Sunday, April 18, 2021

The Other Deficits

                                                                                                         written 11 April 2021

                                                                                                     published 18 April 2021


            Now that Republicans are no longer in power, they are again concerned about the growing federal debt.  To be fair, operating in constant deficit does bring long term consequences.  Fiscal deficit is the mismatch between income and expense within a given period of time, while debt is the accumulation of deficits over time.  But fiscal deficit is not the only deficit of concern.  Deficits in infrastructure (social and physical structures supporting the economy) and the environment (living organizations supporting planetary life) should also be considered, as they are arguably more significant.

            Infrastructure deficit can be considered the balance between the wear and tear of normal operation balanced against regular maintenance and repair.  Consider a bridge: it's operating life can be extended by the expense of regular repainting and repairs of normal use damage.  To save money, this maintenance can be deferred, a material deficit which becomes a debt over time.  When the maintenance eventually occurs, the expenses might be larger, as deterioration has increased over time, much like interest on a fiscal debt.  The damage could be so great that the bridge totally collapses, requiring even more expense, similar to a fiscal bankruptcy.

            Even with regular maintenance, infrastructure has a life span, and requires eventual replacement.  In addition, changes in the economy may make a previously adequate structure obsolete for the current needs, requiring not just replacement, but evolved design and added investment.

            Much of our public infrastructure was built shortly after World War 2, and is now reaching the end of its design life.  Our economic system pushes to maximize profits and minimize taxes, so public infrastructure has been running a deficit for decades.  A recent survey of bridges in the US showed that one third needed major repair or replacement ($160B).  One fifth of roads are in poor repair ($170B).  Half of American dams need repair ($60B).  A quarter of all drinking water leaks before reaching customers ($330B), and most sewer systems are old ($300B).  The recent work on State Street in Ukiah included replacing water mains that were 100 years old.

            For profit infrastructure suffers from the same deficit mentality.  The electric grid is antiquated, inadequate to changing demands, prone to fire ignition, and will cost $5T-$7T to upgrade.  The 94 US nuclear reactors, average age of 39 years, were designed to last 40 years.  So far, no nuclear reactor has broken due to aging equipment, despite close calls.  A Fukushima magnitude failure should be avoided, but it would cost $700B to replace what we have.  Infrastructure demands change with time.  The US had some of the first fiberoptic networks, but these rapidly became obsolete.  Bringing 5G connection to the entire US would cost $130B.

            Unlike fiscal debts, which can be written off when required, these infrastructure debts are real, and eliminating them requires real investment of material and time to avoid societal devastation.

            The same considerations apply to environmental systems.  Capitalism discounts inputs from natural systems, according them no value, so environmental deficits, extraction exceeding renewal, are normal.  The accumulated environmental debts resulting from decades, if not centuries, of environmental deficits are manifest daily in the news.  Top soil loss, polluted waterways, depletion of ground water aquafers, wetland losses, and deforestation are just some of the massive debts generated by business as usual environmental deficits, with increasing economic consequences.  

            The most significant environmental debt is climate change.  The leading edge has arrived: wide spread species extinctions, oceanic heating, coral bleaching, retreating ice, increases in storm duration, strength, and moisture content, wilder temperature swings, increased drought duration and extent, and hotter, larger wildfires.  The recent Texas freeze cost over $20B, and annual US weather disaster costs are approaching $1T.

            This is a weakened bridge, swaying in the wind.  When a bridge collapses, it intrudes into the economy with sudden, massive, and unexpected dislocation.  The collapse of portions of the environmental systems, abrupt climate change, is a real possibility, leading to societal collapse and possible near-term human extinction.

            Some people believe this environmental debt is just fake news.  Others believe it is already too late, with collapse inevitable.  Only a global effort will suffice, and it will take humanity embracing our interconnected fate.  Estimates are it would cost $130T to decarbonize the global economy, about 18 months of global GDP.  But isn't a viable future worth the effort?