption obtain large estimated multipliers. For example, studies that consider the tax that will need to be levied tomorrow to pay for today‘s spending, find much smaller multipliers, even when interest rates are

exceedingly low. 9 Stimulus in a highly indebted nation: An extensive study from the IMF shows that fiscal multipliers in nations with debt levels in excess of 60 percent of GDP are zero or even negative.

10 The current U.S. debt-to-GDP ratio is 70 percent and, according to the Congressional Budget Office, it will be 90 percent within seven years and 100 percent within ten. 11 Stimulus under flexible exchange rates: The same IMF study also

finds that a nation‘s exchange-rate regime impacts the size of the multiplier. When a nation‘s exchange rate is fixed, the multiplier can be relatively large. 12 But when the country allows the market to dictate movements in the

exchange rate—as the United States does—the IMF economists found that the multiplier is much lower. This is because fiscal stimulus tends to cause domestic interest rates to rise relative to foreign interest rates. And when this happens, foreigners increase their demand for the domestic currency, causing it to appreciate. This, in turn, makes domestic goods more expensive and foreign goods cheaper, decreasing net exports and lowering output. Stimulus in a balance-sheet recession: The current recession has resulted in an unprecedented collapse in net wealth. In other words, it is a deep ―balance sheet‖

recession. But with personal wealth diminished and private credit impaired, some economists believe that stimulus is likely to be less effective than it would be in a different type of recession. This is because consumers are likely to use their stimulus money to rebuild their nest eggs, i.e., to pay off debts and save, not to buy new products as Keynesian theoreticians want them to. 13 The same is likely true for state and local governments who have used their ARRA dollars to reduce their budget gaps or reduce their borrowing rather than to increase

infrastructure spending or other government purchases. Diminishing marginal returns to stimulus: New research also suggests that

there are diminishing marginal returns to stimulus. 15 This makes new stimulus even less helpful than what has already been undertaken. The Federal Government has already spent over $1 trillion in legislated stimulus. Beyond this, unlegislated ―automatic stabilizers‖ in the budget have helped to push the primary deficit well over $1 trillion. 16 The problems

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with infrastructure stimulus: There are unique problems with infrastructure stimulus that tend to diminish its

chances of success. Chief among these are long implementation delays. The Congressional Budget Office reports that:

[F]or major infrastructure projects supported by the federal government, such as highway construction

and activities of the Army Corps of Engineers, initial outlays usually total less than 25 percent of the funding provided in a given year. For large projects, the initial rate of spending can be significantly lower than 25 percent. 17

Economists from the IMF studied the impact of implementation delays on the multiplier and found that, ―Implementation delays can postpone the intended economic stimulus and may even worsen the downturn in the short run.‖ Perhaps the most important reasons to be skeptical about further stimulus—particularly infrastructure stimulus—have to do with the way it is implemented. As a general rule, the studies that obtain large multipliers do so by assuming that stimulus funds will be distributed just as Keynesian theory says they ought to be. Keynesian economist and former presidential economic advisor Lawrence Summers has offered a widely accepted summary of how—ideally—fiscal stimulus ought to be applied.

18 He argues that fiscal stimulus ―can be counterproductive if it is not timely, targeted, and temporary.‖ In reality, however, infrastructure spending cannot fulfill these criteria. There is no such

thing as a “shovel ready” project: By nature, infrastructure spending fails to be timely. Even when the money is available, it can be months, if not years, before it is spent. This is because infrastructure projects involve planning, bidding, contracting, construction, and evaluation. 19 According to the GAO, as of June 2011, 95 percent of the $45 billion in Department of Transportation infrastructure money had been appropriated, but only 62 percent ($28 billion) had actually been spent. 20 Un-targeted: Effective targeting means that stimulus money should be spent in those areas that have been hardest hit by the recession. The goal is to make the most use of ―idle resources‖ (as Keynesian theory terms them). For instance, depressed areas like Detroit have a considerable number of unemployed resources (people, firms, equipment, etc.). So theoretically, government stimulus should

be able to put these idle resources to work. A number of studies, however, have shown that stimulus funding tends not to go to those areas that have been hardest hit by a recession. 21 Even targeted stimulus may fail: Many of the areas that were hardest hit by the recession are in decline because they have been producing goods and services that are not, and will never be, in great demand. Therefore, the overall value added by improving the roads and other infrastructure in these areas is likely to be lower than if the new infrastructure were located in growing areas that might have relatively low unemployment but do have great demand for more roads, schools, and other types of long-term infrastructure. 22 Job poaching, not creating: Unemployment rates among specialists, such as those with the skills to build roads or schools, are often relatively low. Moreover, it is unlikely that an employee specialized in residential-area construction can

easily update his or her skills to include building highways. As a result, we can expect that firms receiving stimulus funds will hire their workers away from other construction sites where they were employed rather than from the unemployment lines. This is what economists call ―crowding out.‖ Except that in this case, labor, not capital, is being crowded out. In fact, new data confirm that a plurality of workers hired with ARRA money were poached from other organizations rather than from the unemployment lines. 23 Not temporary: Even in Keynesian models, stimulus is only effective as a short-run measure. In fact, Keynesians also call for surpluses during an upswing. 24 In reality, however, the political process prefers to implement the first Keynesian prescription (deficit-financed spending) but not the second (surpluses to Not

temporary: Even in Keynesian models, stimulus is only effective as a short-run measure. In fact,

Keynesians also call for surpluses during an upswing. 24 In reality, however, the political process prefers to implement the first Keynesian prescription (deficit-financed spending) but not the second (surpluses to pay off the debt). 25 The inevitable result is a persistent deficit that, year-in, year-out, adds to the national debt. 26 A review of historical stimulus efforts has shown that temporary stimulus spending tends to linger and that two years after an initial stimulus, 95 percent of the spending surge remains. 27 Ratchet-up effect: Evidence from World War II suggests that when spending spikes, as is the case during the current recession, it tends not to return to pre-spike levels. 28 This ―ratchet up‖ in spending is exacerbated when federal spending is channeled through state and local governments, as was the case in ARRA. Data from 50 states over a 13-year period show that temporary grants from the federal government to state and local governments cause the latter to increase their own future taxes by between 33 and 42 cents for every dollar in federal grants received. 29 Cost overruns are the rule rather than the exception: The most comprehensive study of cost overruns examines 20 nations spanning five

continents. The authors find that nine out of 10 public works projects come in over budget. 30 Cost overruns dramatically increase infrastructure spending: Overruns routinely range from 50 to 100 percent of the original estimate. 31 For rail, the average cost is 44.7 percent greater than the estimated cost at the time the decision is made. For bridges and tunnels, the equivalent figure is 33.8 percent, and for roads 20.4 percent. 32 On average, U.S. cost-overruns reached $55 billion per year. 33 Even if they lead to localized job growth, these investments are usually inefficient uses of public resources. Inaccurate estimates of demand plague infrastructure projects: A study of 208 projects in 14 nations on five continents shows that 9 out of 10 rail projects overestimate the actual traffic. 34 Moreover, 84 percent of rail-passenger forecasts are wrong by more than 20 percent. Thus, for rail, passenger traffic average 51.4 percent less than estimated traffic. 35 This means that there is a systematic tendency to overestimate rail revenues. For roads, actual vehicle traffic is on average 9.5 percent higher than forecast traffic and 50 percent of road traffic forecasts are wrong by more than 20 percent. 36 In this case, there is a systematic tendency to underestimate the financial and congestion costs of roads. Survival of the un-fittest: Studies have shown that project promoters routinely ignore, hide, or otherwise leave out important project costs and risks to make total costs appear lower. 37 Researchers refer to this as the

―planning fallacy‖ or the ―optimism bias.‖ Scholars have also found that it can be politically rewarding to lie about the costs and benefits of a project. The data show that the political process is more likely to give funding to managers who underestimate the costs and overestimate the benefits. In other words, it is not the best projects that get implemented but the

ones that look the best on paper. 38 A rapid increase in stimulus spending makes things worse: There is an inherent tradeoff between speed and efficiency. Policy makers need time to weigh the merits of a project, structure requests for proposals, administer a fair bidding process, select the best firms, competently build the project, and impartially evaluate the

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results. Quite understandably, economists have found that when funds are spent quickly, they are not spent wisely. 39 In October 2010, President Obama conceded that, in fact, ―There‘s no such thing as shovel-ready projects.‖ 40 In sum, there are strong reasons to suspect that stimulus is not likely to be implemented as Keynesian theoreticians say it ought to be. This means that

even by Keynesians standards, the newest round of stimulus is likely to fail. Tellingly, the political economy problems that plague the implementation of stimulus were actually significant enough to make Lord Keynes himself a skeptic. Toward the end of his life, he wrote: Organized public works, at home and abroad, may be the right cure for a chronic tendency to a deficiency of effective demand. But they are not capable of sufficiently rapid organization (and above all cannot be reversed or undone at a later date), to be the most serviceable instrument for the prevention of the trade cycle. 41 Given the experience with recent stimulus packages, Keynes‘s observations appear to be remarkably prescient. Unfortunately, modern-day Keynesians appear not to have paid heed. Economists have long recognized the value of infrastructure. Roads, bridges, airports, canals, and other projects are the conduits through which goods are exchanged. In many circ*mstances, private firms can and should be allowed to provide this infrastructure. But in other cases, there may be a role for public provision at the local level. 42

But whatever its merits, infrastructure spending is not likely to provide much of a stimulus. As a

short-term measure, more deficit-financed infrastructure spending is a risky bet. At best, it is likely to be ineffective; at worst it will be counterproductive. One long-term impact of further stimulus is certain: it would leave the United States deeper in debt at time when we can ill afford it.

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Indict – Keynes

Keynesian economics failWolf 11 11/7, *Charles Wolf Jr. holds the corporate chair in international economics at the RAND Corporation and is a senior fellow at the Hoover Institution at Stanford University, “Where Keynes Went Wrong,” http://www.rand.org/blog/2011/11/where-keynes-went-wrong.html, AJ

It is generally recognized that the conceptual underpinnings for so-called stimulus programs lie in the theory developed by

John Maynard Keynes in the 1930s. That the practical results of these programs in recent years have been negligible, if not negative, while their costs have been high, may be sufficient grounds for avoiding them in the future. But what if the theory itself is flawed? For many economists, flawed theory would be a greater concern—surely more hurtful to professional pride—than ineffectual results from programs based on a valid theory. Moreover, it would mean no amount of effort to improve the design of stimulus programs is likely to help. Total stimulus costs have been high, but

reckoning them accurately isn't easy. They include $787 billion in federal spending that was legislated and appropriated in 2009 with the "stimulus" label attached to it. In addition, a proper accounting of the cost should include several other programs and outlays that, while not carrying the "stimulus" label, were designed to boost domestic spending or preclude reductions in spending that were otherwise expected to occur. These other programs include the following: TARP funding to relieve the impaired asset values and weakened balance sheets of financial institutions ($700 billion); bailout funds provided to support the auto industry ($17 billion); extension of unemployment benefits to support income and spending by unemployed workers ($34 billion); and temporary subsidies for the "cash for clunkers" program ($3 billion). These other measures should be included in a full reckoning of stimulus costs because of their shared common purpose: to boost aggregate demand, or avoid its further decline as a consequence of the Great Recession. All of these outlays, amounting to more than $1.5 trillion, are properly encompassed in Keynes's central policy prescription: namely, to use public policy aggressively to stimulate "aggregate demand." Those who have criticized the government's stimulus efforts for being too small may not realize how large they have actually been. What about the

results of the stimulus package? Between the end of the second quarter of 2009 (when, incidentally, the Great

Recession's two-year negative GDP trend ended) and the end of the second quarter of 2011, nearly all the stimulus funding was disbursed. The result was that GDP increased from $12.6 trillion (in 2005 prices) to $13.3 trillion —an increase less than half the dollar-for-dollar injection of stimulus money ! In the same period, gross private consumption rose by $400 billion, and gross private (nonresidential) fixed investment rose by $155 billion. In the same period, employment decreased by 581,000. A simple

accounting of costs and benefits—costs are high, benefits much lower—warrants skepticism about further recourse to stimulus spending. Still, it could be contended that, if the programs were better designed and better targeted in the future, results might justify the effort notwithstanding the recent record. This possibility warrants another look at the underlying Keynesian theory. The core of the theory is "aggregate demand" defined in terms of two components: consumption demand and investment demand. In defining and measuring these components, Keynes acknowledged, with unusual and becoming modesty, his debt to a then-contemporary Russian-American academic, Simon Kuznets, who pioneered the development of a national accounting framework, which Keynes used in formulating his general theory. (Kuznets received the Nobel Prize for economics in 1971; Keynes died before the prize, which is not awarded posthumously, was initiated.) Insufficient aggregate demand was Keynes's diagnosis of the Depression-era conditions of continued unemployment and stagnant economic growth. Consumption demand had sharply contracted owing to the Great Depression's effect on employment and income, and investment demand was depressed because profitable investment opportunities depended heavily on consumption, which had been decimated by the Depression. Keynes's prescription for escaping this vicious circle was to stimulate aggregate demand by aggressively increasing government spending and/or lowering taxes. Unlike many of his current disciples, Keynes acknowledged the potential of lower taxes to stimulate demand. However,

the room for remedial action through tax reductions was limited in the 1930s because prevailing taxes were already low. Consequently, in Keynes's view, increased government spending was necessary to boost aggregate demand—what was referred to in that day as "pump-priming" and these days as "stimulus." Moreover, whether the stimulus was to be provided by public works ("infrastructure"), by employing workers to dig holes and then fill them, or by other means didn't matter to the theory. With ample idle resources—specifically, unemployed labor and idle plant and equipment—it was assumed that the only missing ingredient was sufficient demand to jump-start the economy. One dollar of additional government spending would wend its way through the economy as first-round recipients spent most of what they received, second-round recipients, in turn, spent most of what they received, thereby raising the income and ensuing spending of the next recipients, and so on. The total effect would thus be a multiple of the initial increase in spending. If, for example, the proportion of government's increased spending that was spent by recipients was, say, 50 percent, the multiplier effect through the full economic circuit would be $2 for each dollar of increased spending; if the proportion were 60 percent, the multiplier would be 2.5. The similarities between the Depression era and the current circ*mstances of our post-Great Recession are obvious. So, where's the flaw? All economic theories involve assumptions. The critical question is whether the assumptions are realistic. If there is uncertainty about the answer, the follow-on question is: How much will it matter if the assumptions are wrong? Keynes assumed that the initial deficient level of aggregate demand would remain unchanged until the stimulative ("pump-priming") effect of additional government spending kicked in. In other words, increased government spending, or its anticipation, would not further diminish pre-existing levels of consumer demand and investment demand. However, Keynes's failure to consider the possibility of an adverse effect from government spending—that it might lead to still further decay in the prior levels of consumption and investment—was a fundamental flaw in the theory . So how might government spending actually undermine its explicit purpose of boosting aggregate demand? It is quite plausible that the behavior of consumers and investors might change as an unintended consequence of the increased government spending, and might do so in ways that would partly, fully, or even more than fully offset the attempted effort to raise aggregate demand. Consider "Ricardian equivalence"—a conjecture advanced by

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David Ricardo a century before Keynes's general theory and thus something Keynes was aware of, or should have been aware of. Ricardian equivalence suggested that consumers might reduce their spending to prepare for the tax increases they'd face in the future to pay for government spending financed by borrowing in the present. In recent years, Ricardo's conjecture has been applied and tested in a formal model developed by Robert Barro. That prior consumption demand might actually have been reduced as a result of recent government stimulus spending is suggested by two indicators: Since mid-2009, household savings increased by 2-3 percent of GDP, and household debt decreased by 8.6 percent ($1.1 trillion). It is also plausible that investment demand might shrink as a result of increased government spending or its anticipation. This diminution might occur if investors have recourse to other investment opportunities that seem more profitable or less risky than those that would accompany or follow the attempted government stimulus. For example, such opportunities might lie in investing abroad where tax liabilities are less onerous, rather than investing at home; or investors might choose to invest in long-term instruments (30-year U.S. government bonds) while reducing investment in fixed capital or equities. These opportunities might seem rosier because of anticipated increases in future taxes, or because of increased regulatory restrictions that might (and did) accompany the increased government spending. In fact, such alternative investment opportunities are much more numerous and accessible now than in Keynes's era. Failure to consider the potentially adverse effect of government spending on the preexisting level of aggregate demand was and remains a disabling flaw in Keynesian theory —then and now. If the theory's underlying logic is flawed, it can be expected that policies and programs based on it will fail . They have in the past. They should be avoided in the future.

Impossible to prove Keynesian Economics successBarro, 11— economics professor at Harvard and a senior fellow at Stanford's Hoover Institution(Robert, “Keynesian Economics vs. Regular Economics: Food stamps and other transfers aren't necessarily bad ideas, but there's no evidence they spur growth”, The Wall Street Journal, 8/24/11, http://online.wsj.com/article/SB10001424053111903596904576516412073445854.html)//JL

If valid, this result would be truly miraculous. The recipients of food stamps get, say, $1 billion but they are not the only ones who benefit. Another $1 billion appears that can make the rest of society better off. Unlike the trade-off in regular economics, that extra $1 billion is the ultimate free lunch. How can it be right? Where was the market failure that allowed the government to improve things just by borrowing money and giving it to people? Keynes, in his "General Theory" (1936), was not so good at explaining why this worked, and subsequent generations of Keynesian economists (including my own youthful efforts) have not been more successful. Theorizing aside, Keynesian policy conclusions, such as the wisdom of additional stimulus geared to money transfers, should come down to empirical evidence. And there is zero evidence that deficit-financed transfers raise GDP and employment—not to mention evidence for a multiplier of two. Gathering evidence is challenging. In the data, transfers are higher than normal during recessions but mainly because of the automatic increases in welfare programs, such as food stamps and unemployment benefits. To figure out the economic effects of transfers one needs "experiments" in which the government changes transfers in an unusual way—while other factors stay the same—but these events are rare. Ironically, the administration created one informative data point by dramatically raising unemployment insurance eligibility to 99 weeks in 2009—a much bigger expansion than in previous recessions. Interestingly, the fraction of the unemployed who are long term (more than 26 weeks) has jumped since 2009—to over 44% today, whereas the previous peak had been only 26% during the 1982-83 recession. This pattern suggests that the dramatically longer unemployment-insurance eligibility period adversely affected the labor market. All we need now to get reliable estimates are a hundred more of these experiments. The administration found the evidence it wanted—multipliers around two—by consulting some large-scale macro-econometric models, which substitute assumptions for identification. These models were undoubtedly the source of Mr. Vilsack's claim that a dollar more of food stamps led to an extra $1.84 of GDP. This multiplier is nonsense, but one has to admire the precision in the number. There are two ways to view Keynesian stimulus through transfer programs. It's either a divine miracle—where one gets back more than one puts in—or else it's the macroeconomic equivalent of bloodletting. Obviously, I lean toward the latter position, but I am still hoping for more empirical evidence.

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Keynesian Economics -- unreliable, unrealistic, and unsupportableRoss, 11— senior computer scientist and information security researcher at the National Institute of Standards and Technology, NIST (Ron, “Fatal Flaws of Keynesian Economics”, The American Spectator, 7/22/11, http://spectator.org/archives/2011/07/22/fatal-flaws-of-keynesian-econo)//JL

It's now clear that the federal government's massive stimulus spending has not achieved its objectives. Why hasn't it? It's important that we have answers to that question.The stimulus was premised on the economic model known as Keynesianism: the intellectual legacy of the late English economist John Maynard Keynes. Keynesianism doesn't work, never has worked, and never will work. Without a clear understanding of why Keynesianism cannot work we will be forever doomed to pursuing the impossible.There's no real mystery about why Keynesianism fails. There are numerous reasons why and they've been known for decades. Keynesians have an unrealistic and unsupportable view of how the economy works and how people make decisions. Short-Run FocusKeynesian policy advocates focus primarily on the short run -- with no regard for the future implications of current events -- and they assume that all economic decision-makers do the same. Consider the following quote by John Maynard Keynes: "But the long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean will be flat again."After passage of the stimulus package, Lawrence Summers, Obama's chief economic advisor at the time, often said that the spending should be "timely, targeted, and temporary." Although those sound like desirable objectives, they illustrate the Keynesian focus on the short term. Sure it would be convenient if you could just spend a bunch of money and make the economy get well, but it's not that simple.The implication of a Keynesian perspective is that you can hit the economy a few times with a cattle prod and get society back to full employment. Remember that so-called "cash-for-clunkers" program? Maybe it accelerated some new car sales by a month or two, but it had no lasting impact. The "Chicago School" is the primary source of serious research and analysis related to the Keynesian model. Two Chicago School conclusions, in particular, make it clear where Keynesian policies run aground. The two theories are the "permanent income hypothesis" and the theory of "rational expectations."The "permanent income hypothesis" was how Milton Friedman termed the findings of his research on the spending behavior of consumers. The MIT Dictionary of Economics defines the permanent income hypothesis as "The hypothesis that the consumption of the individual (or household) depends on his (or its) permanent income. Permanent income may be thought of as the income an individual expects to derive from his work and holdings of wealth during his lifetime." Whether consumers and investors focus mostly on the short run or the long run is basically an "empirical question." A convincing theoretical case can be made either way. To find out which focus actually conforms closer to reality, you have to gather evidence. Not Evidence-BasedMuch of the difference between the two schools of thought can be explained by differences in their methodologies. Keynes was not known for his research or empirical efforts. Keynesianism is definitely not an evidence-based model of how the economy works. So far as I know, Keynes did no empirical studies. Friedman was a far more diligent researcher and data collector than was Keynes. Friedman fit the theory to the data, rather than vice versa. The Keynesian disregard for evidence is reflected in their advocacy for more stimulus spending even in the face of the obvious failure of the what's already been spent. At a minimum, we are due an explanation of why it hasn't worked. (Don't expect that to be forthcoming, however). Failure to Consider Incentives Another of the Chicago School's broadsides against Keynesianism is the theory of "rational expectations." It's a theory for which the 1995 Nobel Prize for Economics was awarded to Robert Lucas of the University of Chicago. As economic theories go, it is relatively straightforward. It essentially states that "individuals use all the available and

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relevant information when taking a view about the future." (MIT Dictionary of Modern Economics) The rational expectations hypothesis is the simple assertion that individuals take into account their best guesses about the future when they make decisions. That seemingly simple concept has profound implications. The Chicago School's research led them to conclude that individuals are relatively deliberate and sophisticated in how they make economic choices. Keynesians and their liberal followers apparently think individuals are short-sighted and simple-minded. An elemental but too often overlooked reality about our economy is that it is based on voluntary exchange. Voluntary exchange is an even more fundamental feature of our economy than is the market. A market is any arrangement that brings buyers and sellers together. In other words, the primary purpose of a market is to make voluntary exchange possible. Voluntary exchange leaves large amounts of control in the hands of private individuals and businesses. The market relies on carrots rather than sticks, rewards rather than punishment. The actors, therefore, need to be induced to move in certain desired directions rather than simply commanded to do so. This is the basic reason why incentives are such an important part of economics. If not for voluntary exchange, incentives wouldn't much matter. In designing economic policy in the context of a market economy it becomes important to take into account what actually motivates people and how they make choices. If you want to change behavior in a voluntary exchange economy, you have to change incentives. Keynesian policies do not take that essential step. The federal government's share of GDP has gone from 19 percent to 24 percent during Obama's time in the White House. A larger government share of GDP ultimately necessitates higher taxes or more debt. In and of themselves, higher taxes retard economic growth because of their impact on incentives. The disincentive effect of higher taxes illustrates why big government is far costlier than it first appears.It's no accident that Keynesianism is so popular with liberals. It blends well with their unquenchable thirst for expansive government. It doesn't work for the economy but it works for them. The obvious failure of Keynesianism is further evidence of the bankruptcy of liberalism. Keynesianism is essentially all the Democrats have. It's a one-trick pony. That one trick hasn't worked and now Dems are floundering with nothing more to offer. All but one member of the president's original economic team has exited. According to liberal columnist Ezra Klein, "Lawrence Summers and Christina Romer were two of the most influential Keynesians in the country. Obama didn't just have a team of Keynesians. He had a Keynesian all-star team." Now the president has a Keynesian all-gone team. It will be a brighter day for the country when Keynesianism itself is gone for good.

Keynesian Economics are nothing but a theorySanandaji, 11— researcher at the Institute of Industrial Economics and holds a PhD in public policy from the University of Chicago (Tino, “Why Keynesianism Works Better in Theory Than inPractice”, The American, 12/1/11, http://www.american.com/archive/2011/november/our-two-keynes-problem)//JL

By the late 1970s, the failure of Keynesianism in demand management led economists to become increasingly skeptical of active fiscal stabilization policy. Macroeconomic theory advanced beyond the old, simple Keynesian models by attempting to take into account the decision-making of individuals. In 2011, some of this work was awarded the Nobel Prize in Economics. Economists did not turn against Keynesian policy purely for theoretical or even ideological reasons, but rather because of the disappointing experience from pervasive deficit spending over a long period in a large number of countries. An influential 2003 study examined Keynesian policies in 91 countries in the postwar period and found that “governments that use fiscal policy aggressively induce significant macroeconomic instability.”1,2 Economists still recognized some use for Keynesian policies, but no longer viewed them as unambiguously beneficial. When asked if “fiscal policy can be an effective stabilizer,” the majority of U.S. graduate students in economics “agreed with some reservation.”3 A minority of economists took matters further, claiming that Keynes was wrong not only about fiscal policy, but also

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about the importance of aggregate demand. This “real business cycle” theory explained recessions, including the Great Depression, by reference to aggregate supply alone. This critique of the Keynesian theory of recessions was, however, a minority opinion even prior to the 2008 crash. For instance, Milton Friedman and Anna Schwartz’s monetarist explanation of the Great Depression, in which poor monetary policy played the role of chief culprit, is fundamentally a story of aggregate demand and remains the standard reference in the literature. The economic profession never abandoned Keynes’s insight regarding the importance of aggregate demand for recessions, it only became more skeptical of his prescription for solving the problem. At some point, deficit spending starts doing more harm than good by adding to fear and uncertainty. The 2008 crash shocked the country into briefly disregarding the disappointing Keynesian track record. But the crash itself only confirmed the Keynesian diagnosis, while proving nothing about the effectiveness of fiscal policy for curing the recession. Nevertheless, the Obama administration chose a strong dose of Keynesian medicine, confidently predicting that unemployment would be lowered to 6 percent by the end of 2011. As we now know, this promise was not fulfilled, with unemployment currently at 9 percent. This has, fairly or not, once again soured American voters on Keynes, with three-quarters of the public concluding that the stimulus failed. Of course, the high unemployment rate alone does not prove that the stimulus failed. It may be that unemployment would be 15 percent without it, as former House Speaker Nancy Pelosi has suggested. On the other hand, the poor health of the patient cannot be ignored when evaluating a Keynesian cure which in practice has a spotty track record. Another argument, most notably made by Nobel Prize winner Paul Krugman, is that the high level of unemployment simply proves that the stimulus was too small. But by any objective measure, the fiscal stimulus was very large. Total government spending ballooned from approximately $4.5 trillion before the crisis to $5.5 trillion per year thereafter, adjusted for inflation.4

Keynesian Economics proven wrong—result of attempts is potential recession Kudlow, 12— NROeconomicseditor and host of CNBC's"Kudlow Report” (Lawrence, “Job Report Is Catastrophic For President Obama, investors.com, 6/1/12, http://news.investors.com/article/613429/201206011834/jobs-report-bad-news-for-barack-obama.htm?p=full)//JL

You would think $1 trillion in spending stimulus and $2.5 trillion of Fed pump-priming would produce an economy a whole lot stronger than 1.9% GDP growth, which was the revised first-quarter number. And you'd think all that government spending would deliver a whole lot more jobs than 69,000 in May. But it hasn't happened.The Keynesian government-spending model has proved to be a complete failure. It's the Obama model. And it has produced such an anemic recovery that frankly, at 2% growth, we're back on the front end of a potential recession. If anything goes wrong — like another blow-up in Europe — there's no safety margin to stop a new recession.And that brings us to the grim May employment report, which generated only 69,000 nonfarm payrolls. It's the third consecutive subpar tally, replete with downward revisions for the two prior months. It's a devastating number for the American economy, and a catastrophic number for Obama's reelection hopes. All momentum on jobs and the economy has evaporated. Inside the May report, the data are just as bad. The unemployment rate rose slightly from 8.1% to 8.2%. The so-called U6 unemployment rate, tracking the marginally employed or completely discouraged, increased to 14.8% from 14.5%. And labor earnings are barely rising at 1.7% over the past year, almost in line with the inflation rate. In fact, through April, after-tax, after-inflation income is scarcely rising at 0.6% for the past year. The private workweek also fell in May. So did the manufacturing workweek and aggregate hours worked for all employees. The small-business household survey did rise, but that follows declines in the prior two months.

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***NUCLEAR WAR STUFF

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Yes Extinction

There will be no areas for refugeKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDNot only would major metropolitan areas be heavily damaged, whole regions would be seriously incapacitated. This is true in part because major urban centers tend to be relatively close to one another, such as in the Northeast Corridor, along the southern rim of the Great Lakes, and in Southern California. The primary area of destruction would be the Northeast/East-Central tier of states from Massachusetts to Minnesota. The one-megaton weapon component of the larger attacks (A-3, A-4) would destroy 50% or more of the industrial capacity of every state in the area, except Wisconsin and Indiana, which would suffer between 40 to 50% Manufacturing Value Added (MVA) destruction.[13] Thus, the nation's largest block of industrial states is unlikely to continue to exist as a significant functioning unit because of the loss of population, industrial plants, and economic systems. Several other states or industrial regions are likely to suffer similar destruction and disruption, making their contribution to the survival or recovery of the surrounding territory highly problematic. Key parts of the Sunbelt, sections of Texas, Louisiana, Oklahoma, Missouri, and Florida; and the area covered by California, Arizona, Utah, and Colorado would be severely damaged. These regional patterns of destruction suggest that there will not be large, undamaged areas able to provide adequate refuge and support for the surviving urban population or to foster a rapid economic recovery. Although extensive rural or semi-rural territory will remain undamaged, it is largely devoid of the industrial infrastructure needed for substantial economic recovery.

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Yes Extinction – AT: Coal Solves Post Fallout

Coal does not solve energy post falloutKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDAlthough coal is the most abundant fossil fuel in the United States, substitution of coal for oil will be very limited in the near and mid-term because of existing constraints and those imposed by nuclear war on fuel conversion and coal mining capacity. Coal is mined by electrical and diesel equipment, and it is transported by trucks and trains which will be damaged and short of fuel themselves in the post-attack period. Power generating stations that survive the attacks would also be affected by fuel shortages. As is the case with refining and transporting fossil fuels, efforts to maintain or expand electrical generating capacity will suffer from reduced maintenance capability and lack of equipment and replacement parts. In fact, the loss of skilled personnel is a potentially more significant threat to power plant operation than any physical losses.

