We'll be working out the details in the weeks ahead, but it will be a two-year, nationwide effort to jumpstart job creation in America and lay the foundation for a strong and growing economy. We'll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels; fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead.
We hate to nitpick, but there are too many silly things said here for us to refrain:
- A two-year "jumpstart" has to be the slowest-motion "jumpstart" ever (Michelle: Where have you been for the last two years? Barack: Jump-starting the car.)
- "Crumbling roads and bridges" is a phrase used by every Democratic candidate in an election cycle. Yet one is hard pressed to point to roads and bridges on this continent-spanning nation that are both genuinely "crumbling" and without plans for repair or replacement already in motion. Our own Brent Spence Bridge, as an example, is the object of massive planning efforts at present. So what's new in that?
- The answer to our previous question is more money sooner for unionized construction workers and their politically connected contractors. This is political payback to Big Pavement and Big Iron, with "prevailing wage" as the backdrop.
- "Moderninzing schools that are failing our children" must refer not to reform of financing or accountability or pedagogy but to construction projects, as it's hard to see how any other education initiative is economic stimulus in the period of two years. So does anyone seriously contend that schools can't educate primarily because they need new buildings, that unready students and unable teachers will be transformed by better bricks and mortar? Call this good money after bad, as revealed by the very way Obama talks about investment in something that's failing (cf. Big Three below). Given that old school buildings are found most often in communities with sharply declining public school enrollment, and one can envision sparkling new, largely empty buildings in which NEA-organized teachers fail their few remaining students.
- "Wind farms and solar panels" will require massive investments in an electricity grid to send the power where it's needed, the creation of as-yet nonexistent technologies to store the energy until it's needed, and the devotion of thousands of acres of rural land or wilderness for environment-altering technologies that will leave a bigger mark on the landscape than oil-drilling or coal-mining ever have. Is it not obvious that plants don't grow underneath solar panels*? Get set for the biggest NIMBY reaction ever when Big Wind announces where its turbines are going.
- "Fuel-efficient cars" we have already explained: the quasi-nationalization of the Big Three whereby they will manufacture cars to fit government specifications rather than consumer demand. This is payoff to the UAW and a formula for perpetual public subsidy.
- "Free us from our dependence on foreign oil and keep our economy competitive" works fine as long as oil is at $150 a barrel and up. But now that it's below $50, much closer to the historic price as adjusted for inflation, the numbers don't add up. If the United States commits itself to much more expensive forms of "green" energy (actually not very green), its economy can never be competitive with countries that use more efficient, less expensive "brown" energy.
Missing throughout is entrepreneurship. The Obama stimulus will do nothing to put money in the hands of people who innovate to meet consumer demands. It will prop up existing, relatively unproductive areas of the economy represented by big corporations and big unions, enshrining their eclipsed business models under the banner of innovation for the future.
Whatever the price tag of the Obama stimulus, we expect to find ourselves understimulated. But not undertaxed.
_______________
*We noted yesterday that a solar power company with an initial public offering of stock earlier this year is now trading at 11% of the price of the IPO. It's not looking good for alternative energy.
5 comments:
I think this announcement is clear evidence that Obama is positioning himself as the Second Coming of FDR. Think of the possibilities. Instead of CCC (Civilian Conservation Corps), we could have BCI (Bureau of Crumbling Infrastructure); instead of TVA (Tennessee Valley Authority), we could have GWP (Global Warming Patrol); instead of WPA (Work Projects Administration [i.e., We Piddle Around]), we could have YWC (Yes We Can [i.e., You Were Conned]).
Joking aside, I'm all for the government taking the lead on building and repairing the national infrastructure, preserving the integrity of the natural environment, and stimulating the economy. When left to itself, the market does almost nothing to establish and maintain a public infrastructure, tends to treat the environment as a large trash bin, and creates an economy that is much too volatile for the common good.
The question is whether Obama's proposals are the solution. I think not. Whereas Republicans persistently err on the side of deregulation, Democrats persistently err on the side of regulation. Despite his rhetoric to the contrary, Obama has given no reason to believe he will break out of this pattern and effect real change. To do that, he would have to exercise considerable creativity in balancing the strengths and weaknesses of the public and private sectors. Instead, he seems intent on simply subordinating the latter to the former.
We also detect a creepy preoccupation with being "historic" in what's brewing for 2009. All this Lincoln and FDR talk is unsettling, and not just because the present era doesn't deserve comparison to the crises of 1860 or 1932. We don't like what happens in history when people ascend to power intent on making history.
