Wednesday, January 7, 2009

"Fine line between infrastructure and pork"

"[T]here is a fine line between infrastructure and pork -- the line between
building a bridge, which might promote economic growth, and painting a bridge,
which merely provides a few jobs for a few weeks. And Congress is not
particularly known for its navigation of fine lines." -Michael Gerson

I've said before that Obama's infrastructure programs and spending are really broad. How many of these programs will actually effect people at the margin? Will these programs just cause another seismic labor shift once they are completed? How many roads to nowhere will be built?

And let's not forget that infrastructure spending is sexist too.


Timothy said...

Spending on infrastructure does NOT yield a good economic return-- you usually don't even get the investment amount back in net growth. Here's a good article taking a look at Japan and how they tried to do the same things the Dems want to do just one decade ago...

Ilya said...

The trouble with leftist ideology of all stripes, whether it is the USSR, Western Europe, or Obama, is how it consistently ignores history. Each subsequent administration of the left acknowledges the failures of past socialist policies (often by asserting that particular programs are “underfunded”), then promotes an expansion of the same failing programs.

To the extent that the left admits to a failure of policy, it claims that the problem is one of institutional leadership, rather than of systemic concerns. The leftist politician professes “newness, change, hope.” He presents himself as the master of all trades; just put him in charge of government institutions, and he will fix the troubles that afflict them. This is followed up with what that sounds as if it were an original idea while being nothing more than a rehashed failure of the past.

In his mind, the leftist knows the real truth: that government – the body that uses the force of law to override private decision-making – never has or will create wealth; it can only redistribute what is produced in the private sector. But in his heart, the leftist believes that past conceptions of redistributive justice were poorly managed. He believes that the decisions that he and his cohorts make are correct, even if the rest of us do not know it. Surely, if we the people gave the new leader the power to allocate enough resources to fix economy-wide problems and spur consumer consumption and business investment, he could do so, right?

Wrong. The truth is that any money that the government, regardless of leadership, spends on a “stimulus package” has to come from somewhere. This means that it is borrowed from us taxpayers – thus crowding out private investment, raising the cost of capital, and decreasing the rate of return on assets – and subsequently taxed from us taxpayers. In other words, there is no “free lunch” with government spending.

Moreover, historical evidence in our own country shows the futility of infrastructure spending as the answer to economic malaise. In the 1930’s, government outlays on the New Deal totaled about $500 billion in today’s dollars. The results: unemployment averaged 17%, and GDP did not return to its 1929 levels until 1941.

The left believes that a charismatic leader and a band of government bureaucrats should be entrusted with our money because they can make better decisions than the rest of us. We are wrong, claims the left, by choosing to decrease consumer expenditures. The notion that the economy – the aggregate which comprises all individual decisions – needs government to spend our money as it sees fit in times of distress rests precisely on this notion.

Like all socialist policies, this may look good on paper, but it fails miserably in practice. Human experience indicates that Obama’s spending program will be no different.