Upgraded infra generally pays for itself, but it takes time. A new bridge or a new road will create efficiencies in gas consumption, use of time, etc., which will eventually pay for the project. Think of how the Brooklyn Bridge cut costs, etc., by allowing efficient travel from Manhattan to Brooklyn. These reduced costs and efficiencies are good for the economy as they make it more efficient and productive. Infra projects, if well thought out and financially feasible, are excellent for an economy.
Stupid stimulus programs like Cash for Clunkers, an UTTER waste of money, simply stimulate consumption, a worthless and irresponsible policy objective. Mere consumption does nothing lasting for an economy. Geithner, et al, who pushed this on an economically illiterate President, should be pilloried.
Things that got Boom! - mostly esconced in the Defense Department's budget - do not do this nearly as well. Sure, they increase employment but so do infra projects but their ultimate economic effect is negligible, especially if their ultimate purpose is to literally to blow up.
The problem we have here is that the purpose of O!'s latest stimulus is not to increase the kinds of efficiencies infra projects create, but solely to buck up a failing economy and to create employment in an election cycle setting. The Austrians have in my view shown exceedingly well why this kind of stimulus does not work for the purpose for which it is intended. Keynes, in a word, got it it wrong. But why this is the case is a long and arduous discussion.
We have not had a true Keynesian experiment until recently; the Great Depression did not end as a result of stimulus but because of WWII. The $780 billion package, a huge sum which still must be paid for, did not do the trick. Otherwise, we would not be talking about QE2 and stimulus measures like the one announced today. I think its failure empirically established once and for all the failure of Keynesian theory. In this light, the $50bn stimulus proposed today is probably a waste of money, more debt for our kids to pay.
If we are led by donkeys, what else can we expect? |
