Posted on 05/09/2019 5:45:28 AM PDT by Kaslin
What's the difference between the $2 trillion "infrastructure" plan that Sen. Chuck Schumer, D-N.Y., and President Donald Trump have reportedly agreed to and then-President Barack Obama's so-called economic "stimulus"? Apart from the fact that the Schumer-Trump proposal is double the Obama price tag, the answer is: very little.
Economist Milton Friedman famously said there are four ways to spend money, from the most efficient to the least. The most efficient way is to spend your own money on yourself. That way, the money is spent exactly the way you choose and on exactly what you want. The second, less efficient way is to spend your money on someone else, such as when you are buying a gift; you're somewhat careful about the cost and less careful about the content. The third, even less efficient way is to spend someone else's money on yourself, as when you have a company expense account. You won't be as careful spending company money as you are with your own, but you can't go crazy without running the risk of being fired. Finally, the least efficient, most unproductive way is to spend someone else's money on someone else.
Infrastructure spending falls into that least efficient category. Economist Steve Hanke writes: "In addition to cost overruns, the financing of infrastructure requires the imposition of taxes, and taxes impose costs beyond the amount of revenue raised. The excess burdens of taxation include 'deadweight' distortions and enforcement and compliance costs. In short, it costs more than a dollar to finance a dollar in government spending. The best estimates indicate that, on average, it costs between $1.50 to $1.60 to raise a dollar in tax revenue.
"Taking proper account of cost overruns and the costs of collecting taxes, one wonders if there are any public works projects that could justify federal financing, let alone financing to the tune of $1 trillion."
Shortly after Obama's presidential election, Vice President-elect Joe Biden said, "Every economist, as I've said, from conservative to liberal, acknowledges that direct government spending on a direct program now is the best way to infuse economic growth and create jobs." This is not even remotely true.
In 2009, the libertarian Cato Institute took out full-page ads to criticize Obama's "stimulus" plan. The ad was signed by more than 240 economists, including several Nobel Prize winners, with 130 more eventually endorsing the ad. It said:
"Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we the undersigned do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan's 'lost decade' in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policymakers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth."
The most famous domestic "stimulus" was the New Deal of President Franklin Roosevelt. University of Pennsylvania's economist Harold L. Cole and UCLA's economist Lee Ohanian argue that the New Deal extended the severe economic downturn of the Great Depression by seven years. Indeed, included in the diary of FDR's Treasury Secretary Henry Morgenthau was a transcript of his May 9, 1939, meeting with his Treasury undersecretary and two members of the House Ways and Means Committee: "We have tried spending money. We are spending more than we have ever spent before and it does not work. ... I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. ... I say after eight years of this Administration we have just as much unemployment as when we started. ... And an enormous debt to boot!"
The common justification for this infrastructure spending is that it will address our "crumbling roads and bridges." Even if that were true, under our system of federalism, why should taxpayers in one state help pay for roads and bridges in another state? And then there is the problem of "moral hazard." Federal spending on local projects creates an incentive for states to spend money elsewhere knowing that the federal government stands ready to bail them out.
President Ronald Reagan needed no "stimulus" spending to jumpstart the economy. He reduced taxes and deregulated. In 2008, Senate Minority Leader Mitch McConnell slammed President-elect Obama's proposed stimulus plan, calling it "nearly $10,000 in new debt for everyone who pays federal income tax, charged to the credit card for our children to pay -- without safeguards, without appropriate hearings to scrutinize how tax dollars are being spent."
He was right. What's changed?
“It’s funny how we’ll gather around and support the Trump version while decrying the Obama version. Yet as Elder points out, other than costing more, there’s not much difference.”
Likely the only difference is 0bama’s money went into the pockets of his big money supporters, while Trumps’s money will be spent on actual projects. Not much difference. Nah. Not much difference at all.
Keep pushing the lie, I mean line.../s
In a lot of ways the private sector is not getting it done. In the year of our Lord 2019 many many people that live in rural areas OF THE USA do not have access to even the most basic DSL for data. This is travesty. Many 3rd world countries do better than that!!
. Finally, the least efficient, most unproductive way is to spend someone else’s money on someone else.
Infrastructure spending falls into that least efficient category.
***************
When it comes to infrastructure, the perfect can be the enemy of the good. Even with the best of intentions, there’s going to be waste. But productive infrastructure spending can have a hugely beneficial effect on the economy. Can you imagine how much poorer we would be without the interstate highway system? Our many bridges and tunnel? If the author’s approach had prevailed in the 1950’s, the interstate highway system would not have been built.
