Latest / The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending / Why Governments Dither on Big Projects
Transcript
- Lucas: So, Luna, I was looking at the final numbers on the Keystone XL pipeline — the one that got cancelled for good a few years back, and the total bill for a pipeline that never moved a single barrel of oil came to about one point three billion dollars. Luna: One point three billion for nothing? That's the number that always stuck with me, but I didn't realize it was that high. Lucas: Yeah, and most of that was spent after the project was effectively dead. The construction stopped in early 2021, but the company kept paying for storage, maintenance, and legal fights for another two years. The point is, when governments dither on big projects — approve, then pause, then review, then reverse — the costs don't just go away. They pile up in the background. Luna: So the real price tag isn't just the concrete and steel. It's the waiting itself. Lucas: Exactly. And that's the angle I want to dig into today. Not the usual 'government overpays for widgets' story, but the quieter cost of indecision. When a public project gets stuck in review, or a permit gets delayed, or a whole program gets cancelled after years of work, the money leaks out in ways that don't show up in a single budget line. Luna: Give me a concrete example beyond the pipeline. What does dithering actually look like on a daily basis? Lucas: Take the UK's Hinkley Point nuclear plant. That project was announced in 2007, and it's still not generating power in 2026. Every few years, the government reopens negotiations, tweaks the subsidy deal, and the cost estimate creeps up. In the meantime, the site itself needs security, the equipment ages, and the financing costs compound. Delaying a project isn't like pausing a video — the bills keep running. Luna: Right, and with nuclear, the long lead times make it extra brutal. But what's the mechanism that turns a delay into actual dollars? Lucas: Two big ones. First, carrying costs — interest on borrowed money, land leases, maintenance of half-built structures. Second, the opportunity cost. Every year a project is delayed, the services it would have provided — clean power, faster transit, flood protection — are simply not there. Economists call that the 'social cost of delay,' and it's often way larger than the direct spending. Luna: So it's not just waste. It's the value of what could have been. Lucas: Exactly. And I think the clearest way to see this is the cancel and revive cycle. Look at the East Side Access project in New York — that's the one that connected the Long Island Rail Road to Grand Central. It was first proposed in the 1960s, shelved, revived in the nineties, and finally opened in 2023. The final cost was about eleven billion dollars, and it was a decade late. A lot of that extra money went to redoing designs that had gone stale and paying for a workforce that had to be ramped up twice. Luna: And the same pattern shows up at the federal level with tax reform. Congress spends months debating a bill, lets it expire, then has to pass retroactive patches. The IRS has to re-program its systems every time, and that's pure overhead. Lucas: For sure. But I want to get to something a bit more philosophical, because I think there's a deeper reason governments dither. It's not just incompetence. It's that the political penalty for making the wrong call is often higher than the penalty for doing nothing. So decision-makers have an incentive to kick the can down the road, even when they know delay is costly. Luna: That's a strong claim. Can you back it up with a case? Lucas: The classic is the B-1 bomber program. In the 1970s, the Pentagon spent billions developing it, then President Carter cancelled it. Then President Reagan brought it back. The cancellation alone cost about two billion dollars in termination fees and wasted work. And you can see the same logic at play with the F-35's early years — repeated pauses and restructures that added years and billions to the program. Luna: So each administration gets to look decisive in the moment, but the taxpayer eats the switching costs. Lucas: Right. And it's not just defence. In healthcare, the Affordable Care Act's rollout was a classic dither. The website crashed, the administration delayed the employer mandate twice, and each delay forced insurers to re-file premiums and states to rework their exchanges. You can't put a precise number on it, but the chaos itself had a cost. Luna: Is there any good news? Are there governments that are actually getting better at this? Lucas: A couple of examples. Switzerland has a referendum system that forces a yes or no decision within a set timeframe, so projects like the Gotthard Base Tunnel went from proposal to completion in about seventeen years — that's actually fast for a mega-project. And in Australia, they've set up 'infrastructure Australia' to do independent cost-benefit analysis before projects get politically endorsed. That doesn't eliminate delays, but it makes them more transparent. Luna: So the fix isn't to be faster, necessarily. It's to be more decisive. Lucas: Exactly. And that brings me to something I've been thinking about. We talk a lot about government waste in terms of overpaying for hammers or building bridges to nowhere. But the most expensive kind of waste might be the hesitation itself. When a project is 80 percent done and then gets cancelled, you've not only lost the 80 percent — you've lost the 20 percent of benefits you were about to get. Luna: That's a really good way to put it. It's like a sunk cost fallacy, but in reverse — you're so afraid of throwing good money after bad that you forget the good money is the whole point. Lucas: Yeah. And you know, this is the kind of episode that makes me appreciate that we can dig into this stuff for a living. I mean, every time we talk about how a billion dollars evaporates, I think about how a few bucks from someone who listens could keep this show going. Luna: It really does. If you've gotten something out of walking through the economy with us, a couple of dollars a month genuinely makes a difference. You can support us at buy me a coffee dot com slash fexingo. Lucas: And it's not about perks or anything — it's just knowing that people find this useful. It keeps us ad-free and independent. Luna: Alright, back to the dithering. So if decisiveness is the cure, why don't more governments adopt structures that force it? Lucas: Because decisiveness means someone has to take responsibility. And in a divided government, the safest move is often to form a review panel or commission a study. That way, you can say you're 'doing something' without actually committing to anything. The study itself becomes a way to delay. Luna: So we've got to have a better way to handle the trade-off between speed and deliberation. Lucas: That's the real question. I don't have a perfect answer, but I think it starts with acknowledging that delay isn't free. If every month of dithering has a price tag, then we should treat it like any other cost — and hold leaders accountable for it. Luna: That's a tough sell in a political culture that rewards caution. Lucas: It is. But the more we talk about the actual numbers — like that one point three billion for a pipeline that never ran — the harder it is to ignore. And that's what we do here.