Federal Reserve Chair Janet Yellen announced yesterday that the Fed will hike interest rates for the first time in almost a decade.
The last time that the fed raised rates was June 2006, shortly before domestic and global markets crashed and the Fed was forced to dramatically lower rates to nearly zero.
The idea is simple: when interest rates are low, business and the government are encouraged to borrow at those low rates; ideally to use that super-cheap money for productivity improvements.
In the private sector, that means things like upgrading factories with new machinery and purchasing new technologies to make their operations more efficient.
In the public sector, the federal government in the past, like with Eisenhower's national highway system, takes the opportunity of near-zero rate loans to build out infrastructure, and for other large projects that provide positive returns over time.
And for the past 7 years - most of the past decade - the private and public sector could take advantage of a near-zero borrowing rate.
For 7 years, if Congress had passed a sweeping infrastructure bill, it would have only had to pay one-quarter of one percent interest on the loan, or very low rates in that neighborhood.
That means if we had borrowed 1 trillion dollars to rebuild our nation's crumbling roads and bridges, we would have only had to pay back 2.5 billion dollars of interest at the end of the borrowing period.
To put that in perspective, he EPI estimated in last year that if the federal government borrowed just a quarter of a trillion dollars - 250 billion dollars - and invested it in infrastructure, we would see a 400 billion dollar ANNUAL boost to GDP.
That 250 billion dollar investment would also create 3 million new jobs in just the first year. And all those now-employed people would be paying taxes into the federal coffers, instead of taking unemployment benefits out of the federal coffers.
But the radical right-wingers in the House and Senate blocked every attempt in Congress to boost federal investment in infrastructure, and now that window for borrowing at near-zero rates is closing.