The Keynes formula:
statism + government interventionism + redistributionism +egalitarianism = total government control of the economy
Fiscal policy:
increased budget deficits
increased government spending to drive up aggregate demand
Monetary policy:
increase the money supply
low interest rates
Labor policy:
pro-union legislation
minimum wage laws
anti-free market in labor
Anti-business policy:
anti-trust legislation
nationalization
less aggregate savings by business
Results of Keynesianism:
increased taxes
increased borrowing and national debt
inflation
increased mass consumption and decrease in total productive ability
decreased savings, which lead to decreased productive expenditure, which leads to lower demand for labor, which leads to lower average wage rates and lower standard of living of the average worker.
Lower productive expenditure also leads to economic stagnation, which leads to mass impoverishment
As I recall, Obama appointed Joseph Biden to oversee the spending from Porkulus I. A web site was set up to track the spending geographically, and that’s the last we heard of it.
Joe?
In other words, the Porkulus was not intended to be an infrastructure bill at all. It was intended to be a means of injecting borrowed federal funds into the economy in a manner than would help Democrat constituencies. The result was that we spent $800B but ended up with almost nothing tangible to show for it.
It's perfectly fair to oppose Trump's infrastructure bill on the grounds that you don't believe the government should spend that money period. But to imply there are no differences between Obama's bill, and a bill actually designed to build/repair physical infrastructure, is disingenuous.
The whole long article never touches on the REAL difference.
Trump would spend the money on infrastructure.
Obama spent the money on teachers unions salaries, and
“Rich Democrat donors also got payback. The farcical “green” energy company Solyndra defaulted on more than half a billion dollars of our money, while Obama mega-donor George Kaiser finagled his interest ahead of ours. Other beneficiaries of Obama’s largesse for dubious deals include Larry Page and Sergey Brin (if you Google them you will find they founded Google) for Tesla Motors, NRG Solar owners Warren Buffet and Steve Cohen, and Siga Tech owner Ronald Pearlman. All told, more than 75 percent of stimulus grants and money for such “businesses” found their way to big Obama supporters.
Even creepy crony capitalist of the century Al Gore got his snout in the trough. His investment in Fisker Automotive scored a $528 million loan guarantee.”
https://www.ocregister.com/2013/03/26/ron-hart-where-did-the-stimulus-money-go/
Money is fungible.
This isn’t about infrastructure.
It’s a short term bailout that’ll be used to cover states’ soaring welfare, public pensions and bennies costs.
But nobody has the guts to support a bailout.
For historical perspective.
Small government Thomas Jefferson in 1807 proposed a plan of $20 m “infrastructure” (several times the total national budget) for clearing harbors, building roads, and other “internal improvements.”
Just wouldn't expect so many Freepers to have bought into that propaganda in the first place.
Trump won’t use graft like with solyndra
Interestingly, the legislative/constitutional debate over the role of the Federal government in funding roads and bridges was resolved when Congress authorized funding for the construction of the first National Road back in 1806. That funding bill was signed into law by President Thomas Jefferson.
The timing of that project was critical, because the construction of this road was established by Ohio as a condition of its admission to the U.S. a few years earlier. Congress decided -- and rightly so, in my opinion -- that the U.S. as a unified nation of quasi-independent states could not exist unless there was a core network of roads and canals to connect them for the purposes of conducting commerce.
Without a national transportation network in place, this country wouldn't have grown very much beyond the Appalachian Mountains.
It still goes to the same union folks because of prevailing wage and Davis Bacon.
Well for sure 0bungos plans never worked unless it was intended for the demise of the USA
Trump has been in construction all his life and has a history of bringing in projects ahead of schedule and under budget.
For the road portions, I agree. But this is more than just roads and bridges. It’s sewers, airports, communications....the list goes on and on.
Theory doesn't get you high speed internet. Sometimes the private sector just can't get it done. This is one of those times.
The strongest opponents of this measure have been Republicans in Congress -- specifically those who represent landlocked Great Plains and Rocky Mountain states. This is because they see the threat it poses to their very existence as viable states.
If you give Virginia the responsibility for building and maintaining its own roads, for example, there is absolutely no incentive for them to pave the last mile of any roads connecting it to West Virginia or Tennessee. That may be fine for those of us who see this as a truly constitutional allocation of power between Federal and state governments, but think about the rational next step for any state from Appalachian Mountains to the Sierra Nevada Mountains: What is our incentive to be part of the United States anymore?
It’s hard to compare at this point. I have no idea where all the stimulus money went; there’s never been a real accounting.
But we have federal highways, state roads, and town and county roads - and that’s how they should be funded.
Then again, I am a throwback who still favors a strict 10th amendment, long since largely forgotten.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.