How Can America Escape Its Debt? Maybe with Infrastructure Growth

By Phichaphat @ Adobe Stock

You can see in my chart below that America’s politicians, along with their cheerleaders in the corporate world, have loaded up the taxpayers with generations’ worth of debt. But is there any way out without a crushing inflationary devaluation of the dollar or even outright default? In an op-ed in The Wall Street Journal, Larry Fink, CEO of BlackRock, suggests that America can grow its way out of the debt problem it faces, but first, it must reform the infrastructure permitting process. Fink notes that” Extra-high-voltage power lines take 13 years to permit in the U.S., versus 3.5 years in China.” He writes:

Today, U.S. markets have more cash ready to invest than I’ve seen in decades. Roughly $23 trillion is sitting in U.S. deposits and money markets. Investors have been happy to let this money rest and earn interest, but as the Federal Reserve continues to cut rates, trillions will flow into growth-generating assets, especially infrastructure.

The $1 trillion infrastructure sector is one of the fastest-growing private markets. This is good news for the U.S.: Historically, infrastructure has been responsible for much of our economic growth. Between 1860 and 1890, railroad expansion accounted for 25% of the increase in GDP. The same proved true for highways a century later. Investments in the interstate system drove a quarter of the country’s productivity growth between 1950 and 1989.

Infrastructure investment can do the same today, especially investment in the defining piece of infrastructure in the 21st century, data centers, which are becoming far larger and more powerful with the rise of artificial intelligence.

The newest data centers can require a full gigawatt of electricity all day, every day, equivalent to the energy consumption of a midsize city. The buildings and power supply alone can cost $11 billion to $13 billion. The chips and semiconductor fabs to make them cost even more. Semiconductor-lithography machines require a level of precision comparable to firing a laser at the sky and hitting a golf-ball-size object on the moon, according to Chris Miller’s “Chip War: The Fight for the World’s Most Critical Technology.” It’s as expensive as it sounds.

Historical comparisons are never perfect, but AI infrastructure could be our century’s economic equivalent of the transcontinental railroad—a project that creates historic growth in countless ways from making individual workers more efficient to helping people save more for retirement. Data centers can be great investments for pension funds and 401(k)s, providing long-duration, high-coupon returns.

These benefits won’t accrue only to the wealthiest Americans. The “AI transcontinental railroad” is already creating jobs that, as the Journal reports, “defy traditional blue- and white-collar distinctions.” The technicians who maintain data centers can earn more than $100,000 a year without a college degree. Each data center also requires thousands of skilled workers to build it.

While policymakers don’t need to fund this infrastructure, policy is still crucial. In many states, utility companies have said the surge in energy demand will push their grids past capacity. Without more power generation and distribution, the country may find it difficult to supply electricity for both people and data centers. And a society that cools its servers while its citizens swelter has fundamentally misplaced its priorities.

Reform of the permit process would let the country build energy infrastructure at more than a snail’s pace. Today, permitting for the average U.S. infrastructure project takes longer than building it. Extra-high-voltage power lines take 13 years to permit in the U.S., versus 3.5 years in China. That should change.

In 1989 I saw the newly installed debt clock while walking to BlackRock’s one-room Manhattan office. Today, it’s worth reimagining what that clock should look like. How fast the debt is rising measures only the problem. Two more measures are required to capture the solution: How fast the American economy is growing, and how much we’re building.

I’m confident those two numbers can define America’s economic future. Not our debt.

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