I'm a bit of a blog machine tonight, but this story caught my eye. I'm in favor of this method of economic stimulus. Everything I've read about economic theory has said that checks sent to taxpayers are usually not helpful in the longterm. This article originally posted at Wired.
Hank Paulson and Ben Bernanke have been racking their brains for something that might give the U.S. economy a bump. Their next try might be good for the nation's transportation system — but it's not going to be cheap.
Bernake is throwing his support behind a gigantic stimulus package that House Speaker Nancy Pelosi and other congressional Democrats are pushing through Congress. If it were to become reality in its current form, it would significantly boost spending on roads, bridges and other public works projects: like a giant toll that everyone in the country has to pay.
The stimulus plan, which would be the second this year, would cost between $150 billion and $300 billion. In addition to allocating funds for traditional infrastructure spending, lawmakers are also considering provisions that would give families and businesses tax credits for investing in green projects like wind and solar.
While there is significant support for the package on Capitol Hill, some economists argue that the economic impact of public sector spending is overstated. "If the government taxes or borrows $10 billion new dollars to build bridges and roads, it's sucking the $10 billion out of the private sector economy somewhere else," Chris Edwards of the Cato Institute told Marketplace. "You know taxes are going to have to be higher than they otherwise would be."
Others say that these types of projects take time to ramp up, minimizing their economic impact. But the American Association of State Highway and Transportation Officials disagrees. It estimates that there are roughly 3,000 highway projects that could begin within 30 to 90 days of receiving funding, and several U.S. governors have been pleading with Congress for money to restart their states' stalled construction programs. With the recession projected by many to be long and deep, investment in infrastructure would have a big economic payoff, especially in sectors like construction, where unemployment sits at over 10 percent.
But on the downside, infrastructure spending can be especially vulnerable to political shenanigans. "You don't want to build more bridges to nowhere," Global Insight's Brian Bethune is quoted as saying, referring to the infamous Alaska project that has been bounced around as an issue by both presidential candidates.
At this point the plan is being well received in part because the last stimulus package, which consisted of rebate checks to taxpayers, was a bust. "It gave the economy a sugar high that faded as the financial crisis intensified," economist Peter Morici told the Associated Press.
But priorities in Washington can shift quickly. Right now, if the package actually passes and what it ends up looking like is anyone's guess.
To me, this is similar to the Civilian Conservation Corps, which was hugely helpful in pulling the US out of the Great Depression.