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Yes Extinction – AT: Energy Solves Post Fallout

Energy sources aren’t usable post falloutKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDBoth household and industrial fuel consumption will decrease as a result of losses in manufacturing capacity, population, and housing. It is not possible to predict precisely whether surviving fuel and power resources will match demand, though under the assumed attacks, refining capacity losses exceed losses in industrial capacity. Nor can we know in advance precisely what sort of price system would exist -- whether prices would be controlled by government -- or even the extent to which barter would replace monetary transactions. It does seem clear that maldistribution of surviving fuel stocks and transportation system damage will create local shortages and hamper immediate relief efforts. And what about recovery? Postwar experience in Europe and Japan indicates that to replace and rebuild the fuel processing and distribution systems, as well as electrical generating and transmission facilities, will be time-consuming. Even if domestic or imported fuel is available in adequate quantities -- an uncertain assumption -- the capacity to convert it efficiently to its end use is likely to be inadequate for several years, thereby retarding economic recovery from the post-attack base. The American economy depends on large quantities of electrical power and fossil-fueled transportation systems; combined with the vulnerability of petroleum refining facilities and significant dependence on foreign petroleum, this suggests that the magnitude of the difficulty of meeting energy needs may be one of the most critical determinants of the nation's long-term ability to recover economically from urban-oriented nuclear attacks.

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No Extinction

Transition Wars would lead to Limited nuclear war – not lead to extionctionKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDIn 1974, Secretary of Defense James Schlesinger formally acknowledged the adoption of limited nuclear war (counter- force) as a part of United States strategic doctrine.[1] "Limited" nuclear war is conceived of as a nuclear attack on one or more elements of a nation's land-based strategic arsenal: Intercontinental ballistic missiles (ICBMs), strategic bombers, or nuclear-powered ballistic missile submarine support bases. Other variations on the concept include possible attacks on other critical military, industrial (war production), or command and control centers. Individually, or in combination, these options could be used either as a means of paralyzing effective military response or to demonstrate the attacker's resolve and ability to employ the ultimate weapon. The adoption of this strategy rests on two assumptions. The first is that it is possible to limit and structure a nuclear attack that will seriously damage ICBMs or other strategic targets without causing substantial direct or indirect damage to the civilian population. In other words, societal (and thus political) impacts would be so benign that the attacked nation would perceive it as "acceptable" and would not automatically trigger escalation toward a full-scale nuclear response. The second, and inextricably related, assumption is that following a limited nuclear attack, effective political mechanisms would exist to constrain and terminate the nuclear exchange, preventing escalation to a full-scale nuclear conflict. Thus, it presupposes the physical survival of an effective chain of command as well as a central government that has sufficient credibility, legitimacy, and authority. Within the context of the goals of limited nuclear war, then, the central issue to be considered is not physical survival, but rather the domestic (and international) political acceptability of the damage inflicted by the attack. Essentially the question is whether after surveying the extent of the perceived damage, the national leadership of the country attacked would be able to pursue this so-called "rational" policy of restraint. The effects discussed below are based on a representative hypothetical attack in which the targets would be the U.S. ICBM arsenal and Strategic Air Command bases. The United States has approximately 1000 ICBMs, which are based in the states of South Dakota, North Dakota, Missouri, Kansas, Arkansas, Montana, Wyoming, and Arizona. The 46 Strategic Air Command bases are spread throughout the nation. For each ICBM target, it is assumed that two weapons, each one megaton, would be dropped at ground level. (For purposes of comparison, these weapons would then have approximately 80 times the force of the bombs dropped on Hiroshima and Nagasaki.) The resulting fallout from the ICBM attacks would cover substantial parts of the Farm Belt, the Midwest, and some of the South and Southeast. The bomber or submarine bases would be attacked by three and one, one-megaton weapons, respectively, exploded to maximize blast damage, rather than fallout.

Nuclear War doesn’t lead to Extinction - just casualtiesKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSD

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An initial Department of Defense projection in 1974 estimated less than one million fatalities in the original version of a "limited" attack scenario.[2] The Office of Technology Assessment (OTA) reviewed attack scenarios and produced estimates of 7 to 15 million deaths.[3] Other projections estimate 10 to 20 million injuries, most resulting from radiation exposure due to fallout.[4] For comparison, during World War II the Soviet Union lost 20 million people, but over a period of four to five years; all U.S. combat fatalities in World War II were only 290,000.

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No Escalation

Limited Nuclear attack won’t go full-scaleKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDIt is now possible to target selectively for maximum damage key components of the U.S. or Soviet economic and urban infrastructure, using only a small proportion of the current nuclear arsenal -- for either a first strike or counterattack. The combination of technological advances in weaponry plus the highly integrated nature of technical/industrial societies results in potentially devastating damage from a relatively small attack. To demonstrate this potential, the attacks hypothesized for this consideration use only a fraction of existing nuclear weapons. As already noted, this scenario takes place in the U.S., but there is ample evidence that the Soviet Union would be just as vulnerable -- or even more so -- to such a disciplined attack. In our hypothetical scenario, 34 major categories of industry were assumed as targets. Standard Industrial Classification (SIC) codes were used to identify these major categories. The study established the geographical distribution, capacity and location, by plant, of these major industries. The 71 largest metropolitan areas for 1980 were assumed to be the major initial targets, since they contain the largest concentration of the 34 critical industries. The attacks (designated A-1 the largest to A-4 the smallest) range in size from 800 weapons, with a total destructive power equivalent to about 500 weapons, to 400 weapons totaling 150 equivalent megatons. For comparison, the Soviet SS-18s (which represent 308 out of approximately 1600 of the USSR's ICBMs) are estimated to have over 2,400 warheads, each with the destructive power of at least one megaton. These attacks had two elements: 100(A-4), 200(A-3), 300(A-2) and 500(A-1) one megaton weapons used against the 71 U.S. chief urban centers containing 60% of U.S. manufacturing capability; and a second part in which 200-300 smaller 100 kiloton weapons were employed specifically to destroy eight key elements of the economy such as petroleum refining, iron and steel works, nonferrous metals (aluminum, zinc, copper, lead), drugs, electrical distribution products, and engines and turbines, which would reduce these industries to only 2 to 3% of their pre-attack capacity.[9] No fallout is produced in these attacks. Selective use of weapons producing fallout would increase the effects described below. The largest or "reference" attack -- A-1 -- uses 500 one megaton warheads and 200-300 smaller 100 kiloton warheads. It is based on data developed in a 1970 study entitled Potential Vulnerabilities Affecting National Survival prepared for the Army s Office of Civil Defense.[10] The PVANS study assumed a nuclear attack intended to cripple the national economy recovery capabilities of the United States. Its purpose was to determine the number and variety of weapons needed to accomplish this objective.

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Deterrence Checks

MAD and Limited Nuclear War means assure wars won’t go full scaleKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDThere are significant difficulties in establishing and maintaining a dialogue about nuclear war that would enable policy-makers as well as citizens to analyze realistically the implications of our current and proposed policies, and seek to implement necessary changes. Those images of holocaust and unspeakable damage often close off debate. They are reinforced by the basic strategy of the U.S. and U.S.S.R. -- deterrence, or mutually assured destruction (MAD). The object of this strategy, pursued since the 1960s, is as it states, irrevocable destruction. MAD promises that even after a surprise attack (or first strike) both adversaries would retain weapons sufficient to inflict totally unacceptable damage on the other. Therefore, an adversary would be deterred from initiating a nuclear war because of the certainty of devastating retaliation. On the other hand, technological advances producing sophisticated weapons capable of increased accuracy and targeting flexibility have created a set of confusing and expanding hypothetical versions of "controllable" or "limited" nuclear war. We therefore have to determine the credibility of scenarios that claim to be capable of producing attacks with surgically precise accuracy, permitting nations to engage in a new type of subtle, benign nuclear exchange -- more an apparent extension of conventional warfare than a massive holocaust. In other words, "limited" nuclear war, at least in strategic planning terms, has crept into our vocabularies and has become "thinkable," i.e., potentially survivable. As unobtrusively, a companion strategy of "crisis relocation" -- massive evacuation of urban areas in advance of a threatened attack to reduce casualties -- also has become a focus of interest because of its proposed ability to support successful "war fighting."

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Turns Case

Attack Destroys Transportation InfrastructureKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDThe U.S. food system (production, processing, distribution) is both highly integrated and dispersed. Since food may travel 1000 miles or more from production to consumer, the system depends very heavily on effective transportation and organization. For example, almost one-third of the population lives in counties that produce less than a two-week supply of their grain needs, and half the population lives in counties with two months or less production capability. Approximately two-thirds of the nation's food (as measured by calories) is produced in the North Central tier of states from Indiana to Colorado, which themselves contain only about one-quarter of the population. Moreover, this system is highly dependent on petroleum (farm equipment), electricity (particularly dairy), and fertilizers and pesticides. If, for example, dairy farms lost electricity, many cows could not be milked adequately. Without proper milking a cow would simply dry up in less than a week until it calved nine months later. Finally, almost 90% of U.S. processing capacity (canning, baking and packaging) would be in regions destroyed or severely damaged by the attack.

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Impact – Economy

Nuclear attack Crashes US EconomyKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDCasualties, evacuation, and land denial would create severe national and local economic dislocations. Approximately one-third of the U.S.'s manufacturing capacity lies within the geographic areas most affected by fallout.[5] A major evacuation would leave the regional economy in a shambles. Because of economic interdependence, the problem of "bottlenecking" -- serious disruption of the national economy -- would be likely. Bottlenecking is the disruptive effect that losses in a key industry (e.g., steel) have on other dependent economic activities (automobiles and machine tool production). Even modest reductions in capacity of basic, pivotal industries can have severe, widespread effects on the economy. Despite the possibility of product substitution (e.g., plastics for steel) or high inventories of selected products, the short- and mid-term ramifications of a disruption of even 25 to 50% of the affected region's manufacturing activities (equivalent to 8 to 15% of national economic activities) would be a serious blow to the national economy. This disruption could easily last several months, and in a post-attack stalemate with the possibility of future attack requiring prolonged urban evacuation, it would become worse. There are other likely consequences that are less obvious. The banking system would face a particularly severe burden, for example -- potential bankruptcies; defaults on basic time payments, such as mortgages and major appliances; and major shifts of monies by individuals during evacuation. In contaminated areas individuals or businesses would be unable to gain access to money, especially in local banks, for long periods. In general, it would be virtually impossible for banks, either regionally or nationally, to pursue "normal" lending and borrowing policies. Payments such as rents and salaries to businesses or individuals would also have to be deferred. Business insurance would certainly not cover this type of catastrophe. On a scale unknown in U.S. experience, there would probably be a massive outcry for the federal government to provide regional disaster loans to prevent bankruptcy and help resettle workers and their families from severely contaminated areas. The injured and evacuated population would create enormous social service demands (medical care, welfare, emergency housing, etc.) requiring huge sums of money to be spent rapidly. Unprecedented government intervention would probably be demanded to save industries from bankruptcies, allocate goods, and determine industrial priorities. Since individual, industrial, and even regional economic stability would depend on which industries and plants were decontaminated and/or received needed financial support first, implementing these governmental policies would be politically explosive.

Attack would decimate economy for over 50 yearsKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDDepending on the size of the attack, casualties would range from 20 to 45% of the U.S. population (40 to 90 million people) including 20 to 30 million injured. From 25 to 65% of the economy would be destroyed.[11] The gross economic figures seriously understate the problem since even using the smallest attack A-4 (100 one megaton, 200-300 one hundred kiloton weapons), specifically targeted key industries are likely to be well over 50% destroyed -- some

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as high as 80 to 90%. To put these numbers in perspective, a Stanford Research Institute (SRI) study for the Office of Civil Defense (the Federal Emergency Management Agency's predecessor) estimated that to recover from nuclear attacks in the range discussed here would take well over a decade. We believe these estimates are based upon unrealistically optimistic assumptions -- or as the authors themselves state, the "upper limits on potential recovery. Projected recovery rates should prove over optimistic when compared with rates actually realized in a real case."[12] If recovery is possible, and that is an open question, a more reasonable estimate would be several decades -- perhaps 40 or 50 years. Of course the attacks described above are not full-scale exchanges; under those circ*mstances the number of warheads and megatons directed at urban/industrial targets could easily reach 2000, 3000, or more, as well as substantial fallout from ground bursts not included as part of attacks A-1 to A-4. In the case of a large-scale attack the damage would be even more severe and widespread than in the discussion to follow; combining the effects of Parts I and II might provide the minimum damage expected with a full-scale attack.

Even a small attack destroys Econ and social organizationKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDDespite the effects of so-called urban sprawl and industrial migration, industry and population remain concentrated in a relatively small number of urban areas which present particularly vulnerable targets to nuclear weapons. Nearly 60% of the U.S. population lives on only 1% of the total land area of the United States. This is a result of the fact that approximately 85% of the population of large metropolitan areas lives on only 10% of the total urban land area. The population within these metropolitan regions is concentrated in very high-density areas, rendering the U.S. even more vulnerable to an "economic" attack. For example, the implications of urban concentration are illustrated by the smallest attack, A-4. It would cause the destruction of about 20 to 30% of total manufacturing capacity and 44 to 55% of the manufacturing capacity in the 71 largest metropolitan areas. In cities as diverse as New York, Chicago, Los Angeles, and Akron, Ohio, A-4 would destroy approximately 50% or more of their manufacturing capacity. When the number of one megaton weapons in the attack on these cities is increased five-fold (500%), as in A-1, casualties and industrial damage increase only by approximately 200%. Therefore, devastating economic destruction, disruption, and social disorganization would be caused even by the smaller attacks, since in terms of the destructive effects of nuclear weapons, population and industry are not really dispersed. In the Soviet Union, industry and population are concentrated even more densely than in the United States.

Rebuilding after economic attack is impossible Katz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDA nuclear war would fragment the U.S. economic system; its integration as an effective system would be seriously in question. Economic attacks would not only damage the industrial base (factories, etc.), they would also thin the ranks of the technical and managerial personnel. Moreover, they would disrupt and destroy supporting financial structures, throwing into question the value and utility of money, as well as the value and ownership of goods and property; records of financial transactions would be destroyed, and the lending and borrowing

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system (banks and the Federal Reserve) would collapse with the disappearance of assets and the non-payment of debts. Also associated with extensive industrial damage is injury to the basic physical support systems. In particular, the urban infrastructure in attacked areas -- transportation, utilities, housing, fuel and food distribution systems, sanitation systems, and medical care services -- would emerge either badly damaged or of very limited use in supporting industrial workers. To rebuild these systems or to duplicate them elsewhere would be a lengthy but necessary process, diverting resources from the economic expansion necessary to achieve rapid full recovery. The casualties (dead and injured) resulting from this type of attack would be incomprehensible, even if some reduction due to strategies of civil defense (evacuation) were possible. While the monumental loss of skilled workers, managers and economic leadership has already been noted, the key to the reality of the postnuclear attack period is the staggering burden of 20 to 30 million injured, many of whom would never again be fully productive. Who would care for them? Who would provide the support? What would be the cost to society in delayed recovery and social stability? These are almost unanswerable questions, but one thing is clear: The physical resources left after a "limited" nuclear attack will not exist after an economic attack.

