Exclusive to STR
December 22, 2008
The unknown cost of economic stimulus is somewhere down the unmeasured road, while stimulus's close cousin, public works, would appear to be the next Keynesian cluster bomb to be fired at the yet defiant real world. Illusion enablement aside, a public works infrastructure concept is a modest improvement over naked stimulus. In public works there's at least tangential acknowledgement that it may be a good idea to have some sort of output-- contrasted with stimulus which has an even closer cousin, the broken window fallacy.
Public works has a more hopeful sound. Stimulus could be just a giveaway to Wall Street. Public works is stuff'concrete and steel. If Wall Street is going to get hold of public works money, at least they'll have to work to come up with a twisted scam--it won't be just 'injected' onto their balance sheets.
But if we can't keep that concept of output always uppermost--and the evidence so far is that we can't--the happy, hopeful sound of public works will be another money pit.
The base assumption is already glib--that public works are just something the government does in tough times (and easy times and medium times), to create jobs, stimulate the economy, build infrastructure and give people hope. But what are we talking about?
It's not like we can put together teams of unemployed stock analysts and drywallers and send them off to build bridges. Subtleties like this can get lost in politics, but bridges, I'd point out, are best built by those who know how to build them. Most such people are not hanging around the doughnut shop waiting for Congress's call--they're out there now, building and repairing bridges at the rate society had previously chosen. Stomping on a bridge building accelerator will have a lot of slippage--as for example, when a previously active engineer is lured away to teach due to an accelerated demand for new engineers.
If there's a big ramp up, someday there will be a ramp down. Some of the 'created' jobs will be uncreated, and ripple effects will cause other loss. (And we shouldn't get too excited that only some of the created jobs will be lost. We can't know if it's a gain over jobs that would have been created by some other plan, or by no plan. However, the more splashy and political a job creation plan becomes, the less probable the sustainability becomes.)
A subtle ramping up in infrastructure isn't going to be the payoff that politicians will be looking for. They'll want a voter attention grabbing splash. The reaction in politics to a slower than wishful expectations infrastructure start will be to stomp on the accelerator even harder. (Hopefully in the case of bridge building, we won't get the splash literally.)
New projects have an unfortunate high profile over repairs and maintenance. It seems rather muddled to consider ourselves caroholics and in need of more road infrastructure at the same time, but contradictory rationalizations are becoming an American specialty. Thinking about interest groups now fine tuning their 'infrastructure' proposals is frightening.
Congress appears to be at least as confused as anyone else. And we can always be sure that whoever they decide to listen to, it will be based not on common sense persuasion, but on political connectedness and popularity.
Robert Poole in a Wall Street Journal piece, 'Stimulus Shouldn't Be an Excuse for Pork', focused on U.S. Conference of Mayors requests, and concluded that, 'It is clear that any infrastructure stimulus money given to the country's mayors will lead to thousands of tennis centers to nowhere.' Other advocates, public and private, aren't going to have any more trouble than the mayors in seeing their porkish proposals as 'infrastructure' and 'job creation.'
That tradition--incorrectly considering pork spending as if it's economically additive, has moved from the realm of the disgusting to the dangerous. (Especially if all those tennis courts distract us from the study of safe, proper food rioting techniques.)
Consequences for off the charts government spending and borrowing are somewhere between uncertain, and certainly bad--so justifiability for public works projects on their own merit, ex any consideration of 'stimulus' or 'job creation', should be a bare minimum for any infrastructure proposal.