Stimulus II – Beyond Parody

September 8, 2010

The President has announced a second stimulus which, by the way, is not referred to as a stimulus, given the success of stimulus I. It is being referred to as an infrastructure rebuilding program, or some such thing. The purpose is not to stimulate the economy before the election; it is too late for that, but to get some positive ink portraying the Republicans as dyed-in-the-wool obstructionists. There are many good reasons for questioning this $50 billion largess.

I have always found it odd that Democrats, in particular, push for fixing roads and bridges during a recession. They quote studies that say our infrastructure is crumbling which, I’ll agree, is probably correct. However, it was crumbling even faster before the recession when it had more vehicles plying their way across it. Where was the concern, then? If the recession hadn’t occurred they would be in even worse shape. Obama also mentioned redoing airport runways. Are we to understand that planes are landing on crumbling landing strips. Where are the FAA and the transportation safety boards? The railroads are also being included in this spending spree. I thought they were privately owned.

Government bodies have done this for years: pushing off maintenance and repair because doing it would require either raising taxes or, shudders, restraining spending elsewhere. Runways, roads, and bridges are physical capital that need to be maintained and upgraded on a regular ongoing basis, not an episodic one whose primary goal is to obtain votes or campaign contributions.

Attempting to use infrastructure projects to boost the economy is doomed to utter failure. A critical complaint about government spending to counteract recessions is the lag between the approval of spending funds and the actual spending. Infrastructures are at the extreme end of this spectrum. By their very nature they are long-lived with the funds entering the economy relatively slowly. This round of projects is to be a six-year endeavor. The unemployed won’t be with us if they have to wait that long for the economy to turn around.

A second point is the question of whether or not we should put all of our stimulus funds into one sector: civil engineering projects. On the margin does the citizenry think this is the most critical area to devote resources to, today. I don’t know the answer, and it is doubtful we will ever find out. A third point is that these big infrastructure projects are not very good at getting people back to work. These projects tend to be very capital intensive so that for any given amount of stimulus dollars spent they increase employment less than many other activities would.

The upshot is that the politicians are continuing to treat the populace with callous disregard by their dereliction of responsibility to keeping the roads, bridges, and runways at acceptable levels of repair. (Would a private insurance company be willing to underwrite coverage on some of these roads and bridges?) The spending of the $50 billion won’t impact employment or GDP now. It may add excess demand for resources in three years when the Fed is trying to slow the economy. The only things that it can be assured of doing are increasing the national debt and giving politicians talking points. It would be funny if it weren’t so sad.

Posted by Jim

Hello world!

December 11, 2009

Welcome to This is your first post. Edit or delete it and start blogging!