Lost in the 21st Century

The latest from my favorite economist, Paul Krugman.  Not just my favorite economist, but one of the few who is normally right….

Some bleary-eyed thoughts from Japan on the reported administration proposal for $50 billion in new spending:

1. It’s a good idea

2. It’s much too small

3. It won’t pass anyway — which makes you wonder why the administration didn’t propose a bigger plan, so as to at least make the point that the other party is standing in the way of much needed repair to our roads, ports, sewers, and more– not to mention creating jobs. Once again, they’re striking right at the capillaries.

Beyond all that, the new initiative is a chance for me to air one of my pet peeves: the stupidity of the claim, which you hear all the time — and you’ll hear again now — that it’s always better to provide stimulus in the form of tax cuts, because individuals know better than the government what to do with their money.

Why is this claim stupid? Because Econ 101 tells us that there are some things the government must provide, namely public goods whose benefits can’t be internalized by the market.

So suppose we’re going to put $50 billion of resources that would otherwise be idle to work. Is it better to use them to produce public goods like improved roads, or private goods like more consumer durables? That’s not at all obvious — and anyone who tells you that basic economics settles the question, that is says that devoting more resources to production of private goods is better, doesn’t understand Econ 101.

And there’s a pretty good argument to be made that we are, in fact, starved for public goods in this country, so that it would actually be a good idea to shift some resources to public goods production even if we were at full employment; in that case, we should definitely give priority to public goods when trying to put unemployed resources to work.

Anyway, it’s all academic right now. My response to the administration plan, at least as best as I can respond given a massive case of jet lag, is a big eh.

via Infrastructure – NYTimes.com.

Well, this is definitely a step in the right direction.  It should have been part of a larger stimulus in the first place.  Of course, it’s probably too little too late.

I still think President Obama blew his FDR Moment when he could have given hope and heart to the county, started to rebuild our crumbling infrastructure and started to turn the economy around all at the same time if he had stood up to the GOP and pushed through a visionary, larger stimulus bill in the first place.

Political timidity and an impractical need to seek a bi-partisianship, which the Republicans will never support, has quite possibly undermined his presidency to the point that he’s lost his audience and his chance at greatness.

Now my fear his lack of coherent message and vision and political guts has given the short sighted, ill-informed, petulant American Electorate the impetus to irrationally vote the Republican’s back into power…

God help us all if that happens….

WASHINGTON — President Barack Obama is asking Congress to approve at least $50 billion in long-term investments in the nation’s roads, railways and runways in a pre-election effort to show he’s trying to stimulate the sputtering economy.

The infrastructure investments are part of a package of targeted proposals the White House announced on Monday. With November’s elections for control of Congress approaching, Obama planned to discuss the proposal later Monday at a Labor Day event in Milwaukee.

The proposals would require congressional approval, which is highly uncertain at a time when many legislators and voters are worried about adding to federal deficits that are already sky-high.

Even if lawmakers could pass a bill in the short window between their return to Capitol Hill in mid-September and the elections, it’s unlikely the spending would give the economy a significant boost by the time voters head to the polls.

While the proposal calls for investments over six years, the White House said spending would be front-loaded with an initial $50 billion to help create jobs in the near future.

The goals of the infrastructure plan include: rebuilding 150,000 miles of roads; constructing and maintaining 4,000 miles of railways, enough to go coast-to-coast; and rehabilitating or reconstructing 150 miles of airport runways, while also installing a new air navigation system designed to reduce travel times and delays.

MORE:  via Obama To Back $50 Billion Infrastructure Plan For Roads, Rail, Air Travel.