Yes, infrastructure is good, and government is necessary to develop and maintain it. But we think it's generally attended to rather constantly by our federal, state and local governments. We worry that big initiatives simply lead to uncritical appropriation of funds for less-than-efficient projects. And of course the same may be said for environmental protection: private concerns aren't very consistent on such things, though cost-benefit analysis is not well done by government entities in such matters (cf. Bjorn Lonberg's timely analysis), especially when aiming for a big environmental revolution.
We object that overinsistence on deregulation has not been a mortal sin of Republicans, at least in the mainstream. For every R who wants to privatize the interstate highways, there are thousands who think the idea is looney. Meanwhile, Republicans have championed the rolling back of regulations that provided little benefit and simply interfered with ordinary commerce, like intrusive and pointless OSHA regulations (not that all are, of course).
As to regulation in finance, our current bubble-bursting is both the consequence of inadequate regulation to provide transparency (in mortgage-backed securities and derivatives) and of the government's own over-promotion of mortgage lending, with the enthusiastic support of majorities of both parties.
When Bush got on the mortgage-promotion bandwagon with his "ownership society," he sought to extend the Republican legacy started in the Free Soil Party. What he missed, in our opinion, is that expanding ownership requires first the wider embrace of the virtues that enable ownership, including especially sagacious thrift. But he was last on the bandwagon: the Jacksonians were there long before, and their national leaders never once before the bubble burst raised their voices to call for closer scrutiny of mortgage lending.
Mostly I agree. For instance, I think your comment about "those who ascend to power intent on making history" is right on the money. It conjures up images of Bill Clinton vetting out historians early in his first term to write about his place in history. (Hopefully, they'll repay his self-promotion with extended analyses of how, exactly, such self-aggrandizement led to his impeachment.)
I also think you're exactly right to blame both the Republicans (the primary advocates of the deregulation of mortgage-backed securities lending) and Democrats (the primary advocates of the over-promotion of mortgage lending) for our current financial mess. I think both parties have failed us miserably in this area.
I would point out, however, that I'm not against deregulation per se. I'm against a policy that says more of the same is always better. I don't even believe that about chocolate eclairs. (At least not at the moment.) And, yes, I realize that even Republicans don't want to deregulate everything. It's the over-reliance on that strategy that I object to.
Finally, I think you're right to worry about the results of governmental cost-benefit analyses for large-scale projects. Inevitably, it seems, the costs are grossly underdetermined, and the benefits are wildly overestimated. But it doesn't always work that way. Indeed, not every major government initiative is counterproductive. Take your example of interstate highways. I think we can justifiably say that the success of the project far exceeded anyone's expectations. And it was the brainchild of the Eisenhower administration! What I would like to see is a little more of that kind of creative thinking on the part of our current Republican--or, for that matter, Democratic--leaders. My fear, which I think you share, is that Obama is not being at all creative in his proposals, but simply reverting to business as usual for a Democrat.
I really do hope I'm wrong. I admire Obama (and his family) in many ways, and I think that, if he has a successful presidency, that alone could do much to help decrease our political, cultural, and economic hostilities. I suppose time alone will tell.
We'll protest mildly the notion that the Rs advocated deregulation of mortgage-backed securities. Mortgages bundled and split in the ways they were weren't deregulated so much as invented in advance of any regulations. Neither party made a move to regulate them. Still, your point is extremely valid that any strategy stretched to the vanishing point will fail long before it reaches that point. There ought to be a regulation forbidding being doctrinaire about deregulation.
We definitely agree that some government projects are successful in important ways, and the interstate highway system is one such. We believe, however, that the interstates were not so great an innovation as they might seem. Highways had developed incrementally over time, and the design scheme of the interstates was an extension of the limited-access highways that had already existed in small numbers here and, ominously, in Hitler's Germany. So the investment was timely but sensible--and undertaken over decades, not a couple of years as the president-in-waiting proposes.
Still, it's things like roads, sewers, water, and other infrastructure at which government does its best work. The problem comes when a government decides to increase substantially its investment in such in a single stroke. Compare the result to someone winning the lottery. It's great to have all that money, except that you haven't a clue what to do with it, so much of it is simply wasted on pointless excess. Sure, you paid off your credit cards and maybe your mortgage, but then there's all that stuff that you ordered from QVC . . .
When state and local agencies are offered federal largesse on a use-it-or-lose-it basis, they'll find ways to use it, even if the ways aren't useful.
It definitely sounds like a new New Deal
Post a Comment