The Build-Nothing Country

Stasis has become America's spoils system, and it can't go on.

Photo by vastateparksstaff, CC BY 2.0.

This post is going to be a bit of a rant, because honestly I’m pretty frustrated, and I want the rest of you to understand and share at least a little bit of that frustration.

Specifically, what’s frustrating me is America’s seeming inability to build the things it needs to build in order to prosper and flourish in the 21st century. From housing to transit to solar power to transmission lines to semiconductor fabs, the U.S. has little trouble marshalling the financial and physical capital to create what it needs, but ends up stymied by entrenched local interests who exploit a thicket of veto points to preserve the built environment of the 1970s.

Ever day, new examples of this stasis pile up. In Berkeley, a plan to build student housing was just blocked by a court, which demanded that the university study whether students themselves constitute an environmental hazard. I wish I were kidding, but I’m not.

Alec Stapp @AlecStapp

California’s environmental procedure law is now being used to stop the construction of student housing bc the environmental review didn’t consider the potential noise from student parties. The word “environment” has become meaningless as it’s been expanded to include everything.

The court’s opinion also required the university to study whether the project would cause gentrification by increasing housing demand. The left-NIMBY theory that housing construction raises rents has thus been enshrined by a court of law, despite almost all of the empirical evidence being against that theory. The decision brought a fiery retort from the office of California’s governor, who realizes that preventing this kind of abuse of environmental regulations will likely require legislative reform.

Expect to see battles like this proliferate all over the country, especially in the state of California. That state has mounted an aggressive push to build more housing, enforcing old affordable housing planning requirements with newfound zeal and threatening non-compliant cities with a condition called the “Builder’s Remedy” that suspends zoning regulations. But CEQA, California’s extra-strict environmental review law, will provide a strong last line of defense against these efforts, and can only be reformed through legislation. Nor is it the only such environmental law being abused by local supporters of physical stasis.

Meanwhile, across the USA, housing is just not getting built. The recent runup in prices motivated a lot of developers to pull out their checkbooks, but they barely managed to raise housing starts to their pre-2008 levels, and now things are heading back to stasis as prices cool off.

How about transit? The U.S. is famous for its patchy, low-quality train service, but this is not due a lack of dollar spending; instead, it’s a simple inability to build. New York’s Second Avenue Subway line has become the world’s most expensive subway line — an order of magnitude more costly per mile than similar projects in Europe. A recent report by NYU’s Marron Institute of Urban Management finds that the chief culprits in the overspending are the overuse of expensive consultants, overly large train stations, and poor coordination and pork-barrel spending by other city agencies. Meanwhile, California’s ambitious high-speed rail project, started well over a decade ago, continues to see delays and cost overruns.

How about green energy? Last August the nation celebrated the passage of the Inflation Reduction Act, which allocated $400 billion to building green energy in the U.S. But as with housing and transit, allocating money doesn’t necessarily mean anything actually gets built. Here’s a report from the WSJ:

Even as developers plan an unprecedented number of grid-scale wind and solar installations, project construction is plummeting across the U.S.

Despite billions of dollars in federal tax credits up for grabs and investors eager to fund clean energy projects, the pace of development has ground to a crawl and many renewables plans face an uncertain path to completion. Supply-chain snags, long waits to connect to the grid and challenging regulatory and political environments across the country are contributing to the slowdown, analysts and companies say.

New wind installations plunged 77.5% in the third quarter of 2022 versus the same period the year before, according to S&P Global Market Intelligence. New utility-scale solar installations likely fell 40% in 2022 compared with 2021[.]

Two major factors include a difficulty getting parts and materials due to the Biden administration’s crackdown on sourcing from China, as well as a wave of NIMBY opposition to the projects. The Idaho Capital Sun has a good run-down of the NIMBY problem, explaining that solar and wind projects get a lot of local pushback simply because they take up a lot of space and so they intrude on the scenic views of a lot more local landowners, who use the U.S.’ thicket of onerous environmental review laws and other regulations to hold the projects up. Bloomberg also has a good story about how this is unfolding in California.

A third factor making America unable to build renewable energy is our inability to connect renewable projects to the grid; NIMBYs are also holding up transmission lines. The NYT’s Brad Plumer reports:

The energy transition poised for takeoff in the United States amid record investment in wind, solar and other low-carbon technologies is facing a serious obstacle: The volume of projects has overwhelmed the nation’s antiquated systems to connect new sources of electricity to homes and businesses.

So many projects are trying to squeeze through the approval process that delays can drag on for years, leaving some developers to throw up their hands and walk away…It now takes roughly four years, on average, for developers to get approval, double the time it took a decade ago.

