Tuesday, January 27, 2009

More stimulus thinking...

Brandon writes:
I have to disagree with your opinion that some how infrastructure is possibly a better investment than say tax cuts. I am surprised that somebody with your Libertarian leanings would suggest that the government spending money on something it will ALWAYS own is better than it "spending" money on tax cuts that we can use to buy things that WE all own. I am not saying that tax cuts are always better, but if I get a tax cut it won't necessarily be 'wasted'. Businesses, even small ones, build infrastructure that the private sector will own. In my business infrastructure can be things like land, machinery, houses and IRA accounts. Things that will also have lasting value, just like a state highway.
Well put, Brandon.  But these are perilous days for us libertarians, at least on the economic front.  The tax cuts we championed with powerful data sets were leveraged by seemingly right-thinking politicians to squander on war and by quants to create essentially imaginary wealth (and vast bonuses)At some point, those of us who deemed government the greater fool have to admit it's only by a photo-finish.

The point I labored to get to was I'm not sure we have good enough data to rank stimulus efforts solely by the bang they produce.  Undoubtedly, the final package will be a mix of tax cuts and spending.  My observation was this could be the last good chance to get a bridge or school in my lifetime (thanks to the ensuing deficits and entitlement claims).

When we have exhausted the legacy infrastructure of our grandparents, we may think otherwise. And I note that the real CBO report estimates faster effects for infrastructure spending than I thought - partly because states have been cutting back for so long already.

Returning money to individuals may speed the recovery slightly faster than repairing roads or building a smart grid. But I do not consider impatience sufficient reason to eventually cripple our economy with infrastructure the private sector does not seem to want to invest in.

Would you ever support spending on infrastructure over lower taxes? If the answer is no, then don't be surprised when countries who do build public works overtake us.

I am not arguing either-or, but a reasonable fraction for rebuilding America.

1 comment:

Anonymous said...

I whole heartily agree with investing in our transportation infrastructure. However, I read the House bill yesterday and there is only $30 billion for highways, and about $10 billion for rail, and a relatively modest amount for waterways. Peanuts out of an $825 billion package! We do need to spend the stimulus on things that pay back over long periods of time, as well as providing tax breaks for businesses that create jobs.