Attack destroys ability to save and investKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDPursuing full economic recovery will place enormous demands on the damaged energy system, even if stringest rationing were imposed on individual consumption. It remains doubtful whether the badly damaged economy with its output greatly curtailed would be able to generate the enormous sums of capital and other resources required to refurbish the national energy system and to purchase foreign petroleum (assuming it is available). After a limited nuclear attack, people's time preferences would increase dramatically, and savings and investment would nearly grind to-a halt, even if the institutions to channel savings into rebuilding productive capacity should happen to survive. It is not a far-fetched prospect that the victim of an urban-oriented thermonuclear attack would find itself in the position analogous to many of today's least developed countries -- in a vicious circle where essential consumption prevents accumulation of the surplus resources required to expand productivity and output.

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Impact – Nomz

Nuclear Attack kills food productionKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDFallout would also significantly damage the U.S. food-producing system. The states in the Midwest, Farm Belt, and South/Southwest would be most affected by fallout. They produce 40 to 80% of the U.S. grains, such as wheat, rye, corn, and soybeans, and contain 40% of the cattle and 60% of the nation's hogs. Overall, these states produce about half of the U.S. food energy (calories). With virtually no fallout protection, cattle, hogs, and other animals would be particularly vulnerable since relatively low radiation doses can cause injury or death, similar to levels injuring humans. Besides direct destruction of crops or livestock, many farmers would be killed, injured, or permanently disabled, leaving the food production system without the skilled manpower needed to quickly renew its productivity. In addition, even if the skilled farmers are available, food producing areas would be contaminated; soil radiation levels would be higher than what is considered "acceptable" in peacetime for growing crops. There would also be residual levels of radiation representing unacceptable occupational (worker) and general population exposures. Thus, in vast areas of such states as Montana, North and South Dakota, Nebraska, Missouri, and Illinois, such land denial is certain to occur; crops would be lost and farms unusable for months, or even years, where there are radioactive "hot" spots. All these factors combined will result in severe disruption to the most significant and productive parts of the U.S. agricultural system for a period extending far beyond the attack. Since it is not unusual to have food travel 1000 miles or more from farm to market, a breakdown of the distribution system is likely to cause imbalances of food supply among regions. (The Northeast, for example, produces only 15% of its needs.) Such a geographical imbalance could result in major conflict among regions. The reality is that with huge areas contaminated with radioactivity, tens -- perhaps a hundred -- million or more people evacuating their homes, regional hoarding likely, and social disorganization widespread, the distribution system would be ineffective for months. Prices also would rise dramatically, and major government intervention and controls would be likely results.

Food transportation destroyed by attackKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDTherefore, while mechanization, automation, and widespread use of chemical fertilizers and pesticides have made American food production comparatively very efficient, they have also created a situation in which large urban populations distant from their suppliers are totally dependent for food supplies on a system that is highly vulnerable to nuclear attack.Finally, as we noted in the discussion of limited nuclear war, many other nations that depend on U.S. food production will be affected. A disruption or partial destruction of U.S. agriculture will have implications throughout the world food market, dramatically cutting supplies and increasing prices. For surviving supplier nations, food could quickly become a major political weapon; for consumers, it could become a focal point of desperate conflict in international affairs. From a humanitarian and political perspective, this vulnerability is a serious concern.

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Impact – Psych?

Nuclear attack harms psych – kills social and economic funtionsKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDFrom a psychological point of view, limited nuclear war probably is the worst of all worlds. The imagery of nuclear war, the pervasiveness of casualties, the possibility of massive media coverage and the intense fear of radioactivity that has been manifested in the United States, would spread widely the nuclear war survivor syndrome -- the powerful sense of personal vulnerability, helplessness, guilt, isolation and fear -- seen to varying degrees in the Hiroshima and Nagasaki survivors. If there is any doubt about the effects of the fear of radioactivity, the psychological effects and "loss of trust" described by the President's Commission, and subsequent studies of the accident at Three Mile Island, should provide ample evidence.[8] This would be true of the fallout from an ICBM attack even without the additional impacts of a geographically dispersed SAC-based attack, since fallout would create throughout the nation the image of nuclear threat and vulnerability. The disorienting and debilitating nature of this type of psychological syndrome would threaten an individual's social and economic functioning.

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Impact – Trade

Nuclear Attack kills International tradeKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDNot only is the domestic economy highly integrated and interdependent, so is the international system. Consequences of a limited nuclear war would be felt beyond the U.S. Reductions in industrial and food production would trigger a severely imbalanced import/export trade. This would in turn under- cut the dollar's stability and the international monetary system. The United States plays a key role as a world food producer, exporting food to many nations, such as Japan. The U.S. produces 50% of the wheat and 70% of the corn used for grain, and 80% of the soybeans traded in the world. As a result of a severely damaged food production and distribution system, exports would be severely limited, if they are permitted at all. Thus, a significant number of countries may find themselves inadvertent victims of this attack, with their own stability threatened.

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Evacuation Impossible

Nuclear attack makes Evacuation is impossible Katz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDFallout would be so intense that massive evacuation of the affected areas in the Midwest, South, and Farm Belt would be required; relocation would last for weeks, months, and in some cases, even years. At least 30 to 40 million people would be forced to leave. However, in a stalemated situation -- as "limited" nuclear war is likely to be initially -- well over 100 million people, mostly from major urban areas, would either leave spontaneously or be required to leave by government directive. The implications, particularly for the economy, are dramatic. As Fred Ikle, current Undersecretary of Defense for Policy, concluded 25 years ago, "not only nonessential persons but most of the workers will remain evacuated as long after the first nuclear attack as further attacks appear likely."[6] Certainly this would be the case in a limited nuclear war. If evacuation were to result in a prolonged relocation, divisive social conflicts, as well as economic and social dislocation, would be likely. Under much more favorable conditions in Great Britain during World War II, relationships between evacuees and their hosts degenerated quickly under the influence of prolonged stress, uncertainty, substantial class and urban-rural differences, and inadequate social service resources. This experience was not unique. Japan and Germany in World War II, and even the Netherlands in peacetime, experienced these type of conflicts. Under a limited war scenario in the United States, to absorb the evacuated population the number of people living in a single house or apartment in the host areas would have to increase six times (from three people to eighteen). It is not hard to imagine the conflict and stress that type for crowding would create.[7] Thus these problems are likely to be much more intractable under the "limited" war scenarios because of insufficient social services and the massive numbers of people involved. In threatened but unaffected metropolitan areas, decisions about who will be evacuated and when could become politically explosive -- fraught with fears of one group or another becoming the expendable victims. This is not to mention the problem of deciding when and how to evacuate special populations -- prisoners, patients in acute and chronic care facilities, etc.

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Hospitals Stuff

Hospitals can’t handle nuclear aftermathKatz and Osdoby 82 - Arthur M. Katzis author ofLife After Nuclear War(1982, Ballinger and Co.) Served as consultant to the Joint Congressional Committee on Defense Production, for which he wroteEconomic and Social Consequences of Nuclear Attacks on the United States(1974, Senate Banking, Housing and Urban Affairs Committee) and Sima R. Osdoby is a graduate student in the Department of Political Science, The Johns Hopkins University. (Policy “Analysis of The Social and Economic Effects Of Nuclear War”, Cato Institute April 21, 1982 http://www.cato.org/pubs/pas/pa009.html) MSDWhat would this level of destruction mean? If in the most heavily contaminated and damaged regions, all the doctors survived and hospitals were usable, there would be one doctor for every 50 or 100 injured, and between 10 and 30 patients per available hospital bed. Even if the entire national health care system was used, the patient-doctor ratio would be between 25 and 50 to 1 and patients per hospital bed between 10 and 20 to 1. Care for patients suffering from other medical problems, such as heart attack and cancer, would be significantly degraded for an extended time because of the competing and continuing demands of those injured by fallout, the loss of physicians and hospitals (because of contamination) in specific regions, and potential reductions in the manufacture and distribution of medical supplies (about 30% of all drugs are manufactured in the regions most affected by fallout). For a more specific example, to treat a single patient exposed to substantial levels of radiation (200 Radiation Equivalent Man -- REMS -- or more) would require massive medical resources -- intensive care, bone marrow transplants, blood transfusions and antibiotics. In this type of attack hundreds of thousands -- perhaps millions -- would require complex bone marrow transplants to assure survival. Because of reduced resistance to infectious diseases, all clinical cases (a radiation dose exceeding 50 REMS) would need continuous protection against infection, involving high doses of antibiotics, etc. Treating large numbers would rapidly drain existing supplies and professional energy. As antibiotics supplies dwindled and immunization proved ineffective in this radiation-weakened group, a huge reservoir of potential disease carriers would develop. Diseases such as polio might reappear. Other key elements of medical care support systems, such as medical insurance and records, would be disrupted and in chaos after evacuation.

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***MISC

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AT: Gas Tax CP

Increasing the gas tax and user fees doesn’t solve the affHoleywell 11 February 2011, *Ryan Holeywell covers the federal government, municipal distress and transportation issues for GOVERNING. The Washington Post and USA Today have published Holeywell’s previous work and he has appeared on CNN and public radio to discuss his articles, “Do Roads Pay for Themselves?” http://www.governing.com/topics/transportation-infrastructure/Do-Roads-Pay-Themselves.html, AJ

Do roads pay for themselves? That's the question posed by a new report from the nonprofit U.S. Public Interest Research Groups

(PIRG). The organization’s conclusion? A resounding no. Since 1947, researchers have found that the amount of money spent on highways, roads and streets has exceeded the funds raised from gas taxes and other user fees by $600 billion, "representing a massive transfer of general government funds to highways." In fact, as of 2007, fees charged to motorists covered only about half the cost of building and maintaining the country’s roads. The rest is financed with other taxes and bonds. Beyond the numbers, the report further discredits highway advocates’ oft-repeated claim

that, from a budgeting standpoint, roads are self-sufficient. The problem isn’t really that roads don’t pay for themselves. Rather, it’s that their advocates sometimes wrongly insist that they do, all in an effort to justify roadway construction at the expense of other forms of transportation like mass transit. "People want to keep this myth of user fees and self-supporting roads," says Phineas Baxandall, a senior analyst at U.S. PIRG who

co-wrote the report. "It sort of privileges roads as a spending item." That's a dangerous claim to perpetuate, especially at a time when budgets are tight. But it's been an effective way to ensure that roads and highways get preferential access to funding. "Often when people come up with proposals on how to change transportation

spending," Baxandall says, "a big ending of conversation about reform is to say, 'You can't do that. The gas tax money is a user fee, which is dedicated for a particular purpose.'" That line of reasoning makes even less sense considering that the Highway Trust Fund -- which gets its money from the gas tax -- has been supplemented with more than $34 billion in federal general fund revenue since 2008. The report is something of a shot across the bow at groups like the American Road & Transportation Builders Association (ARTBA) and others that advocate for highway spending -- though that's not how they see it. "It's like taking a shot at an aircraft carrier with a pea shooter," says Jeff Solsby, a spokesman for ARTBA. "The reality is these guys live on another planet." Solsby takes particular issue with a part of the report that notes that the nonmonetary cost of highway expansion -- such as environmental damage, the proliferation of sprawl and a heightened dependence on fossil fuels -- is absent from their supporters' calculations of cost. "It's

creating a new mathematical model nobody else uses," Solsby says. "It's trying to create a new set of rules to the game." But in some ways, that’s exactly U.S. PIRG's point: The game is broken. "One of the reasons our voice is very different is we don't have a dog in the fight of how big aggregate transportation spending should be," Baxandall says. The existing model ensures that highway projects have a guaranteed funding source, regardless of whether there are priorities elsewhere. "The bottom line is we should spend the dollars where they're going to get the best bang for our buck," Baxandall says. "From that standpoint, it doesn't really matter where the dollar originated."

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AT: States CP – Deficit High

The state budget deficit is rising LA Times 12 (Chris Megerian and Anthony York “State deficit estimate hits $16 billion” http://articles.latimes.com/2012/may/13/local/la-me-0513-state-deficit-20120513) //CG

SACRAMENTO — California's projected budget deficit has ballooned to $16 billion, much larger than the $9.2 billion estimated in January, Gov. Jerry Brown said, and he warned of more painful spending cuts. "We will have to go much further, and make cuts far greater, than I asked for at the beginning of the year," Brown said in a video posted Saturday on YouTube. He plans to detail his revised spending plan in the Capitol on Monday. It's a significant setback for Brown, who began his return engagement in Sacramento by promising to get the budget back under control. Advocates expect the state's financial problems to take an even greater toll on welfare and healthcare for the poor; state workers are also bracing for cuts. California's financial situation worsened this year after the courts and the federal government blocked hundreds of millions of dollars in cuts to healthcare programs, and Democratic lawmakers refused to make reductions Brown wanted in March. In addition, taxes fell short of expectations, particularly in April, the most important month for income taxes. There's a $3.5-billion tax shortfall in the current fiscal year, according to the controller. The state also has spent $2.1 billion more than expected. Brown's video announcement did not specify what new cuts he will ask lawmakers to make. On Thursday he said his revised spending plan would fall between $85 billion and $90 billion, down from the $92.6-billion proposal he released in January. Anthony Wright, who advocates for affordable healthcare, predicted that Monday would be the "anti-Christmas." College leaders are also concerned, and University of California officials say they may have to raise tuition at least 6% in the fall if they don't get more money. Lawmakers will spend the next month negotiating a final spending plan, which is due June 15. Brown's announcement doubled as a sales pitch for tax hikes that he hopes voters approve at the ballot box in November. He said budget cuts, primarily to public education, would be even worse without increasing the sales tax a quarter-cent for four years and raising levies on incomes of $250,000 or more by 1 to 3 percentage points for seven years. "We can't fill a hole of this magnitude with cuts alone without doing severe damage to our schools," Brown says. "That's why I'm bypassing the gridlock and asking you, the people of California, to approve a plan that avoids cuts to schools and public safety." Jack Pitney, a political science professor at Claremont McKenna College, said the bad news about the deficit could complicate Brown's push for higher taxes. He said voters may think, "You can't even handle the money we've already sent you. Why should we send you more?" Assembly Speaker John A. Perez (D-Los Angeles) said severe spending reductions in previous years have left few places for lawmakers to make more cuts, meaning higher taxes are needed to close the larger-than-expected deficit. "The size of the deficit and the dwindling of options after years of severe budget cuts also show that our state absolutely needs voters to pair cuts with revenues," he said in a statement. Republicans blamed Democrats for predicting a $4-billion windfall in the current budget, which never materialized. "The imaginary money the majority party counted on in last year's sham of a budget never materialized, and they have refused to cut big government,"

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AT: States CP – States Fail

States would ineffectively spend the money Baxandall 08 (Phineas Baxandall, Ph.D. Senior Analyst for Tax and Budget Policy U.S. Public Interest Research Group “Economic Stimulus or Simply More Misguided Spending?” Dec 30 2008 http://www.pbs.org/now/shows/507/State-Stimulus.pdf)// CG

