Perhaps we forgot. Perhaps we were just too scared to care when we passed the stimulus.
Either way, we failed to learn from our mistakes when we passed the stimulus.
With the crippling of financial markets, government insurance of debt is probably needed to ease credit markets. As for long-term growth or the creation of jobs, there is no evidence that any "stimulus" is a great idea.
Consider long-term growth. One of the projects included in the stimulus package is the development of broadband internet for the country. I would compare this type of project to the US space program. It sounds great: Who wouldn't want internet across the country? Plus, widespread internet development could help spur economic growth.
Like the US space program, in the long-run, we have no idea if this is a productive venture to fund. What if we allocated the internet money somewhere else? Internet costs are not a significant cost faced by businesses.
Eventually, we landed on the moon and our economy was simultaneously growing. Perhaps we could have grown faster if the money from the space program was more efficiently allocated by the private sector.
The expenditures on broadband internet are just an example of the many projects included in the stimulus package. Even if it sounds good and you agree that we need to build more windmills, bridges, etc, we need to remember that this money is coming from somewhere else.
We are building up debt. In our lifetimes, we are going to have to allocate money to pay off the debt. Where will this money come from? Well, there is going to be a serious reallocation of wealth either through taxes or government spending.
Rather than owning a nice house, you might have to settle for a mediocre house because a higher portion of your salary is taxed and goes to pay off US debt.
Social Security, Medicare, Welfare, school funding, defense, any or all government programs could see a serious reduction in funding in the future as we struggle under our load of debt.
Opportunity cost. Economics 101.
Wednesday, February 18, 2009
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3 comments:
chuck, stop blogging during class.
Last time I checked, the Space program (just like DARPA and other military R&D programs) has produced COUNTLESS technologies that have trickled down into civilian life. These technologies have become entire industries, made life easier, and produced the modern, technological world we now live in. In fact, many people argue we need to invest more in NASA in order to get this trickle down effect going again.
Also, taking on debt is considered an acceptable practice as long as it is used to create future growth. In this sense, spending on broadband internet and other infrastructure projects will make it easier for businesses to operate all over the U.S., thereby facilitating broad economic growth. This growth will allow us to pay off the debt and in return we have new bridges, fast internet, clean water and energy, and much more. Sounds like a fantastic deal to me.
Warzel- speak for yourself
Okin- Yes. Our government should spend money on defense. Unless you sell the space program as defense, I don't see the point in allocating billions to it.
Who argues for more investment in NASA? Don't bother listing Tom Friedman because that will only make me mad.
Silly puddy is fun to play with but I think we could have spent money more effectively than putting a man on the moon for the sake of novelty.
I've heard the argument for Keynesian economics before. This is nothing new. You oversimplify the process, however. Massive amounts of money are wasted every time the government does pretty much anything.
Look at the new visitor's center at the capital as an example.
The Interstate Highway System was more than 400% over budget and missed its deadline by more than a decade.
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