Stimulus: How-To?

There are competing visions among leaders on how to execute a stimulus plan.  They differ, not just in size but also in the classes of households or activities that they should support. 

Obama’s administration has initially suggested that the 2009 stimulus could be a place to dovetail job creation with a means for shoring up our nation’s deteriorating infrastructure.  Indeed, these proposals are wide in scope and also include transitioning our economy toward lower reliance upon fossil fuels.  This includes more green jobs and more mass transit.  A Senate bill proposes a huge higher education tax credit ($2500) as well as $142 billion in tax cuts for workers.

An assumption among Keynesian economics is that no projects should be done where benefits fail to exceed costs. 

That reason explains why economist Edward Glaeser suggests that infrastructure-driven stimulus should take a back seat to other alternatives.   While Glaeser is both provocative and right-leaning, in this case his alternative is something out of the Democratic playbook.  He suggests finding ways to reduce tax burdens on low-income filers.  One idea is to “radically” lower tax burdens on Social Security and Medicare for 18 months.  This is essentially an expansion of the EITC, to new areas.  It would be effective as Keynesian stimulus, as such groups are likely to spend the money to meet day-to-day needs. 

The problem, he says, is that it is hard to spend on infrastructure with the speed required to turn an economy around.  It takes planning, permitting, site preparation, and construction.  It is not just that new roads need to be built.  Those new roads, as well as our existing ones, are going to need to be maintained. 

In the Triangle, we’re still sore that the ten years we spent buying railroad track and right-of-way for our light rail system was felled by one obsteperous ex-Senator. Even with this new stimulus, it looks like Triangle Transit would only qualify for a few more buses.  Light rail is still not in New Starts.