Even in semiconductors, the ultra-high-tech industry where the U.S. and its allies must maintain leadership in order to maintain their edge over China, the U.S. can’t seem to build much. TSMC, the Taiwanese company that recently agreed to build a big plant in Arizona, is running into major cost issues:

Kevin Xu (interconnect.substack) @kevinsxu

2/ "We're not able to share with you a specific cost gap number between Taiwan and US, but we can share with you that the major reason for the cost gap is the construction cost of building and facilities, which can be 4 to 5x greater for US fab versus a fab in Taiwan."

All of these are versions of the same basic story. For decades, I’ve heard progressives, including my friends and relatives, bemoan America’s unwillingness to spend money on things like transit and green energy. But now America is spending all the money, and things still aren’t getting built, because of the country’s broken system of permitting, land use, and development.

This is such an important point that it bears repeating. Money is not physical stuff. Just because you earmark $5 billion for a subway or $2 billion for a solar farm in some Excel spreadsheet somewhere doesn’t mean a physical train or power plant has actually been created. If permitting holds up the process for years, then you still haven’t built a damn thing. And if eventually construction does begin, but the cost balloons to absurd levels, that means that a pitifully inadequate amount of actual physical transit, or housing, or solar will be created, despite that huge flood of dollar signs in your spreadsheet.

For decades now, Americans have told ourselves that we’re the richest nation on Earth, and that as long as we had the political will to write big checks, we could do anything we wanted. But that was never really true, was it? The inflation that followed the pandemic should have been a wake-up call — we had all this excess cash, and we started spending it on physical goods, and mostly what happened was just that the price of the physical goods went up. And so R.I.P. to all that cash. From meaningless numbers on a spreadsheet you came, and to meaningless numbers on a spreadsheet you shall return.

What matters is not how big America’s spreadsheet numbers are, but how much physical stuff we get. And yet as a society we’ve decided to award people with stasis instead of stuff. In many dysfunctional societies, the government’s guarantee of economic inclusion comes in the form of a specific physical good — usually, cheap fuel. In the United States, the in-kind subsidy we provide our people is the option to keep their world from changing.

If you’re one of the roughly 2/3 of Americans who owns a home, you can raise your wealth — at least on paper — by going to local government meetings and arguing to restrict the local housing supply. But perhaps just as importantly, you can preserve the built environment around you in exactly the form you’re used to. You can keep your streets quiet and uncrowded. You can preserve your open space, your big lawn, and your scenic views. You can keep your neighborhood free of any poor people who might live in nearby apartments or ride a train to your area. You have the option to keep your area free of anything you don’t want, for any reason.

This is a form of subsidy from the government to the people of America. It seems like a costless subsidy, because it doesn’t involve writing checks to people. But the costs are real, and Americans pay the costs. They pay them in the higher tax bills that citizens pay to fund infrastructure. They pay them in the increased prices businesses have to charge to make up for higher land costs. They pay them in higher rents. They pay those costs in more expensive electricity and increased carbon emissions. They pay them in the lower wages that workers earn because their cities can’t build sufficient housing near to the areas of greatest economic opportunity. They pay them in lower productivity because cities can’t grow big enough. They pay those costs in lost wages and incomes from disinvestment, when companies decide that America’s obstacles to land development make it a bad country to build a factory in. And eventually they pay the cost of a weak country that doesn’t have the economic strength to stand up to rivals like China.

Physical stasis seems cheap, but it’s an incredibly expensive way to subsidize the lifestyles of Americans. And it seems that whenever our real incomes flatlined, as they did in the 70s and again in 1999-2015, we increased this stasis subsidy to compensate, making it even harder to build anything — a booby prize for an electorate mired in stagnation, which ended up exacerbating that very stagnation. The 70s were when the embrace of stasis began, but the 2010s are when it reached its apotheosis.

This ill-advised path has now come to its inevitable end. We no longer have the luxury of giving our people a shadow subsidy by freezing their neighborhoods and cities in amber. Spiraling housing costs in any city with real economic opportunity, a floundering energy transition, and the inexorable migration of manufacturing to more development-friendly countries have become so severe that we must dispense with our collective illusion that America will always look like it looked in 1975. Slashing the thicket of red tape that prevent development, and subordinating local interests to the needs of the nation itself, are no longer idle dreams — they are immediate necessities. If we insist on continuing to be the Build-Nothing Country, our once-mighty middle class will sink into a genteel poverty, and someone else will build the future on the bones of our civilization.

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