Simply sending economic recovery funds for transportation to the states without spending rules that reflect national priorities and without accountability mechanisms will not ensure the most effective spending. We know this based on what the states themselves say they would do with the money. As part of developing a stimulus plan, states have been asked to develop “ready to go” lists of transportation projects on which funds could be spent if made available. These lists have been collected by a national coalition of transportation reform groups. 14 They have been obtained for analysis for: Alabama, California, Colorado, Florida, Georgia, Idaho, Kansas, Maine, Massachusetts, Missouri, Nebraska, New York, North Carolina, South Carolina, Tennessee, Texas, Utah, and Wisconsin. Together, these states constitute 56 percent of the U.S. population. 15 Summarized at the back of this report, these lists are not necessarily complete; but they provide a snapshot of how money would be spent without additional stipulations. The findings and conclusions of our analysis of the lists are troubling. In almost every state, there is a yawning gap between the kind of projects the states have queued up for stimulus money and the most-urgent priorities for bringing the nation’s transportation into the 21 st century. Road and bridge repairs shortchanged in favor of lane widening, new roads – Of the fourteen states for which sufficient data were available to analyze the allocation of road project funding, only Massachusetts would completely prioritize road funds toward repair and maintenance projects. Colorado, in second place, still 5would divert almost 13 percent of road funds away from repair and maintenance. On average, states would allocate 56 percent of road funds away from repair and maintenance. Adding up total spending on state wish lists, funds for new or wider roads would be more than two and a half times greater than those for preserving existing assets. Florida, Kansas, South Carolina, Utah and Wisconsin would spend less than a quarter of road funds on repair and maintenance. (See Table 1) Public transit takes a back seat – For the nineteen states with available lists, the average state would spend more 77 percent of funds on highways and only seventeen percent on public transit or intercity rail. 16 In fact, seven states would allocate 1 percent or less toward these growing transportation modes, including four that would allocate nothing at all. Florida, with dozens of much-needed transit and intercity rail projects more transit agencies than all but three states would allocate only 1 percent of funds to transit. These distributions represent a step backward from the already inadequate 20 percent share of funding in federal transportation laws since the 1970s. It also sharply contrasts with the long-term decline in automobile use and ridership records for transit and intercity rail. (See Table 2) Beyond what we see in these lists, it is troubling what we don’t see. There is no good reason why less than half of states’ lists have become available to the public. Since the public will ultimately be asked to pay for the billions in economic recovery spending, it is imperative that project lists from all 50 states be fully transparent and accessible. 17

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Privatization Solvency

Privatization solves the affGlaeser 12 2/13, *Edward Glaeser, an economics professor at Harvard University, is a Bloomberg View columnist, “Spending Won’t Fix What Ails U.S. Infrastructure: Edward Glaeser,” http://www.bloomberg.com/news/2012-02-14/spending-won-t-fix-what-ails-u-s-transport-commentary-by-edward-glaeser.html, AJ

DE-FEDERALIZE TRANSPORT SPENDING: Most forms of transport infrastructure overwhelmingly serve the residents of a

single state. Yet the federal government has played an outsized role in funding transportation for 50 years. Whenever the person paying isn’t the person who benefits, there will always be a push for more largesse and little check on spending efficiency. Would Detroit’s People Mover have ever been built if the

people of Detroit had to pay for it? We should move toward a system in which states and localities take more responsibility for the infrastructure that serves their citizens. The federal government does have a role. It should ensure coordination in nationwide networks. It can embrace smart policies, such as the Education Department’s Race to the Top initiative, that provide incentives for innovation and reform, and the president’s budget seems to move in that direction. The government must go beyond just being the big spender cutting checks. Our current approach has produced a highway system in which,

as the Office of Management and Budget once noted, “funding is not based on need or performance and has been heavily earmarked.” The House’s new highway bill may be earmark-free, but it does little to tie spending to need or

performance. PROMOTE PRIVATE-PUBLIC PARTNERSHIPS: Chile has been at the forefront of pioneering public-private transportation investment, and the U.S. has much to learn from its example. The basic idea is that

the government establishes the need for some new investment, and clears the political hurdles, but then takes bids from the private sector for construction and operation . The private entity pays the upfront costs, which are then recouped with toll revenue. In some cases, a moderate subsidy may be required, but at least that subsidy is transparent. This system has three big advantages. The private sector may be most cost-effective at construction and maintenance . The project only goes forward if private investors

anticipate significant toll revenue. The private operator has every incentive to keep up maintenance, because it can only recoup costs if people keep driving the roads. There are also challenges involved in managing private concessions, as California’s experience with State Road 91 illustrates, but these hurdles should be surmountable, especially if we have enough regulation to keep private roads and bridges safe.

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Fiscal Cliff Good

Fiscal Cliff good—forces fiscal reform. Cline 6/2012 “Restoring Fiscal Equilibrium in the United States” William R. Cline (senior fellow, has been associated with the Peterson Institute for International Economics since its inception in 1981. His numerous publications include Financial Globalization, Economic Growth, and the Crisis of 2007–09 (2010) and The United States as a Debtor Nation (2005). He contributed to The Long-Term International Economic Position of the United States (2009).) Petersn Institute for International Economics: Policy Brief June 2012 http://www.mi.iie.com/publications/pb/pb12-15.pdf

‘Despite the year-end risks, it is difficult to escape the conclusion that it is a good thing that the United States faces a fiscal tax rates and/or eliminate tax deductions so that the United States can restore federal revenue to at least 18 percent of GDP and probably somewhat more in order to meet growing fiscal needs associated with an aging population.

The political pain of the higher tax rates should concentrate political minds on the associated task of finding more ways of cutting spending and limiting increases in entitlement spending. It will

nonetheless be important to phase in the fiscal adjustment gradually, for example, over the four years of the next presidential term, in order to moderate the output loss that would otherwise occur under current conditions of high unemployment combined with interest rates near zero. Moreover, the target for adjustment in the structural (noncyclical) fiscal balance should be 3 percent of GDP, and the component of overkill included in the fiscal cliff’s 5 percent of GDP adjustment should be avoided.

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Fiscal Cliff Bad

Fiscal cliff has multiplier effect—tanks economy over the long-term Congressional Budget Office 5/2012 Economic Effects of Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013 MAY 2012 http://www.cbo.gov/sites/default/files/cbofiles/attachments/FiscalRestraint_0.pdf

In its most recent economic forecast, published in January, CBO projected that real GDP would grow by 2.0 percent in calendar year 2012 and 1.1 percent in calendar year 2013 (measured by the change from the fourth quarter of the previous year). That forecast was consistent with projected federal spending and taxes under the law then in place. It also reflected CBO’s view—which was shared by many private-sector forecasters—that the forces holding back the pace of economic activity were gradually waning, so that, absent the upcoming fiscal restraint, the growth of the economy would pick up during the next few years. Economic data so far in 2012 have been broadly consistent with CBO’s January projections, so the agency has not updated its forecast for this report to incorporate new economic data. However, CBO has updated its projections to include the effects of legislation enacted since January—in particular, the extension through the end of 2012 of the payroll tax cut for employees and emergency unemployment

benefits. That change in fiscal policy will boost real GDP at the end of 2012 by about 0.6 percent but will have little effect on the level of GDP at the end of 2013, CBO estimates.

Accordingly, CBO now anticipates faster growth of GDP this year but slower growth next year than it projected in January. The fiscal restraint that will be imposed on the economy in 2013 under current law will dampen economic growth slightly in the second half of 2012. CBO expects that households will restrain their spending a little as the scheduled increases in tax rates draw near and that businesses will hold off from some investment and hiring out of concern that the economy will weaken next year. In addition, government agencies may pull back on spending in anticipation of cuts in funding at the beginning of the year. Although quantifying those anticipatory effects is difficult, CBO estimates that they will reduce the growth of real GDP by about 0.5

percentage points at an annual rate in the second half of 2012. Fiscal restraint will have a much larger impact on the economy in 2013. The increases in taxes and decreases in government benefits will lead households to cut back their purchases of goods and services, and the decline in funding for government programs will lead to further cuts in purchases. That drop in demand will, in turn, lead businesses to lower their production, employment, and investment. The magnitude of those responses is hard to judge. On the one hand, households generally respond to declines in income by reducing both spending and saving, thereby generating changes in spending that are smaller than the changes in income. And the effects on income of some of the tax increases—for example, the reductions in the refundable child tax credit—might not be recognized by households until they

file their tax returns in 2014. On the other hand, initial cutbacks in spending have so-called multiplier effects on the economy, because reductions in employment, for example, cause households to cut back on their purchases further in a reinforcing fashion. Incorporating the effects of the legislation enacted since January, CBO now projects that real GDP will increase by just 0.5 percent next year under current law. That small gain for the year as a whole reflects a contraction in output at an annual rate of 1.3 percent during the first half of 2013 (measured as growth between the fourth quarter of 2012 and the second quarter of 2013) as the fiscal restraint takes effect and then a renewed expansion in output at an annual rate of 2.3 percent in the second half of 2013 (measured as growth between the second and fourth

quarters of 2013). If history is a guide, such a contraction in the economy in the first half of 2013 would probably be deemed a recession by the National Bureau of Economic Research. That organization dates the peaks and troughs of U.S. business cycles by examining changes in a host of economic indicators, including GDP, employment, industrial production, and retail sales. The economic outcomes that CBO expects, under current law, for the first half of 2013 strongly resemble mild recessions that occurred in the past.6 It bears emphasizing, however, that economic forecasts are very uncertain. Many developments, including the evolution of banking and fiscal problems in Europe and the speed at which the U.S. housing

marke Although removing or reducing the fiscal restraint scheduled to occur next year would boost the economy in the short run, doing so would reduce output and income in the longer run relative to what would otherwise occur. The fiscal restraint embodied in current law will reduce deficits markedly in the next few years, to an average of 1.4 percent of GDP over the 2013–2022 period. With deficits small relative to the size of the economy, federal debt held by the public will fall from 73 percent of GDP in 2012 to 61 percent in 2022, according to CBO’s latest baseline budget projections.9 That decline in debt relative to the size of the economy will

induce additional private investment, raising the stock of productive capital and boosting output and wages. By contrast, if the scheduled fiscal restraint was eliminated by extending all current policies—not just in the short run, but

for a prolonged period—debt would continue to rise much faster than GDP. For example, under the alternative fiscal scenario, which includes the extension of some but not all current policies, federal debt held by the public would reach 93 percent of GDP by 2022.10 t improves, could cause economic outcomes to differ substantially, in one direction or the other, from

those CBO has projected. If all current policies were extended, debt would be substantially higher. However, debt cannot continually increase as a share of the economy: Policy changes would be required at some point. The longer the necessary adjustments in policies were delayed, and the more that debt increased, the greater would be the negative consequences.

Specifically, a greater accumulation of debt would have a number of costs: Rising debt would cause a growing portion of people’s savings to go to purchase government debt rather than to finance investments in productive capital, such as factories and computers. For example, under the alternative fiscal scenario, gross national product (GNP) would be 2.5 percent lower in 2022 than it would be under current law, according to CBO’s estimates.11 That figure represents the net effect of the crowding out of capital investment and the encouragement that lower tax rates provide for work and saving. If all current policies were extended for the entire decade, the reduction in GNP by 2022 would

probably be substantially larger. Higher amounts of debt would necessitate higher interest payments

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on that debt, which would eventually require either higher taxes or a reduction in government benefits and services. Rising debt would increasingly restrict policymakers’ ability to use tax and spending policies to respond to unexpected challenges, such as economic downturns, financial turmoil, or international crises—especially because debt held by the public is already much larger relative to GDP than it

has been in recent decades. Growing debt would increase the likelihood of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget and the government would thereby lose its ability to borrow at affordable rates. Such a crisis would confront policymakers with extremely difficult choices. Again, the current high level of debt relative to the size of the economy means that further substantial increases in debt would be especially risky in this regard. Therefore, eliminating or reducing the fiscal restraint scheduled to occur next year without imposing comparable restraint in future years would have substantial economic costs over the longer run. However, as shown earlier in this report, allowing the full measure of fiscal restraint now embodied in current law to take effect next year would have substantial economic costs in the short run.

Fiscal cliff will be detrimental to the economy. Abelson 6/4/2012 “Beware the Fiscal Cliff” Alan Abelson (veteran financial journalist, and has long written the influential Up and Down Wall Street column in Barron's Magazine. He was editor of Barron's) . Barron's. New York, N.Y.: Jun 4, 2012. Vol. 92, Iss. 23; pg. 7, 2 pgs http://dl2af5jf3e.search.serialssolutions.com.proxy.lib.umich.edu/?genre=genre=article&isbn=&issn=10778039&title=Barron%27s&volume=92&issue=23&date=20120604&atitle=Beware+the+Fiscal+Cliff.&aulast=Abelson%2c+Alan&spage=7&pages=7-8&sid=EBSCO:Business+Abstracts+with+Full+Text+(H.W.+Wilson)&pid=

JOURNALISTS THESE DAYS RANK IN POPULAR ESTEEM A TAD HIGHER THAN congressmen and somewhat lower than rattlesnakes. We're not complaining, but simply striving as scrupulously as possible to describe the mood of the citizenry. Nor are we preternaturally sensitive to demeaning views of our chosen profession. And, in the event you're an animal lover, be assured that we have zero aversion to serpentine creatures. After all, we've spent virtually our entire adult life covering Wall Street, so inevitably some of our best friends are snakes. But only a very few of them, we're happy to report, are toxic. One of the hackneyed-but no less compelling for being so-dictates of our trade is to leave no stone unturned in trying to provide an honest rendering of the way things are and what the foreseeable future might bring. No simple task at any time when dealing with something as fluid and quirky as the stock market, but tons more difficult right now. Friday's dismal labor report was unhinging enough. But it could well be that

the worst is yet to come. For beclouding the outlook for equities are not a few stones or even a pile of large boulders, but a huge and ominous cliff that already is causing a certain unease among investors, a perturbation that seems destined to grow inexorably in magnitude and intensity as this screwy year wends its wacky way through its fraught remaining months. It's Street lore that everything that affects the market deserves a name, a kind of linguistic dog tag, and that

looming overhang of rock is no exception. Thus, it has duly been labeled, in keeping with its basic ingredient, the "fiscal cliff." Less grandly, fiscal cliff describes still another monument to congressional folly dating back to last July's deal between

the two parties to raise the debt limit. More specifically, it mandates a wide and indiscriminate swath of spending cuts, including Medicare pay for doctors, the end of sundry tax breaks, and sharply compressed aid to the jobless come 2013. Unless the lawmakers and the administration decide to act like grown-ups (even with their fingers crossed) and amend the law-most unlikely, to put it mildly, in this politically charged climate-the draconian changes could push our slowpoke recovery plumb off the cliff. We're indebted to that savvy pair who run the Liscio Report, Philippa Dunne and Doug Henwood, for the clearest and best summation we've come across of the fiscal cliffand what it may portend for the shaky economy. They, in turn, bestow plaudits on the recent analysis by the Congressional Budget Office of the impact of the potential cuts (which makes the irony and the pity all the greater that the legislators themselves largely pay no heed to its findings). The raw numbers nicely convey the grisly

tale for the recovery (and a grizzly tale for the stock market). The net effect would be an awesome fiscal squeeze of some 4%, and, as Doug and Philippa observe, such unprecedented tightening would be felt almost overnight. While there have been instances of significant fiscal contraction in the past-3.3% in the 1960s, for

example-and all were followed, as night follows day, by recession, 4% in a single year is stark. How stark? Well, about half of what Greece went through in 2010, roughly what Iceland suffered in 2010 and Ireland endured from 2009 through 2011. In other words, as the Liscio duo put it, "the fiscal cliff we're headed for in seven months would be on a par with some of the world champions in the austerity Olympics." Since the Congressional Budget Office reckons that, save for those automatic constraints baked into law, GDP next year would grow by 4.4%. That seems to us a bit of a stretch but, in any case, a couple of

million more jobs might well be added. Instead, we're looking at the nasty prospect of a recession, fewer new jobs, and a bigger hole in the nation's accounts. Given not-fully-repaired household balance sheets and sagging consumer sentiment, Philippa and Doug hazard that "a fresh recession, so soon after the end of the Great Recession, could

well lead to a nastier spill than the CBO projects." They grant that "the longer-term budget situation remains dicey; we can't have vast pots of red ink for decades." But they caution "there's no need to lurch toward balance overnight, with the U.S. economy still vulnerable and much of the outside world in even worse shape." And they conclude,

"the closer you look, the scarier this cliff gets." You can say that again, in spades, when weighing the likely effects of going over the cliff would have on our nervous Nelly of a stock market. AS FRIDAY'S WRETCHED REPORT ON May employment from the Bureau of Labor Statistics makes abundantly clear, there's reason enough to be antsy even before that daunting cliff casts its chilly shadow over the economy. The Liscio folk dub the report saggy and admit that the past two months have been saggier than they thought. Sufficiently saggy, in any event, to make them wonder "whether we've reached the dangerous state of 'stall speed.' " Dave Rosenberg of Gluskin Sheffhas fewer doubts: He calls the jobs report "horrible." Whatever epithet you prefer, the numbers were decidedly unlovely. Factory payrolls added a meager 69,000 jobs, compared with the wildly errant Street guesstimates of 130,000 to 150,000. Moreover, on second count, April's initially reported gain of 115,000 turned out to have shrunk to 77,000, and March's originally reported rise of 154,000 was reduced to 143,000. If it makes you feel better, the private sector added 82,000 slots. A big jump in the labor force-a lot of it in the form of students sprung from college and seeking jobs-was

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reflected in a modest increase in the unemployment rate to 8.2%, from 8.1%. The household survey, as usual, went its own erratic way, tacking on 422,000 jobs, virtually all of them of the part-time variety. The work week and aggregate household survey were down, while U-6, a measure of underemployment along with unemployment, moved up three notches, to 14.8% from 14.5%. We might mention, too, that the Bureau of Labor Statistics' good old birth/death model added 789,000 jobs last month. Not all of these, to be sure, were products of the BLS's imagination, but it's safe to assume that some portion of them just might be. As Dave observes, this blessed nation of ours has a total pool of available workers of 18 million souls who are competing for 3.7 million jobs. So "you don't need a degree in economics to figure out what that means for wages and salaries." (A degree in economics, we suspect, more likely qualifies you to be one of those 18 million souls.) And he adds, "Show me how you squeeze inflation out of that lemon, and I'll send my kids to summer camp and put the balls, bats, and gloves back in the garage." He goes on to point out that unemployment is a global woe: Spain's involuntary idled total is 24.3%, Portugal's, 15.2%; France and Italy jobless come in at 10.2%; and the euro region's as a whole stands at a record 11%. "These may not be Great Depression numbers," Dave comments, "but they are Modern Day Depression statistics- not befitting a third year of alleged recovery." And he warns: "The implications for social stability are not trivial at all." Nor have we seen the full impact yet of the tumble in commodities paced by oil's precipitous drop to under $84 a barrel or China's lagging export trade, to cite just two of the possible depressants. What it all adds up to, Dave contends, is a definite whiffof deflation. Which, among other things, is not great for stocks. BARRY RITHOLTZ, FUSION IQ'S CHIEF everything, has an engaging-often bordering-on-the-rabid-sense of humor. He's also a skeptic, not only when he views the market and the economy, but that woolly place called Wall Street as well. His latest examination of the weird behavior of its inhabitants centers on their pronounced tendency to espy bottoms for one failing sector or another. His acronym for this widespread compulsion is PWBC, which stands for perennially wrong bottom callers, who, he avers, run rampant among portfolio pros, sell-side analysts, realtors and media types assaying the housing industry. His riff we found especially appealing because it jibes with our less exhaustive (and exhausting ) observations. Under the title "Yeah! The Housing Bottom is Here! (PWBC)" he proceeds to vent his bemusem*nt at declarations of bottom sightings, along with excerpts from these co*ckeyed seers going back to 2006. All told, in the half-dozen years since then, which encompassed the worst housing collapse in history, he lists no fewer than 80 separate articles, analyses, explanations and the like pronouncing the turn in housing. And Barry by no means claims that his sampling is anywhere near complete. The bad calls of a housing bottom, he says, occur every spring, as the data make their typical improvement. This year, the freakishly mild winter, he reports, threw the perennially wrong into a tizzy and suckered them into the same old joyously false belief of a bottom. "Spring," he exclaims, "has sprung, and the usual suspects are up to their old tricks." Because there are so many PWBCs, he's reluctant to make special mention of any one, but he can't resist singling out Alan Greenspan, "who was wrong early and often," and the National Association of Realtors, "whose spin has been astoundingly consistent-bullish and wrong."

Fiscal cliffs relapses to a double dip. Calmes 5/23/2012 Economy Could Tip Back Into Recession on Washington Impasse, Budget Office Says. By: CALMES, JACKIE, New York Times, 03624331, 5/23/2012- http://web.ebscohost.com.proxy.lib.umich.edu/ehost/detail?sid=ec42a3e1-2a3e-4539-84c5-89d9591223ad%40sessionmgr104&vid=4&hid=107&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bft&AN=75381580

WASHINGTON -- The economy could relapse into a recession if President Obama and Congress remain

at an impasse and allow several big tax increases and spending cuts to take effect at the start of 2013, the Congressional Budget

Office reported on Tuesday. The nonpartisan budget office analyzed the impact of what has come to be called the year-end fiscal cliff. Largely by coincidence, several big tax cuts, including those from the Bush era, will expire as deep across-the-board

spending cuts take effect. Many economists say the jolt of tax increases and spending cuts would shock the economy after four years of stimulus measures. In the first half of 2013, the economy would contract at an

annual rate of 1.3 percent, the report concluded, instead of growing by a similar rate. Slow growth would resume in the second half, it said. ''Such a contraction in output in the first half of 2013 would probably be judged to be a recession,'' the report said. Avoiding that danger in the short run, by extending tax cuts and repealing automatic spending cuts, would hold its own economic perils for the long term by adding to annual deficits, the budget office said. It suggested a combination of higher deficits in the short term with adoption of tax and spending policies meant to gradually reduce annual deficits later in the decade. The budget office estimated that the tax and spending changes ahead would slash the deficit from the 2012 fiscal year, which ends Sept. 30, through the 2013 fiscal year by $607 billion, or 4 percent of the gross domestic product -- $560 billion after accounting for higher unemployment compensation costs and lower tax collections from individuals and businesses because of the slow economy. Among the changes that will take effect if the White House and Congress do not act: The Bush-era tax rates will expire on Dec. 31. Republicans want to make them permanent, which would reduce tax receipts by more than $1 trillion over a decade, while Mr. Obama and Congressional Democrats insist that for the wealthiest taxpayers the rates should return to the higher levels of the

Clinton era. Millions of middle-income taxpayers will have to pay the alternative minimum tax -- which was intended only for the richest Americans -- when they file their returns next year. A

temporary two percentage point cut in Americans' payroll taxes, effective in 2011 and 2012, will end on Dec. 31. Automatic cuts of $1.2 trillion will be made, half in domestic programs and half in the military, because the president and Congress did not agree to a 10-year deficit cutting package last year. Reimbursem*nts to doctors who treat Medicare patients will be cut significantly, taxes will increase for wealthy taxpayers to help pay for health insurance for more Americans and temporary business tax cuts, part of stimulus measures, will expire. Adding to the fiscal hazards ahead, the nation's debt limit must be raised early next year, according to the Treasury Department. A repeat of last year's damaging deadlock is threatened because Republicans again are demanding domestic spending cuts equal to the amount of the increase in the debt ceiling. But Democrats say further deficit reduction must include higher tax rates for the wealthy.

Fiscal cliff kills consumer and investor confidence—tanks economy. Marron 6/8/2012 The “Tax Expirers” Donald B. Marron* Director, Urban-Brookings Tax Policy Center www.taxpolicycenter.org Testimony before the Subcommittee on Select Revenue Measures of the Committee on Ways and Means, United States House of Representatives June 8, 2012

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In deciding the fate of these “tax expirers,” Congress should consider the larger problems facing our tax system. That

system is needlessly complex, economically harmful, and widely perceived as unfair. Because of a plethora

of temporary tax cuts, it’s increasingly unpredictable. And it fails at its most basic task, raising enough money to pay our

government’s bills. The “expirers” worsen at least three of those problems. Their temporary nature adds to policy uncertainty, making it harder for businesses and families to plan ahead. Innovative companies can’t be sure whether future research expenses will qualify for the research and experimentation (R&E) credit, for example, and families considering adoption don’t know whether a federal credit will offset some of their costs. That uncertainty

undermines any incentives created by those credits. Temporary provisions also add complexity to compliance and administration, particularly when they are renewed retroactively, a particularly pernicious feature of recent tax

policy. And they reduce federal revenues at a time of persistent, large deficits. The expiring provisions have mixed effects on the fairness of the tax code. Some, such as the one for NASCAR venues, add to the perception that the tax code is riddled with special interest giveaways. Others arguably make the system fairer. The tax break for mass transit benefits, for example, reduces the federal tax disparity that would otherwise exist between people who use mass transit and those who drive.

These provisions similarly have mixed effects on the health of our economy. Several have attempted to provide near-term economic stimulus. Others attempt to encourage clean energy, but fall short of the economic ideal (Marron 2011a). And some

worsen existing economic distortions. The deductibility of mortgage insurance premiums, for example, further amplifies the tax code’s bias in favor of housing debt over other uses of capital. Fundamental tax reform would be the best way to address all these concerns. Congress can and should create a tax code that is simpler, fairer, and more conducive to economic prosperity while raising adequate revenue and eliminating pointless expirations of tax provisions that deserve longer lives. Such reform could involve several components, such as greater reliance on consumption and pollution taxes. The most likely path, however, involves broadening the tax base by reducing tax preferences and using the resulting savings to reduce deficits, lower rates, or both. That approach has been endorsed by several reform efforts, including the Bowles-Simpson commission and the Domenici-Rivlin task force (National Commission on Fiscal Responsibility and Reform 2010; Bipartisan Policy Center Debt Reduction Task Force 2010; I was a member of the latter).

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Decline Hurts Children

Econ Crisis harms current and future children

Harper et al., 09-- PhD in Social Anthropology and is currently associate director of the Chronic Poverty Research Centre and a Research Fellow at ODI. Previously director of the Childhood Poverty Policy and Research Centre (CHIP) (Caroline, “Children in times of economic crisis: Past lessons, future policies”, Overseas Development Institute, March 2009, http://www.odi.org.uk/resources/docs/3749.pdf)//JL

Given experience from previous crises, all countries need to consider the impacts on children. Increases in child mortality and morbidity, child labour, child exploitation, violence against children and women and other forms of abuse, alongside declines in school attendance and the quality of education, nurture, care and emotional wellbeing, can all be traced to times of economic crisis. It is importance to recognise the following: • We know women, children and young people suffer disproportionately. Parents try to protect their children from the worst impacts of crisis, but there are often limits to how much they can do, especially the poorest. • _Vulnerabilities depend on both gender and age, and are multidimensional. Women are the first to lose jobs, having to work harder to seek additional income, spending less time on nurture and care. Youth recover from the impact of lost job opportunities slowly or not at all. Girls often experience higher levels of nutrition and educational deprivation then boys, with long term wellbeing implications for themselves and their own children. And many women, youth and children (to varying degrees) lack voice and power which, among other effects, contributes to abuse and exploitation.• _It is essential to focus on major irreversabilities: if children are severely malnourished, pulled out of school, subject to neglect or violence and/or pushed into work, they live with the consequences for their whole life, sometimes passing the consequences onto their own children (Harper, 2005). This implies much greater future poverty, probably higher inequality and lower prospects for economic growth. • _Policy should not underestimate the agency of households, including children, in responding to crisis. The challenge is to support constructive coping mechanisms and seek to discourage unconstructive ones.

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Decline Hurts Workers

Financial Crisis hurts workers, poor individuals, consumer prices, and more.Baldacci, Mello, and Inchauste, 02— Deputy Division Chief, Economic Counsellor to the Chief Economist of the OECD, and senior economist with the IMF Institute (Emanuele, Luiz and Gabriela, “Financial Crisis, Poverty, and Income Distribution”, International Monetary Fund, June 2002, http://people.ucsc.edu/~hutch/Lund/Financial%20Crises%20and%20Poverty%20FD%20June%202002.pdf)//JL

Weaker economic activity. A financial crisis can cause workers' earnings to fall asjobs are lost in the formal sector, demand for services provided by the informalsector declines, and working hours and real wages are cut. When formal sectorworkers who have lost their jobs enter the informal sector, they put additionalpressure on informal labor markets. Relative price changes. A financial crisis typically involves a large currency depreciation, which changes relative prices. For example, the price of tradables rises relative to nontradables, causing earnings of those employed in the nontraded goods sector to fall. At the same time, increased export demand boosts employment and earnings in the sectors producing the exports. The currency depreciation may also affect consumer prices, and the higher cost of imported food hurts poor individuals and households that spend much of their income on food. Fiscal retrenchment. Governments often respond to crises by tightening the monetary and fiscal stances, often leading to cuts in public outlays on social programs, transfers to households, and wages and salaries.

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Energy Solves Environment

Alternative Energy is the best solution to climate problemsSchwartzman 2012 –Professor of Biology at Howard University, environmental scientist, PhD, Brown University (David, A Critique of Degrowth and its Politics, Capitalism Nature Socialism, 23:1, 119-125, http://dx.doi.org/10.1080/10455752.2011.648848)

Answering this question is central to the issue of whether the global economy needs to grow or degrow. The human development index (HDI) is a UN-defined measure of quality of life, a composite of life expectancy, educational level, and standard of living (http://en.wikipedia.org/wiki/Human_Development_Index). While it may not be a perfect measure of quality of life, national HDI strongly correlates with life expectancy, arguably the best single metric of quality of life. Smil (2003, 2008) estimates a minimum requirement of 3.5 kilowatts per capita for high HDI. With this assumed minimum of 3.5 kW per capita multiplied by the present world population of 7 billion people, a global power capacity of 25 TW or 1.5 x the present capacity of 16 TW is inferred for a high

HDI for everyone on this planet (1 Tera Watt (TW)1012 watts). Hence, while the U.S. and several other countries need to reduce their energy consumption, given their wasteful use of energy, most of the global South suffers from energy poverty and requires a significant increase to achieve a ‘‘state of the art/science’’ quality of life (AtKisson 2009; Swedish Society for Nature Conservation 2010). A shift to wind- and solar-generated electricity as an energy source could reduce the required power level by 30 percent once a global system is created. ‘‘For example, only 17 to 20 percent of the energy in gasoline is used to move a vehicle (the rest is wasted as heat), whereas 75 to 86 percent of the electricity delivered to an electric vehicle goes into motion’’ (Jacobson and Delucchi 2009, 60). A shift to solar power would likely increase the quality of life for the same level of present energy consumption by reducing/eliminating the negative externalities of fossil fuels and nuclear power (e.g., the impact of air and water pollution on health). On the other hand, in the transition to that ‘‘other world that is possible’’ additional energy will likely be required to clean up the ‘‘mess’’ left by the historic dependency on fossil fuels and nuclear power, and in addition to repair the physical infrastructure and create green cities globally. Future progress in increased energy efficiency, such as dematerialization of information technology, will likely reduce the required minimum per capita consumption. The die-off school of Peak Oil (e.g., Heinberg 2009) promises a future of unimaginable misery for most of the world’s people who now suffer from energy poverty. The degrowth argument promises little more. Nevertheless, while degrowth may be a problematic recipe for global restructuring, it should not be dismissed as a useless response to the unsustainable reproduction of capital. A reduction in certain kinds of consumption is imperative*especially in the global North and for elites in the global South*since numerous countries such

as the United States are such profligate energy and material wasters. Thus arguments for degrowth such as those found in Latouche (2009) should be taken seriously insofar as they address economic activities that increase consumption of fossil fuels, especially coal and tar sands, the two most intense carbon emitters. Struggles against big projects such as the Medupi South African coal-fired power plant (Bond 2010) are

imperative. Likewise, the growing urban organic farming and solar cooperative movements are inspiring examples of how communities can create sustainable alternatives and manage them on a local level, starting in neighborhoods and urban centers. However, not all big projects should be opposed. Infrastructure must be repaired and replaced, and the immense contamination of our anthroposphere by industrial and military activities must be cleaned up*our responsibility to future generations. Solarization is already occurring on many scales and should continue at a more rapid tempo in the future. This includes ramping up installation of photovoltaics and solar water heaters on homes and apartment complexes and constructing huge offshore wind turbine installations and concentrated solar power in deserts. Likewise, the struggle for social management should range from the neighborhood to the globe, in varied forms of cooperative and nationalized ownership, enlarging the commons by first constraining then doing away with the rule of capital on our planet once and for all. This should be a central objective of the ecosocialist agenda for class struggle in the 21st century.

