Wednesday, January 21, 2009

Buicks to the Moon

The current congressional proposal for stimulus will borrow (or print, because God knows who would buy a Treasury bond at 0.05% interest, or whatever it is today) $825 Billion and throw some of it into the economy in various ways.  Some of it will go to State and local governments, which means that we can kiss that money goodbye.  Some of the other provisions: a small cut in Social Security Withholding that should help the poor, but puts one more chip in our fragile Social Security situation.  About $358 Billion of it will go into so-called "shovel-ready" infrastructure projects, which someone somewhere in Washington thinks will be built in the next two years.  Let me first say that within reason, infrastructure is the business of government.  No country has ever successfully transferred the building of roads, bridges, water supplies, etc., to the private sector.  It is cheaper to build infrastructure projects in bad economic times than in good.  That being said, let's put this $358 Billion number in perspective:
In 2008 Dollars,
The entire Space Program through the Apollo Era cost $288 Billion over 18 years.
The entire Interstate Highway System Project cost $425 Billion over 35 years.
The entire New Deal cost $500 Billion over 18 years.
There is no way that this stimulus package will actually get spent on real, needed projects in two years.  And the stimulus effect of infrastructure projects is greatly overrated.  One only has to look at the US during the 1930s or Japan during the 1990s to see that.  So I expect a whole lot of the money to be spent on time machines and bridges to the moon, which will neither have a stimulative effect nor provide meaningful improvement to our country's infrastructure.  On a local scale, this is the equivalent of Houston looking at Reliant Stadium, calling it a success, and building 5 more.
I don't want to reject the Obama/Pelosi/Reid plan without offering one of my own.  Cut the infrastructure grants to zero.  Instead, offer very low interest loans (1% is probably possible) to any state, city, county, school board, or other local government who can pass a bond on the infrastructure need that they think they have.  I'll bet gold to dollars that this would cut the short-term Federal expenditures by 75% or greater, cut the long-term cost to almost zero, and eliminate almost all of the make-work programs that don't improve infrastructure in any meaningful way.

No comments: