Tuesday, January 06, 2009

Spending on "Infrastructure"

Washington Post: The package Congress is compiling is expected to include fresh investments in infrastructure.

Bloomberg: Obama is working on a package combining tax cuts and spending on infrastructure, such as roads, bridges and transit systems, to boost growth.

Thomas Sowell: Take the idea that much of this money will be spent on "infrastructure." This certainly sounds good-- until you stop and think about it. So do most political notions.
Does spending on infrastructure mean that the money is going to be spent filling potholes and repairing bridges? Or will it be spent creating new things?


One of the key reasons why infrastructure gets neglected in the first place, is that there is very little political pay-off to filling potholes and repairing bridges, compared to spending that same money creating community centers, bike paths and other things. These new things create opportunities for ribbon-cutting ceremonies that give politicians favorable free publicity in the media. But nobody holds ribbon-cutting ceremonies for filling in potholes or repairing bridges.

The whole process is biased toward doing new things, even if the repair and maintenance of existing infrastructure would serve the public interest better. But, even in the unlikely event that the public interest triumphs over special interests, there is another very important difference between repair and maintenance activities, on the one hand, versus building new things on the other.

New things require long delays before they can get started, especially when they have to be done by politicians. Someone once said that Congress would take 30 days to make instant coffee-- and Congress is just the beginning of the delays, as all sorts of competing interests jockey for position at the public trough. Just putting together an environmental impact report for something new to be built can be a long process, especially if its findings are challenged by environmental extremists, who pay very little price for challenging, even if the delays caused by their challenges cost others millions of dollars.

In short, it can be years before the money that is supposed to stimulate the economy actually gets into the economy. And nobody knows what the economy will be like when that money finally gets into circulation. A common problem with government economic policies in general is that it is very hard to predict how long it will be before the policy actually affects the economy. An economic stimulus policy created during a contraction in demand can take effect during an inflationary expansion of demand-- and fuel still more inflation.


5 Comments:

At 1/06/2009 12:19 PM, Blogger misterjosh said...

It seems to me that this item ignores the most important question. Is increased infrastructure spending necessary? (falling bridges etc.) I thought that the general conclusion was YES.

The Minneapolis I-35W bridge is a perfect example of GOOD infrastructure spending. It was necessary, and it was bid commercially.

 
At 1/06/2009 12:36 PM, Anonymous t jefferson said...

From what I have seen in the past is the money allocated to Infrastructure gets diverted to protect bloated Government... like Political pay back jobs in the form of a new Infrastructure Department to wisely study, assign priorities, and allocate the money. The Department will be around for the next century like Our battle to stop drug use, drug imports and distribution to the end user, is a colossal failure. But those in authority refuse to admit it because such a huge number of bureaucracies have been created that it would be next to impossible to move that money into prevention and treatment programs.

 
At 1/06/2009 3:04 PM, Blogger 1 said...

Infrastructure needs money?!?!

What happened to all the money paid into the highway trust fund and how much of that money was WASTED on an attempt to socially engineer us into riding mass transit?

 
At 1/07/2009 12:32 PM, Anonymous Bradshaw said...

There will be challenges to quickly distribute the funds issued by the federal government, but I think people have blinders on as the current status of our country's infrastructure. It is a lot more than roads: Have you thought about power transmission, water mains, sewers, ... things underground you can't see? There is almost century old wooden water main still in service in some old towns!
The quicker this infrastructure money gets distributed back into the economy the better.

 
At 1/07/2009 5:06 PM, Blogger 1 said...

"The quicker this infrastructure money gets distributed back into the economy the better."...

Again, what happened to the money already extorted from the citizens by the local and state governments for the very things you listed bradshaw?

Thomas Sowell answered that question: "One of the key reasons why infrastructure gets neglected, in the first place, is that there is very little political pay-off to filling potholes and repairing bridges, compared to spending that same money creating community centers, bike paths and other things"...

 

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