I have been making the point (here, here, here) that we should resist the emerging Very Serious D.C. conventional wisdom that the financial bailout will constrain our ability to make other much-needed public investments.
It's wrong, wrong, wrong. Obama was a little wishy-washy on the subject in the debate, but as Kate noted, in a speech yesterday he pushed back a little more firmly.
The latest pundit I shall recruit to make the point for me is Ezra Klein. Here, he argues that we can't not invest in healthcare reform -- healthcare costs are rising and will soon completely swamp the federal budget.
The point transfers straightforwardly to energy. Obama's energy and infrastructure programs are "expensive," but he has proposed them at a time when energy costs are steadily rising (especially for the poor and middle class), infrastructure is on the verge of crumbling, and national security and competitiveness are on the line. In what sense would it be fiscally prudent to push this reckoning even further into the future as the problems continue to fester? In what sense is it fiscally prudent to respond to economic stagnation by cutting stimulus? The amount we'll eventually have to spend will only grow with delay.
As Ezra says:
A recession creates a straightforward Keynesian case for increased investment. When natural economic demand slackens, the need for public investment to kickstart the economy increases. Meanwhile, short-term problems do not obviate long-term threats. The looming dangers posed by health costs, global warming, etc, will not pause to politely wait out our recession.
Word.
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Comments
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Sam Wells Posted 9:56 am
01 Oct 2008
Just about everyone believes that keeping the renewable tax credits is a good idea. However, some editorials I've been reading are saying that the people and the markets - not the government - should be the ones to further the goals of renewable and clean energy sources.
Look at the "clean ethanol" mandate as an example of a failed government program. People know this intuitively. If ethanol is all that great, go sell your own on the market with no government subsidy at all. That's called "free markets."
Historically, the US Government has invested in infrastructure such as canals, ports, highways, and all kinds of operations, very true. But the Government never ran it's own utility company, railroad, or trucking company to compete against the market. And that's exactly what some might think you intend to do. -sam
Onward through the fog
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RossBleakney Posted 3:21 am
03 Oct 2008
Even if the bailout was a huge expenditure (it is not) then improving our economy (at the possible cost of inflation) would makes sense. But because the bailout is an investment, it makes even more sense. If we cut back on spending (or increase taxes) and it causes a bigger slowdown, our investment will be wasted. If the economy rallies, it will end up costing the tax payers nothing.
Sam: I have to disagree with you there. Municipal utilities are quite common. I pay one of the lowest electric rates in the country because I am served by Seattle City Light. We get most of our power from dams created by the federal government. Seattle City Light competes quite well with surrounding private utilities (they were smart enough not to invest in the WPPSS debacle). I might also add that a major infrastructure investment does not necessarily require major public companies to compete along side private ones (although this happens with health care, pensions, etc.). Boeing (another local company) became the biggest jet maker in the world largely because of military investment. There are plenty of similar investments made (many by the military) that help create enormous industries. We are both using one right now (the internet).
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