Governments around the world, but of more concern for TAFKAS, around Australia, are about to go into an infrastructure frenzy. You see, it’s the only thing that can save the ecomomy. You know it is.
Somewhere, some how, TAFKAS estimates around the late 1999’s, Australian governments got bitten by the infrastructure bug. Yes, yes. Government always built stuff, but now with the advent and popularisation of official sounding “infrastructure” (trademarked), building schools and building hospitals and building roads can be lumped into a single infrastructure bucket. Voilà. And, like all government spending, apparently, the more that is spent, the better it is. Apparently.
TAFKAS suspects this folly started with the move to accrual accounting for government budgets. Now, rather than just reporting just a net cash spent result, there were so many ways to confuse. There was the cash total result, the accrual operating result, the cash operating result and so on. Just pick the one that looks best.
But the move also allowed Governments to justify more borrowing. Debt for operating costs – BAD. Debt for capital (ie infrastructure) – GOOD.
Thus because infrastructure, irrespective of its return, is capital, debt is fine. No prob. Just remember, Infrastructure = GOOD = SPEND SPEND SPEND.
It is thinking like this that gave us the light ghost rail in Sydney and the phantom roadways in Melbourne (the roadways you pay contractors NOT to build).
Infrastructure is also another Keynesian Kon – it’s wasteful government spending, but because you can see something at the end, it’s not spending – it’s investments – and investment is good. So Infrastructure = Investment = GOOD = SPEND SPEND SPEND.
It is this thinking that brings you investments in health and education and they other stuff that are really expenses but presented as investment. Remember Investment = GOOD = SPEND SPEND SPEND.
But when it comes to actual capital expenditure, the stuff that leaves evidence (buildings and roads etc), there is a reason why it costs to much and we need “tax reform” to fund health and education. It’s because our governments (elected and bureaucratic) are stoopid. Sorry, let TAFKAS clarify, they are really stoopid.
Why does TAFKAS say this? Because this is how they do it:
- Identify an amount of money that can reasonably and unreasonably be spent in total on infrastructure – a function of how much that can be taxed and borrowed without looking like a Palaszczuk or Cain/Kirner government.
- Find capital works project that are of questionable economic value but of high political value.
- Come up with ridiculously high project budgets.
- Invite tenders in the naive belief that it will be competitive and which will come up with tender prices well above the ridiculously over spec’ed and over the original estimate.
Bish – bosh – bash. You get white elephant cities and dud “infrastructure” which drag on the economy for generations. Oh and don’t forget the ongoing operating and maintenance costs that need to be funded.
But the MPs get their orders of Australia and their names on opening plaques and the bureaucrats get their Public Service Medals. We, the dumb taxpayers however, we get stuck with the bill.