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Peak Oil Coming

Oil availability has plateaued which will lead to food shortages and alternative energy cannot meet our energy needs Spence 10 (Emily Spence is an author living in Massachusetts. She has spent many years involved in human rights, environmental and social services efforts. 10 April, 2010 “Peak Oil: Are We Heading Towards Social Collapse?” http://www.countercurrents.org/spence100410.htm)//CG

Recently, Glen Sweetnam, director of the International, Economic and Greenhouse Gas division of the Energy Information Administration at the DoE, announced that worldwide oil availability had reached a "plateau". However, his statement was not made known through a major U.S. mainstream media outlet. Instead, it was covered in France's "Le Monde" as follows: article in Le Monde. One could assume that the U.S. assessment of the oil decline was exposed through this particular publication perhaps due to some arrangement that Barack Obama made with Nicolas Sarkozy. (Maybe it is an indirect way to alert the French while keeping most Americans still in the dark on the topic so that the later bunch can ignorantly carry onward as usual. After all, no unsettling prognosis should disturb their slow return into shopoholic ways that keep the economy, particularly China's on which the U.S. federal government depends for loans, going strong.) All considered, there was not, as far as I know, even a ten second blurb about Glen Sweetnam's message issued via newscasts in New England where I live. At the time of his declaration, their reports primarily covered ad nauseam the recent flood again ... and again. In a similar vein, no reporter discussing the deluge dared to raise the point that worsening extreme weather is on the way with climate change consequences in the mix, along with oil's relationship to these outcomes. Moreover, imagine the effect on the Dow or NASDAQ if Glen Sweetnam's estimation and a discussion of connected economic ramifications got splashed all across the U.S.A. What exactly are the implications? In Life After Growth, Richard Heinberg, Senior Fellow-in-Residence at Post Carbon Institute, states, "In effect, we have to create a desirable 'new normal' that fits the constraints imposed by depleting natural resources. Maintaining the 'old normal' is not an option; if we do not find new goals for ourselves and plan our transition from a growth-based economy to a healthy equilibrium economy, we will by default create a much less desirable 'new normal' whose emergence we are already beginning to see in the forms of persistent high unemployment, a widening gap between rich and poor, and ever more frequent and worsening financial and environmental crises—all of which translate to profound distress for individuals, families, and communities." In other words, we collectively have to stop our delusions about perpetual economic growth and find another way to live from this point forward. We need to stop pretending that all is well because our myopic view of life shows no oil or other major shortfalls in the very near future. If we do not face up to the truth, the repercussions are clear. Instead of an "ignorance is bliss" outlook, it's markedly better to have long range vision and see the coming monster so that meaningful preparations can be made. Scrutiny of the landscape behind and ahead followed by timely adaptation is required. A suitable response is preferable to someone or some group blindly sticking to the same old patterns that could have worked well in the past, but are no longer functionally viable. (Shortsighted government leaders trying to wring the last drops of oil out of the Earth to continue globalized commercial goals certainly provide a clear case in point.) Certainly, reality does not conform to fanciful hopes and dreams regardless of the degree that they are compelling due to familiarity or any other reasons. A willful adherence to past choices and whimsies just won't help under the circ*mstances. As John Adams suggested, "Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence." At the same time, our current standard of living clearly is provided by our ability to burn through unimaginable amounts of fossil fuels, including an estimated 30 billion barrels of oil a year whilst roughly 40 percent of global energy consumption stems from petroleum. Conversely, people without access to such rich energy sources, whether in developed or developing nations, rightfully equate prosperity

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and access to material goods with fossil fuel use. After all, no "green" substitute can even come close to the energy density obtained by their derivatives. As such, Robert Bryce, managing editor of "Energy Tribune" and author of the newly released Power Hungry: The Myths of "Green" Energy, and the Real Fuels of the Future, points out in Let's Get Real About Renewable Energy at online WSJ: "We can double the output of solar and wind, and double it again. We'll still depend on hydrocarbons." In his view, the reason is that we can never, in a reasonable amount of time, reach the colossal scale needed to supply sufficient energy by alternative means. Likewise, "[renewables] cannot provide the baseload power, i.e., the amount of electricity required to meet minimum demand, that Americans want."At the same time, access to fossil fuels will increasingly be a major driver of small and large conflicts around the world with the biggest contenders -- most notably the U.S.A., China and Russia -- using ever more forceful means to gain advantage over rivals. As such, the current Middle East and African wars are diminutive in scale compared to the contention that lies ahead. In addition, the pending oil shortfall will cause products, services and food that rely on oil to skyrocket in cost. Moreover, petroleum derivatives serve as the foundation for fertilizers, pesticides, herbicides, transportation of goods to markets, the majority of the grocery packaging operations (i.e., the manufacture of containers in addition to the bottling and canning processes, etc.) and, of course, operational farm machinery. All considered, imagine just farms alone being run without sufficient oil. Would they be capable to supply enough food for close to seven billion people without it? How will they provide for the nine to ten billion expected to be on the Earth in approximately forty years? Henry Kissinger stated, "Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world." However, he perhaps neglected to consider that our food, practically all industry and finance are deeply tied to energy and that, in turn, is tied to fossil fuels. According to a Greenpeace USA report released last month, "'Nearly 71 percent of U.S. electricity comes from fossil fuels, including 53 percent from coal. Of the remainder, 21 percent is generated from nuclear power, 15 percent from natural gas, 7 percent from hydro, and less than 2 percent from other renewable sources.' As a result of this energy mix, the U.S. emits more than 2,500 million metric tons of C02 (MMtC02) every year."In addition, coal and gases, that can be converted into power supplies, are not endlessly abundant. So in light of our energy dilemma, what can be expected in times ahead?

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AT: Food Shortages

No future food shortages, prefer data. Bekerman 02 “Poverty of Reason: Sustainable Development and Economic Growth” Wilfred Bekerman. Pub. The Independent Institute. 2002

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AT: Precautionary Principle

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Precautionary Principle is wrong—prevents future innovation. Bekerman 02 “Poverty of Reason: Sustainable Development and Economic Growth” Wilfred Bekerman. Pub. The Independent Institute. 2002

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Infrastructure Reduces Oil Dependence

Infrastructure key to decrease oil dependence National Research Council 09 “Sustainable Critical Infrastructure Systems: A Framework for Meeting 21st Century Imperatives” Toward Sustainable Critical Infrastructure Systems: Framing the Challenges Workshop Committee- Board on Infrastructure and the Constructed Environment Division on Engineering and Physical Sciences, National Research Council of the National Academies International Standard Book Number-13: 978-0-309-0XXXX-X International Standard Book Number-10: 0-309-XXXXX-X. Copyrighted 2008 by the National Academy of Sciences

While 42 percent of the petroleum used in the United States comes from domestic sources, 58 percent is imported (EIA, 2008a). The majority of imported oil comes from Canada (18 percent), the Persian Gulf countries (16 percent), Mexico (11 percent), Venezuela (10 percent), and Nigeria (8 percent) (EIA, 2008a). Some of these countries are politically unstable, and transporting

supplies to market involves vulnerable points that are subject to disruption (NRC, 2008a). With demand for energy increasing around the world in combination with limited supplies of oil, prices for petroleum are likely to rise over the long term. Decreasing the nation’s dependence on imported oil has implications for national security as well as for consumers’ pocketbooks. Reducing the level of imported petroleum will depend in part on strategies to reduce overall demand (for example, by means of more fuel-

efficient cars and greater reliance on public transportation); on whether the United States is able to efficiently generate, store, distribute, and use power from domestically available, alternative sources of energy;

and on other measures. Opportunities exist to produce power from wind, the Sun, hydrogen, and other sources of energy. The construction of new infrastructure— microgeneration facilities, power plants, and distribution networks—may be required. Some alternative energy power projects have been developed—such as those converting the methane gas produced by landfills to energy—and many have been proposed. However, they are being implemented on a case-by-case basis in the absence of an overarching strategy. A range of demand-side and supply-side strategies are available that could lead to a reduction in the national demand for imported oil. Each brings with it a host of implications for future development and future generations. Any pursuit of narrowly focused objectives and one-dimensional strategies, however, could lead to serious, unintended consequences. For example, the focus on producing ethanol derived from corn kernels as a biofuel to reduce the demand for imported oil has had unforeseen impacts on the cost of corn for food products and has not fully taken into account the impacts on water availability, water quality (NRC, 2008c), and other factors. Ad hoc development of new infrastructure systems could lead to redundancies in

some areas, a lack of service in others, the waste of valuable resources, and adverse environmental impacts. To the extent that new systems or components of systems are developed, they will require substantial public- and private-sector investments. Typically, major infrastructure projects take 10 to 20 years or more to plan, approve, obtain needed permits, fund, and build. Even with the careful planning, design, and siting that promise to mitigate environmental impacts, local opposition is likely to arise, a phenomenon sometimes referred to as NIMBYism, (for “not in my backyard”).

Coordinated action across political jurisdictions and stakeholder groups as well as broad public support will be needed to develop cost-effective infrastructure systems required to deliver energy from alternative sources in the next 10 to 20 years. Coordinated

action will be difficult to achieve in the absence of an overarching concept or objectives for critical infrastructure systems.

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Growth Correlates With Consumption

Bad economic times and consumer spending are inexorably linked, if the economy fails, consuming slows. Elwell 5/17/12 Congressional Research Service. “Economic Recovery: Sustaining U.S. Economic Growth in a Post-Crisis Economy” Craig K. Elwell (Specialist in Macroeconomic Policy) Congressional Research Service. May 17, 2012 Pg. 4-7 http://www.fas.org/sgp/crs/misc/R41332.pdfIn the third quarter of 2011, the economy had regained its prerecession level of output. But it took 15 quarters to accomplish this as compared to 5 quarters on average in previous post-war recoveries. However, since potential GDP has als ocontinued to grow, the

output gap over this time period has only narrowed from about 8.1% to 6.1%. • Consumer spending, the usual engine of a strong economic recovery, remains tepid, generally slowed by households’ ongoing need to rebuild substantial net worth lost during the housing crisis and the recession, continued high unemployment and underemployment, and a surge in energy prices in the first half of 2012. • Employment conditions remain weak. The unemployment rate, which had peaked at 10.1% in October of 2009, has only fallen to 8.1% in April 2012. However, much of this improvement occurred during 2010, with essentially no net improvement during 2011, because economic growth in 2011 was only just fast enough to keep the unemployment rate from rising. This high rate of unemployment after more than two years of economic recovery is unusual and a source of concern. Also some of the fall of the unemployment rate does not reflect people finding jobs, rather it is caused by discouraged workers leaving the labor force. Another measure of labor market conditions, the employment to population ratio, which is not affected by changes in labor force participation, shows a labor market that is essentially “treading water.” During the recession that ratio fell from 63% to 58%, and it has remained near that low through nearly three years of economic recovery. [….]Much of the vigor that has occurred on the

demand side of the economy in 2009 and 2010 has largely come from fiscal stimulus and business inventory restocking. Fiscal stimulus and inventory rebuilding are, however, temporary sources of support of aggregate spending. Sooner or later fiscal stimulus will fall away. The Congressional Budget Office (CBO) projects that fiscal stimulus peaked in 2010, provided a smaller boost to demand in 2011, and will continue to diminish in 2012. 20 Inventory building is a self-limiting process that will not go on indefinitely; stock-building was weaker during most of 2011, and despite a stronger turn in late 2011 and early 2012, inventory growth will unlikely continue to have a major positive effect on aggregate

demand. A strong recovery of private-sector demand, including consumer spending, investment spending, and exports, is required to sustain an economic recovery that brings the economy quickly back

to its pre-recession growth path and unemployment rate. However, there are major uncertainties about the potential medium-term strength of each of these components that could dampen aggregate spending and constrain the economy’s ability to generate a recovery period with above normal growth

and quickly falling unemployment. Consumption Spending Personal consumption expenditures historically constitute the largest and most stable component of aggregate spending in the U.S. economy. During the first three post-war decades, personal consumption spending averaged a 62% share of GDP. However, that share rose significantly overthe next three decades, averaging about 65% in the 1980s, 67% during the 1990s, and about 70% between 2001

and 2007. The high level of household spending reached during the 2001-2007 expansion is unlikely to reemerge during the current recovery because it was supported by an unsustainable increase in household debt, decrease in personal savings, ease of access to credit, and rising energy prices. 16

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Consumer Confidence High

Consumer Confidence RisingAP 6/14/12 (Associated Press, “Lower Gas Prices Not Enough to Lift US Economy” June 14, 2012, http://business.time.com/2012/06/14/lower-gas-prices-not-enough-to-lift-us-economy/) MSDBut the news from a spate of government data Wednesday wasn’t all bad. Consumers spent more in May on cars, appliances and furniture — big purchases that help drive growth. Businesses continued to restock this spring at a healthy pace. And wholesale prices outside of gasoline costs remain stable, which means consumers can expect inflation to stay mild. If gas prices stay low, Americans are likely to spend more freely this summer on other goods, from autos and furniture to electronics and vacations, that fuel economic growth. Gasoline purchases tend to provide less benefit for the U.S. economy because some of the money goes to oil-exporting nations. “The continued fall in gasoline prices should support consumption by freeing up cash to be spent on other items,” said Paul Dales, senior U.S. economist at Capital Economics. Ian Shepherdson, chief U.S. economist at High Frequency Economics agreed. “The drop in gas prices means summer spending will accelerate,” he said. Retail sales fell 0.2 percent in May and April, the Commerce Department said. It was the first back-to-back decline in two years. But overall sales were pulled down by a 2.2 percent decline in gasoline station sales, reflecting the lower prices. Excluding volatile gas station sales, retail sales grew just 0.1 percent in May and dipped slightly in April. Consumers reduced spending in May at building supply stores, such as Home Depot, and general merchandise stores, a category that includes Wal-Mart and Target. Auto sales rose solidly, one of the few positives in the report. Consumers also spent more on electronics, clothing and furniture. Much more spending is needed to lift to an economy that has limped along since the Great Recession ended three years ago. Hiring has slowed sharply this spring. And unemployment remains high at 8.2 percent. Wage increases are trailing inflation. And Europe’s debt crisis has kept investors and companies on edge. “All these things are making people feel uncomfortable about spending,” said Chris Christopher, an economist at HIS Global. “It is obvious that consumers are starting to hold back in the second quarter.” Christopher expects the economy to grow at an annual pace of 1.8 percent in the April-June quarter, just below the first quarter’s annual pace. That’s roughly in line with other economists’ forecasts. The one major positive development in the past two months is that gas prices have tumbled. The producer price index, a measure of wholesale prices, dropped 1 percent in May, the Labor Department said in a separate report. That’s the biggest decline since July 2009. It reflected a 9 percent fall in wholesale gas prices. Consumers are already feeling less pinched by gas prices. The average national price for a gallon of gas was $3.54 Wednesday — 40 cents cheaper than the year’s peak price in early April. Modest wholesale inflation reduces pressure on manufacturers and retailers to raise prices. That helps keep consumer prices stable, which boosts buying power and drives growth. Consumer spending makes up about 70 percent of economic activity. Weaker consumer spending and mild inflation could give the Federal Reserve room to hold interest rates at record-low levels and potentially take other steps to boost the economy. Still, most economists don’t expect the Fed to take further steps at its policy meeting next week. A third report Wednesday showed that businesses restocked at a slightly faster rate in April than March. When businesses step up restocking, they order more goods. That generally leads to increased factory production and higher growth. But further stockpile growth depends on increased spending by consumers. Some of the weakness in retail sales may be payback for stronger spending at the start of the year. A warm winter encouraged some homeowners to get a head start on remodeling and landscaping projects that normally occur in spring.

