Saturday, February 16, 2008

A Capital Idea

Thinking more about how to use fiscal policy as economic stimulus, I hold forth in the current issue of the Ripon Forum. Here's a teaser:

The agreement reached by the House and White House in January addressed two problems that the United States does not have.

First, the nation does not have an underconsumption problem. The personal saving rate hovers around zero. The government’s budget has been in surplus in only four of the last 35 years. The nation has run current account deficits with the rest of the world for the last 15 years. If we are looking for additional economic activity, consumption is a poor choice.

Second, we do not have an underinvestment problem in the private sector. Interest rates have been very low by historical standards, and the Federal Reserve intervened immediately to lower them even further. With or without additional tax-based incentives, corporations have plenty of access to cheap credit to expand their capital stocks.

Where our country does have an underinvestment problem is in our public infrastructure. The failed levees of New Orleans. The collapsed bridge in Minneapolis. Those are but two recent examples of an area where the federal government is falling down on the job. Regrettably, they are not the only examples. In 2005, the American Society of Civil Engineers released a report card in which it estimated that $1.6 trillion would be required over a five-year period to restore the nation’s physical infrastructure to good condition.

Because infrastructure projects are in many cases public goods or natural monopolies that can be provided more efficiently with government regulation or implementation, the government should bear responsibility for them. Looking ahead, the country faces potential bottlenecks in network infrastructures in broadband and alternative energy that could be added to the ASCE report’s recommendations.

Read the whole thing.

1 comment:

Anonymous said...

"Where our country does have an underinvestment problem is in our public infrastructure. The failed levees of New Orleans. The collapsed bridge in Minneapolis."

The constituents are screaming for investment in infrastructure and the "no new taxes even if it literally kills people" Republicans are stone deaf.

Take a look at what just happened in Minnesota. This is huge (there have been only 14 veto overrides since 1939 in the MN legislature, and 12 of those were under Ventura -- testimony to how ineffective 3 party government is!).

The comedy action continued yesterday as the Republicans took their six renegade party members (who voted for the transportation funding bill on the override) out and publicly lynched them (they were stripped of all their leadership positions and top committee assignments, at a public conference). They're calling it the "Nazi party" here, lol. Geez, they can't even let their own members vote for the common good (and what their constituents were asking for) -- because they believe in no taxes at ANY cost -- even people dying from bridge collapses and crumbling roads. The backlash against the state Republican party is just beginning . . . . the "Renegade 6" have quickly achieved a weird sort of Che Guevara mythic status . . . cult heroes.

Anyway, Pawlenty just lost his bid to be McCain's running mate. His 'sour grapes' statement in today's paper was priceless.

Who knew bipartisanship could be so much fun?