Tuesday, December 23, 2008

Infrastructure stimulus = FAIL...?

The collective lips of all engineers were licked when Obama started the "infrastructure stimulus" train out of the station. Any engineer likes the idea of infrastructure, because these are typically huge, expensive, long-term projects that don't require an extraordinary effort. Often the design takes a short amount of time, and the redesign makes the engineer a fortune. Plus, public projects can be pretty, with photo-friendly architectural features, because hey, if the client is the taxpayer then there is no one to complain.

However I think I should point out that massive infrastructure spending is going on right now and it isn't doing the economy any good. Ever since the bridge collapsed in Minneapolis in August 2007 the entire nation has been on a full-scale bridge inspection, repair and rebuilding blitz. State DOT's have reported as much as 40% of the nations bridges are structurally deficient or in need of repair. Many states have been granted as much as $1 billion to repair their bridges from 2008-2014, and some states report they could use 7 times that much and still not get all the work done.

That's $50 billion being pumped into infrastructure spending, and the economy didn't seem to notice much. If Obama wants to stimulate the economy, he should consider the Ramsey-Waller bailout plan, as well as increasing school funding and tax credits for manufacturing companies. Infractstructure spending (though decreasing unemployment - depending on whom you ask) really didn't boost the economy during the Depression, and it won't work this time either.


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2 comments:

Vernon Malcolm said...

Now that the anti-science, superstition-based initiative presidency ends, we need several public works science Manhattan projects to make us great again and boost us out of this Grotesque Depression. First we must provide free advertising-based wireless internet to everyone to end land line monopolies. Then we must criscross the land with high speed rail. Because bovine flatulence is the major source of greenhouse gases, we must develop home growable microbes to provide all of our protein. Then we must create microbes which turn our sewage and waste into fuel right at home. This will end energy monopoly by putting fuel in our hands. We must address that most illness starts from behavior, especially from parents. Since paranoid schizophrenia is the cause of racism, bigotry, homelessness, terrorism, ignorance, exploitation and criminality, we must provide put the appropriate medications, like lithium, in the water supply and require dangerous wingnuts who refuse free mental health care to be implanted with drug release devices. CHurches should be licensed to reduce supersition and all clergy dealing with small children should be psychiatrically monitored to prevent molesting. Osama bin Laden and Timothy McVeigh were the ultimate superstition based initiatives. Widen navigation straits (Gibraltar, Suez, Malacca, Danube, Panama and Hellspont) with deep nukes to prevent war. In order to fund this we must nationalize the entire financial, electrical and transportation system and extinguish the silly feudal notion that each industry should be regulated by its peers. Technology mandates a transformation of tax subsidies from feudal forecloseable debt to risk sharing equity. Real estate and insurance, the engines of feudalism, must be brought under the Federal Reserve so we may replace all buildings with hazardous materials to provide public works. Insects, flooding and fire spread asbestos, lead and mold which prematurely disables the disadvantaged. Disposable manufactured housing assures children are not prematurely disabled and disadvantaged. Because feudalism is the threat to progress everywhere, we must abolish large land holdings by farmers, foresters or religions and instead make all such large landholding part of the forest service so our trees may diminish greenhouse gases. We must abolish executive pay and make sure all employees in a company are all paid equally. We must abolish this exploitative idea of trade and monopoly and make every manufactured disposable cottage self sufficient through the microbes we invent.

Benjamin Dueholm said...

1) It's true that the federal budget for road and bridge projects is already very big, but economic stimulus only happens if you increase levels of spending. $50 billion over six years is just not going to cut it in an economy our size. It has to be much, much more to have a counter-cyclical effect.

2) The reason infrastructure is an attractive method of economic stimulus is that it is a legitimate function of the government that needs to be done anyway. Our infrastructure in this country is in terrible shape thanks to decades of mis- and under-investment. We need to fix it anyway. we always fund these things with bonds, and with bond rates for the federal treasuries at historic lows, this is a great time to do it.

3) The other big reason infrastructure makes good stimulus is that it tends to create high-paying jobs that can't be done oversees. This means more people with more money to spend, which soaks up more of our excess economic capacity, because...

4) Tax credits for manufacturing companies will have no stimulus effect. Basically, most manufacturing has too much, rather than too little, capacity right now. The problem is that there is not enough demand for the products. That is a problem that cannot be solved by giving companies more money to keep doing what they do. They need more people to be buying. Your consumer bailout plan might be a good idea on the merits, but it, too, would not effect the problem of cratering consumer demand.

5) And lastly, infrastructure spending did end the Great Depression. It just came in the form of a massive military build-up that cranked up economic output without actually raising standards of living very much (bombs don't add to anyone's marginal utility). It would have been much better--in the absence of an international war, of course-- to spend all that money building stuff that would improve our lives in the long run, such as better intercity train lines, newer school facilities, you name it. But the spending did the trick. By the end of the war, we owed over 100% of our GDP to the holders of federal treasuries, but the Depression was over.