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Climate Change Focus Bad

Funding measures to stop climate change trades off with nuclear waste disposal, disease control, and standards of living in developing countries. Bekerman 02 “Poverty of Reason: Sustainable Development and Economic Growth” Wilfred Bekerman. Pub. The Independent Institute. 2002

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Government Should Act

Pressure on Fed to act

Boak 6/19/12 - economics reporter for POLITICO, Chicago Tribune and the Toledo Blade. Educated at Princeton and Columbia,(Josh, “With recovery wobbling, Federal Reserve’s options limited” Politico, June 19, 2012 http://www.politico.com/news/stories/0612/77602.html) MSDSeveral months of atrocious employment reports have the recovery wobbling but not to the point that would prompt massive intervention, economists say. It isn’t sufficient that job creation slipped precariously in May and consumer confidence followed suit this month. That, coupled with Fed Chairman Ben Bernanke’s hesitant testimony on the Hill earlier in the month has led to projections that they will — at best — take small steps to keep a flailing economy afloat. Gridlock between President Barack Obama and House Republicans on other fiscal policy and tax cuts has increased the pressure on the Fed to act. But the Fed’s options are limited. Wall Street economists anticipate the Federal Open Market Committee could announce plans Wednesday to keep its key interest rate for lending to banks near zero percent through 2015, a policy hinted at in recent speeches by Fed Vice Chairwoman Janet Yellen. That’s a critical though slight change, since the Fed previously announced the rate would hew close to zero through late 2014. The other possibility is that the committee will decide to extend its Operation Twist program set to expire at the end of the month. That program helped reduce interest rates for Treasury bonds and mortgages because the Fed bought $400 billion of long-term government debt — taking it off the market — through the sale of its short-term holdings. But the major option, the one dependent on the economy tanking, would be a third round of what’s called quantitative easing. In the past two rounds of this program, the Fed bought $1.25 trillion of mortgage-backed securities and $600 billion of government bonds with electronically created funds. Much of the clamor for the Fed to do something — anything — comes from the markets, said Drew Matus, a senior economist with UBS Securities. Stocks have been known to surge on dour economic reports because it increases the possibility of the Fed finding ways to inject more money into the economy. The Fed has also tried to avoid disappointing a market that runs as much on psychology as raw data. There’s a danger in that. Move too early on a stimulus program now and the markets force the Fed to swing to the rescue again and again. “The market keeps playing chicken with the Fed and the Fed blinks,” Matus said. “Once you do this, it’s like Pavlov’s dog. They know from experience that every time they push the Fed, the Fed has reacted exactly as they wanted it to.”

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Transportation Relies On Gas Tax

New Transportation Bills rely on gas tax – not sustainable

Simon 6-23-12 – writes for LA Times, (Richard, “Congress may use gas tax funds to press states on distracted-driving initiative,” The Sacramento Bee, June 23, 2012 http://www.sacbee.com/2012/06/23/4584344/congress-may-use-gas-tax-funds.html) MSD That's the question before the House, which will vote this week on whether to seek to keep $78 million in "legislative candy" out of a new transportation bill. Under the Senate transportation bill, states would receive additional funds if they outlaw texting from behind the wheel, prohibit drivers under age 18 from using cell phones of any kind while driving and take other actions to combat distracted driving. The bill also would require states to spend a chunk of the money they receive on anti-distracted driving programs, such as beefed-up law enforcement targeting distracted drivers and advertising on the dangers of distracted driving. Rep. Diane Black, R-Tenn., is seeking to eliminate the incentive fund, calling it an effort at "federal manipulation of state law." "I want safety on our roads," she said on the House floor Thursday. But Congress, she said, could "make our roads safer by making sure that our roads and our infrastructure are in the best shape" instead of trying to entice states into passing anti-distracted driving laws as defined by Washington. She noted that 39 states are "already doing something related to distracted driving." Her efforts have run into Democratic opposition. Rep. Jason Altmire , D-Pa., said the incentive grants are "an opportunity to address the rapidly growing problem of distracted driving." States are "free to pass any distracted-driver laws they wish or not," he said during a debate Thursday. Although some Republicans, he said, "are skeptical of seemingly every federal program, we must avoid the temptation to eliminate programs without considering the real impacts they have on the lives of our constituents and on communities all across America." The fight over $78 million in a $109-billion Senate-passed bill underscores the political potholes that have faced lawmakers in trying to reach agreement on a major transportation bill before the government's authority to collect gasoline taxes and fund projects expires June 30. The bill's writing has been complicated by an 18.4-cent-per-gallon federal tax that isn't bringing in enough money to maintain highway and transit spending at current levels, creating new fights over how funds are spent. The anti-distracted driving money was included in the Senate bill in response to what Sen. John D. Rockefeller IV, D-W.Va., chairman of the Commerce, Science and Transportation Committee, called "a growing crisis in this country."

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Random

TagBoak 6/12/19 Economics reporter for POLITICO, former writer for Chicago Tribune and the Toledo Blade, graduated from Princeton and Columbia, received the Livingston Award for a series(Josh, “With recovery wobbling, Federal Reserve’s options limited,” Politico. 6/12/19 http://www.politico.com/news/stories/0612/77602.html) MSD“Politicians in office want to do everything they can just before an election to try and temporarily boost something,” said Romney, adding that the potential threat down the road is that the influx of cash from the Fed would lead to inflation. Bernanke, first appointed by George W. Bush and re-appointed by Obama, values his independence and has largely refrained from waging partisan battles. In congressional testimony, he has chided lawmakers at hearings about the need to lower the deficit over the longer term while not choking off the recovery, but he’s avoided specific recommendations in order to not fan ideological flames. But to Romney’s argument, the challenge for the Fed is that any new program has to deliver — and that’s increasingly difficult without complementary efforts by lawmakers. For example, low interest rates do little to improve the economy if homeowners cannot refinance their mortgages until Congress approves a program of its own. Robert Stein, a senior economist with First Trust Advisors, said the obstacles facing the economy can’t be repaired by manipulating interest rates alone, yet Bernanke has to offer the possibility that he can fix something — anything — regardless of how minor it is. “He realizes they’re only working on the margins,” Stein said, “but he realizes at this point that everything is important — even at the margins.” More than that just doesn’t make sense unless the economy craters, said Jason Schenker, president of the consultant Prestige Economics. “What we’d need to see is almost a cessation of growth,” Schenker said. “Then if they think they need to pull the trigger, they’ll pull the trigger.”

TagWeisenthal 6/24/12 - Correspondent for paidContent.org, as well as the Opening Bell editor at Dealbreaker.com analyst for Techdirt.com, analyst for money management firm Prentiss Smith & Co. A graduate of The University of Texas at Austin, Deputy Editor for business insider, (Joe, “The Downturn In Germany Is The Best Thing To Happen In A Long Time,” Business Insider, June 24, 2012, http://www.businessinsider.com/the-fall-in-the-german-economy-is-good-news-2012-6#ixzz1yjdUbrMe) MSD

An important development happened in Europe this week: The German economy officially began to crack. On Thursday, Germany had a very bad Flash PMI report , showing an accelerating decline in manufacturing and service output. On Friday, a survey from the well-known Ifo Institute showed business confidence in Germany collapsing . Throughout the crisis, Germany's economic performance has been nothing short of miraculous. Even as its peers have been heading into depression, the German economy chugs along, and unemployment has ground lower and lower. Here's a look at unemployment in Germany going back to 1997. Eat your heart out, world. Against this backdrop, it's understandable why Germany has been reluctant to endorse anything that might, you know, change the status quo. No monetary or fiscal stimulus has been tolerated. When the ECB does do something, the German bundesbank objects. The German ability to withstand the latest bout of crisis has lead to a textbook example of a country -- as they say -- sipping its own Kool-Aid. Merkel thinks austerity and the hard euro has worked just fine for Germany, and so she can't imagine why it won't work for Greece (or Italy, or whoever). It's just a matter of needing the proper discipline. But what has only been getting more attention recently is the way in which Germany thrived over the years because the peripheral countries went into debt for the purpose of buying German goods. Here's a look at household debt-to-GDP in Spain (blue line) vs. household debt-to-GDP in Germany (red line) between 2005-2010. Germany's debt is going down the whole time, in part because Spain's is going up.

What the Euro did was create a bubble in peripheral countries that allowed for mass consumption of German goods. Relatedly, Germany benefited from the fact that the Euro was cheaper than the Deutsche Mark otherwise would have been, thus giving it an export boost. Again though, the German line will be that its practiced austerity and engaged in labor market reforms that would work for everyone else, if only they would bite the bullet. The truth of the matter is that not only has the Euro been a perfect form of stimulus for Germany all these years, it has also benefited from more explicit forms of public stimuli. As Richard Koo recently pointed out , the ECB cut rates aggressively after the tech bubble collapsed (a bubble that at least in Europe only happened in German). The lower rates didn't help the German economy

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directly, but the rates did help stoke the bubble in the periphery, since there never was a post-bubble bust in those countries. Instead, the low rates just helped to heat up already hot economies, further creating a credit boom and demand for more German goods. But wait, these ECB rate cuts following the collapse of the tech bubble had another effect. The countries of southern Europe, which had not participated in the IT bubble, enjoyed strong economies and robust private- sector demand for funds at the time. The ECB’s 2% policy rate therefore led to sharp growth in the money supply, which in turn fueled economic expansions and housing bubbles. Wages and prices increased... leaving those countries less competitive relative to Germany. In short, the ECB’s ultra-low policy rate had little impact in Germany, which was suffering from a balance sheet recession, but it was too low for other countries in the eurozone, resulting in widely divergent rates of inflation. As Germany became increasingly competitive relative to the strong economies of southern Europe, exports grew sharply and pulled the nation out of recession. Germany’s trade surplus quickly overtook those of Japan and China to become the world’s largest, with much of the growth fueled by exports to other European markets. Here's one of Koo's chart showing wage divergences. It's well known that wages in the peripheral countries rose a lot faster than in Germany (and this is supposedly one of the arguments for internal devaluation, and an argument that Germany has done better) but Koo argues that this is essentially the result of the post-2000 interest rate cuts. The reason German wages didn't rise by as much is because in a balance sheet recession (which is what the US is in now, and which is what the German economy had post-bubble) monetary policy doesn't work as well. So the whole idea of Germany being disciplined about wage growth, and the periphery going hog wild giving everyone raises is a myth.. it's really more about the ECB stoking their economies on behalf of the Germans post-2000 bubble. And so now, finally, the magic is wearing off and Germany will be soon forced to confront the fact that it doesn't have a miracle economy that can thrive on the basis of its worker productivity and government discipline alone. Prior to recently, it would have been insane for Merkel to do anything to change the status quo in Europe, since it was all working so well. Thus her neighbors have been collapsing (to varying degrees) thanks to a reticent ECB and an inability to juice the economy. This has lead to a global crisis. Now Merkel is trying the other shoe on, and it could be just what Europe needed to get onto a new path.

TagCRUTSINGER 6/21/12 - AP Economics Writer (Martin, “Fed message: Economy unlikely to improve this year.” San Francisco Chronicle, June 21, 2012, http://www.sfgate.com/business/article/Fed-message-Economy-unlikely-to-improve-this-year-3646832.php) MSDOn Wednesday, the Fed said it thinks the economy will grow between 1.9 percent and 2.4 percent this year, sharply less than in its previous estimate in April. And it's roughly the annual pace at which most economists think the economy is growing now. "All economists have shaved down their forecasts for this year," said Sung Won Sohn , an economics professor at the Martin Smith School of Business at California State University . Sohn said his own forecast was in line with the Fed's. He said he was surprised the Fed didn't downgrade its unemployment outlook even more based on its forecast for economic growth. Even so, "If the Fed's forecast unfolds, that would be bad news for incumbent politicians," Sohn said. "If I were President Obama, I would be worried." Some political strategists expect the picture the Fed sketched of the economy to play into Romney's hands. "If I'm Mitt Romney, I immediately use Bernanke's comments to make the case that what I've been saying is right: Barack Obama isn't working, the stimulus has failed and the only way to take us out of this is to make a change in the White House," said Joe Brettell , a Republican strategist. He said Romney's message is simple: "I'm the guy who can fix the problem." Most people think the biggest problem is unemployment. Brian Bethune , an economics professor at Gordon College in Massachusetts, said he thinks the unemployment rate will end the year at 8.1 percent or 8.2 percent. Bethune thinks the Fed might decide by early fall that the economy needs some aggressive new step, such as another bond buying program. The Fed has completed two such programs. It bought more than $2 trillion in Treasurys and mortgage-backed securities. If such a program were launched and helped boost the economy, it could end up benefiting job seekers and perhaps Obama's re-election chances. "If we are still seeing these terrible employment numbers," Bethune said, "then the Fed is going to have to consider another move. The economy can't just flop along at this level." Bethune said the problem for incumbents like Obama is that perceptions about the economy tend to freeze about six months before an election — even if the economy improves after that. Even so, economists note that continued declines in oil and gas prices could spur growth by giving consumers more spending power. On Wednesday, the Fed said it will continue a program called Operation Twist through year's end. Under the program, the Fed has been selling $400 billion in short-term Treasurys since September and buying longer-term Treasurys. The Fed said it will extend Operation Twist using $267 billion in securities. But it might not provide much benefit. Businesses and consumers who aren't borrowing now at historically low rates aren't likely to do so just because rates dipped a little more. David Jones, chief economist at DMJ Advisors, estimates that extending Operation Twist will lower long-term rates by only about one-tenth of a percentage point.

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