An economic stimulus? Infrastructure
Why do some countries' economies grow and others don't? A World Bank commission says that, among other things, the ones that grow invest in their infrastructure. Commentator Robert Reich says that's what the United States ought to do.
Robert Reich (Robert Reich)
More on Commentaries, Commentary - Robert Reich, Robert Reich, Fed. Budget/Govt. Spending
TEXT OF COMMENTARY
KAI RYSSDAL: Among the many questions macro-economists like to sit around and chew on is this one: Why do some countries have economies that grow and others simply don't. A commission set up in part by the World Bank has been trying to find the answer to that for the past couple of years. Today the group recommended, among many other things, heavy investment in infrastructure.
Commentator Robert Reich says that's exactly what the United States ought to be doing, too.
ROBERT REICH: From the 1930s through the 1970s, we assumed that the biggest economic challenge was to avoid recession or depression, so we came to rely primarily on government spending to keep the pump primed and demand up. Richard Nixon declared in 1971: "We are all Keynesians now." He was almost right.
But then came the late 1970s, and inflation became a bigger threat than recession. It was running at double digits when Fed chief Paul Volcker put a break on it by hiking interest rates so high he almost broke the economy, too. From then on we assumed monetary policy was more important than fiscal policy.
But the biggest challenge now, as it was before the '70s, is lack of demand. Consumers don't have enough money in their wallets to keep the economy growing. And the Fed is stuck. If it cuts interest rates much further, it risks pushing the dollar lower. But that will spur inflation as everything we buy from abroad costs more.
So we've got to go back to fiscal policy -- big time. The tiny checks the Treasury just sent out are barely enough to pay our rising fuel bills. We need a stimulus package that's truly up to the job of restoring aggregate demand.
And the best and easiest candidate is spending on the nation's crumbling infrastructure. We've deferred billions of dollars of maintenance on bridges, sewers, water systems, levees and dams. That's already cost the nation dearly.
Problem is, the public doesn't trust the government to spend money on infrastructure wisely when earmarks go to "bridges to nowhere."
So here's the deal: The next president establishes a capital budget that lists infrastructure projects in priority order. No more earmarks. The capital budget will reflect the nation's true infrastructure needs.
And the government would fund that capital budget the way capital budgets should be funded -- through borrowing that assumes a realistic return to those capital investments, just like any smart business does. That way we keep the economy growing, create millions of jobs, and we get the infrastructure we need for the 21st century.
It's a win-win-win.
RYSSDAL: Robert Reich teaches public policy at the University of California, Berkeley. His latest book is called "Supercapitalism."
Comments
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From Chicago, IL, 05/22/2008
Investments in infrastructure, while stimulating job growth, can also be sustainable. Using permeable paving and structural soil, where storm water filters through sidewalks and parking lots, reduces infrastructure costs and allows trees to grow big. Large trees increase property values, provide habitat,reduce the heat island effect, and allow pedestrians comfortable places to commute and shop. If something as simple as paving choice provides all these things, why are we not pushing our local governments to make these investments now?
05/21/2008
Absolutely support the going metric thing. Long long overdue
From Katy, TX, 05/21/2008
In his commentary, "An economic stimulus? Infrastructure", Robert Reich argued that the government should increase demand by increasing spending in infrastructure projects which would help the population by improving our bridges, roads, etc. and at the same time create more jobs--a “win-win” situation. Furthermore he pointed out that the government should fund the increased spending by borrowing money assuming a "realistic return" on investment.
According to the book I am reading, "Economics for Dummies", the government borrows money from people like you and me through the use of government bonds, which are essentially loans to the government from people like you and me. When it comes time to pay for those loans, if the government accurately calculated a “realistic return” on investment, it can pay back the loan and interest using increased tax revenues. However, if the government ends up short, it can 1. issue more bonds to pay for the original bonds plus interest, or 2. print more money. The first option ends up adding to the budget deficit which adds to the national debt, and the second option severely increases inflation which destroys economic activity—these are clearly “lose-lose” situations. =(
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