Back in an October 2011 column, we discussed the many ways repairing our fraying infrastructure could help the United States’ economy. Our transportation grid has gotten old and out of shape. The interstate highway system is in disrepair. Bridges are rusting away, with some collapsing now and then. The electrical grid is a patchwork of jury-rigged fixes, vulnerable to blackouts and foreign cyberattacks. The cellular network of the United States is a laughingstock versus Asia’s or Europe’s coverage. Two years later, none of that has really changed.
The argument then was that a major infrastructure repair program would create jobs, keep us competitive with China and improve the security of our ports, energy facilities and electrical grid. And as a fantastic bonus, borrowing costs for funding these repairs were at the lowest levels in a century. Imagine the least costly way to improve and repair our infrastructure imaginable, and that was what was available to us: the deal of the century.
All of the above remains true — except the bit about ultra-low rates. They have begun to move higher as markets anticipate the end of the Fed’s quantitative easing. The most widely held U.S. Treasury, the 10-year bond, was yielding about 2.6 percent late last week — a full percentage point higher than in early May. The 30-year bond, which we tend to think of as the cost of funding infrastructure that will last for decades, has risen almost as fast.
As a nation, we still have a window to take advantage of these historically low rates. However, that window is beginning to close, and we need to act sooner rather than later.
As D.C. dithers, the rest of the economy has already jumped at the chance to put this cheap credit to work. The corporate sector has taken advantage of low rates to refinance its debt. Today, publicly traded U.S. companies have the cleanest balance sheets seen in decades. It is in no small part a driver of the stock market rally that began in March 2009.
Households have also taken advantage of low rates. Families with a reasonable income and a half-decent credit rating should be refinancing their consumer debt, especially home mortgages. And the data show that many of them have been.
That leaves Uncle Sam, along with the states and municipalities, as the odd men out of the debt refinancing boom. Rather than waiting for bridges to collapse to do expensive emergency repairs, we should proactively be upgrading and improving the rest of our infrastructure. We should be refinancing whatever debt we can while rates are still low.
What can we do as a nation to take advantage of these interest rates before they return to normal? Choose your favorite part of America that can be upgraded: