Ed Huntress wrote:
"John R. Carroll" wrote in message
...
Wes wrote:
"Ed Huntress" wrote:

snip


It's difficult to stimulate real growth with deficit spending. At
best, it might turn a decline around, but the effect is a weak one.
Stimulus is not about creating long-term sustainable growth.

AAAAAHHHH - Not exactly.
At least there is another aspect to this. What you defecit spend ON
can create the foundation for future growth and this is an important
consideration.

In theory, it can. In practice, it's very difficult, or maybe
impossible, to direct *enough* of a stimulus into projects that
specifically lead to real growth.

The TVA lead to real growth Ed.
So did the construction of the Interstate highway System, the St. Lawrence
Seaway, and the Erie Canal. Some jobs were produced right away to build the
things but they all made real long term growth possible far beyond anything
that would have been possible in their absence. The Corps of Engineers
hasn't stopped digging and dredging in NJ in your lifetime. The economy
would collapse if they did.
N.O. Needs a big harbor project and we'll either get about the job or the
Mississippi won't be passable to open water. Doing this stuff no makes
perfect sense especially now because it wouldn't put pressure on a tight
labor market and be inflationary.

Even John Boehner is admitting that he was wrong in his stated belief that
health care would collapse the country this week or next.
We might as well start acting as though there is going to be a future by
preparing to take the fullest possible advantage of the opportunities that
exist now and will down the road. Somebody probable ought to sit down and
make a damned plan or somethingG


You won't get anything but a fizzle
if you try to make it all infrastructure, or education, or other
things that arguably provide a foundation for growth. You can't move
enough money, fast enough, that way.

I honestly don't think actual amounts matter at ten percent unemployment.
Ten percent is painful, but hardly catastrophic.
90 percent are working, sort of. Consumer confidence is still low and the
needle needs a shove.
I'll be pleased as hell when Bernanke starts getting twitchy about
inflation.
Everyone but bond holders ought to cheer when the Fed raises rates two
meetings in a row.
As a public matter, we ought to be selling as much long term debt as we can
find buyers for right now.
Money will not be this cheap again for a long time and there will be
inflation. We need there to be inflation as a matter of fact.
Two or three percent would do nicely.


The mainstream view, if I'm not behind on it (I haven't been reading
economics journals for a while), is that you really have to focus on
how money is going to move around, and who it is who needs that money
to prevent a crumbling of important institutions like home ownership,
the credit system, the existing education system and vital services
such as police and fire, etc. The Obama plan does a lot of that. It
doesn't do a lot of direct building of the economy; it keeps crucial
institutions from collapsing.

And has the advantage of not really costing a whole lot.
Don't forget that one, as you mention this is preservative and defensive.
They don't lead to anything. Preventing collapse is certainly worth doing
but why pass up a perfectly good crisis to actually get some things done for
the future. Absent some big water projects in our city's, we will all be
drinking water that resembles **** from a broken down system that can't
deliver product reliably. These kinds of things can pose a real headwind for
future growth.
Worse that higher levels of debt by far.

As for the "mainstream" view, did you see Krugman's piece today? He
contradicts his own argument.
I think he's lost a marble or had a brain fart.


So everyone is always in favor of stimulus that directly feeds real
growth, but no one has ever really succeeded in directing money that
way in a recession.

The recession is over unless we have another dip and it has been. Global
debt and the bond market are worrisome but it's the long term future and the
public's role that genuinely concerns me.
Crappy infrastructure and yesterdays energy policy will be a real drag on
future growth and anyone, economist or not, should be able to understand
that - even without a computer model. The world as we all knew it doesn't
exist.

--
John R. Carroll