Civilization's preservation not shovel-ready; must be canceled

Hundreds of economists left right and center gathered together (PAR-TEE! PAR-TEE!) in San Fransisco the other day to agree that yes, just about all of them are four-square behind a Keynesian big government spending initiative as the only hope of reestablishing a more or less functioning national and global economy.

But they also took some time to do what economists do best -- postulate why something won't work as well as hoped. From the NYT...

Nearly every economist who spoke here agreed that a dollar invested in, say, a new transit system or in bridge repair is spent and respent more efficiently than a dollar that comes to a household in a tax cut. A bigger percentage of the latter is saved, they said. There was concern, however, that the nation lacked enough “shovel ready” projects that could be ramped up quickly, generating jobs.

While attendees at the American Economic Association's annual meeting (PAR-TEE! PAR-TEE!) hailed mostly from the academy,  the analysis du jour among their far more wealthy colleagues in the private sector similarly contends that it will take a year and then some before the recovery plan proposed by Obama and friends will begin to show its biggest impact  (Reuters).

Fair enough, at least as far as physical infrastructure projects are concerned. Even on those projects that are "shovel ready" (as the kids say these days), it will take time for spending to make its way through contractors, subcontractors, employees, suppliers, etc. and ripple out into the economy.

But infrastructure projects aren't the only element of the recovery plan -- and if current buzz is to be believed, not even the largest (that'd be tax cuts). The plan also is expected to provide untold billions of dollars to help state governments forestall additional cuts in spending on health, education and social services.

As regular Gleaner readers (both of you) know, since at least, hmm, about this time last year I've been noting the importance of state government spending to the health of the local economy -- and not just infrastructure spending. Every time Nevada pulls back on funding for (in Nevada, already-underfunded) health, education and social services and programs, it is extracting money from the economy that otherwise would be spent ultimately and predominantly in local businesses.

By curtailing government spending, Nevada may be meeting its constitutional mandate to balance the state budget -- albeit in an irresponsible, callous and cowardly manner.

But it also further shrinking the state's gross domestic product and generally pursuing policy that not only contributes to the current vicious downward spiral of pain and gloom, but is making it all that more difficult for the area economy to recover in the future. Assuming there is one.

Nevada and states nationwide are scrambling to put together budgets while suffering severe revenue shortfalls. State and local governments are cutting services, programs, employee pay and benefits and other expenditures now. It is true that the biggest bang for the bucks likely won't be seen from the infrastructure investment portion of a federal recovery plan for months or more. But it's also true that if states aren't rescued from being forced to make even more draconian cuts now, then for months and more, the economy will be in even worse shape than it would be otherwise.

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About those tax cuts that have emerged as the charismatic megafawn of Obama's recovery plan ... I've long been an advocate of giving working families a tax cut by reducing their payroll taxes. Real and sustained tax cuts for people with lower incomes are far more likely than Republican-cherished tax cuts for the rich and corporate to jolt the economy in the form of immediate spending. And payroll taxes are regressive, so there's also the fairness thing.

But if Dean Baker is right, and Obama is also going to use the stimulus to give a tax break to the likes of Robert Rubin's Citigroup, well, the increasingly frightening Harry Reid seems hell-bent on bitching about something. He should bitch about that.

Also on the tax front ... New School economist Jeff Madrick has a piece in the Boston Review titled "No New Tax Cuts" and the article is as trenchant as the headline, just fyi.

Comments

[....Temujin... Khan..of..the..Yakka..Mongols...]

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...Damn the deficit,...Forget the infrastructure,..Postpone education,..slack off medicare and prescriptions...

...I propose an O'bama day and declare a trillion dollar mardi gras celebration. Drink every brewery dry from coast to coast, let no whiskey bottle hold spirits North to South, "More wine for the horses."

...I'm sure this government expenditure could lift this country out (hic) of it's current doldrums..

...The Great Khan has spoken...

[dave404]

Gleaner, thanks for sharing the link to the Jeff Madrick article; it is quite thought provoking and provides empirical evidence against those who are like,
""Professor Dick Armey, a mainstay of the House for years and former majority leader, claimed that those who did not agree with his passion for tax cuts and small government were afraid of “big thoughts.” Those big thoughts were the ideas of his hero Friedman.""

[Patrick]

Economists actually don't have a good way of predicting whether or not a dollar spent on local services is more likely to stay in the community than a dollar spent at say Wal-Mart.

Even if true, it isn't a big deal, otherwise North Korea would be an economic powerhouse today.

[The Penguin]

Khan, pass the Cutty Sark already!

[....Temujin... Khan..of..the..Yakka..Mongols...]

.
..
...
To hell with the blended Scots whiskies my feathered friend....
...Penquin tonight we empty the single malts.
Glenlivet, GlenMorangie. Glenfiddich...Drink hardy Penquin.. tis the taxpayer picking up the tab this O'Bama Day.
...More Wine for the Horses...

[....Temujin... Khan..of..the..Yakka..Mongols...]

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..
...
Here's to the maid who steals a kiss and runs to tell her Mother...

...She's a foolish foolish one

...She's a foolish foolish one

...For she'll not get another...

[Batman]

Oh Temujin bought a mule,
but he thought it was a cow,
he wanted to milk it,
but he didn't know how.

Soon it got dark,
and he couldn't see,
and the dang hold mule,
pee'd all over...

him.

[Scorpiogal]

Pen,
Would you be kind enough to pass that Cutty over here? I would be very grateful.

[The Penguin]

I have some Bushmills' Black Bush at home, t'was a gift from a Irishman with whom I made an acquaintance a couple of years back. But that, I am not sharing.

[....Temujin... Khan..of..the..Yakka..Mongols...]

.
..
...Black Bush...??...Laura..??

[Scorpiogal]

No self-respecting Irish-American would part with the Bushmills Black Bush...that's sacrilege!

[The Penguin]

Scorp, and I'm not even Irish (as far as I know) and you ain't gettin' any! But I will share some rum and beer with you...

[Scorpiogal]

LOL!At this point Pen, that'll do. I can't take any more of Patrizio's logic...or lack there of.

[The Penguin]

Patrizio? No such person on my radar. Oh well, let's drink ourselves silly anyway!

[....Temujin... Khan..of..the..Yakka..Mongols...]

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..
...
Throws his swizzle stick over his shoulder..."Shall we dance"..

[Patrick]

Scorpgirl....

I come here for the poor logic, disastrous reasoning skills, misguided economic lessons, and revisionist historical interpretation.

You come here to call names, get frustrated, pull your hair out and to get angry because you can't comprehend how the opposition keeps making such good points that you have to resort to standard name calling.