Obama Economic Adviser: Creating Jobs Through Government Spending Is Totally Impractical
Which is exactly the sort of thing Obama critics have been saying about The One’s plan to create jobs through public works projects. This is what former Congressional Budget Office director and current Obama administration budget chief appointee Peter Orszag is saying about creating jobs through government spending.
Practically speaking, however, public works involve long start-up lags. Large-scale construction projects of any type require years of planning and preparation. Even those that are “on the shelf” generally cannot be undertaken quickly enough to provide timely stimulus to the economy. For major infrastructure projects supported by the federal government, such as highway construction and activities of the Army Corps of Engineers, initial outlays usually total less than 25 percent of the funding provided in a given year. For large projects, the initial rate of spending can be significantly lower than 25 percent.
Some of the candidates for public works, such as grant-funded initiatives to develop alternative energy sources, are totally impractical for countercyclical policy, regardless of whatever other merits they may have. In general, many if not most of these projects could end up making the economic situation worse because they would stimulate the economy at the time that expansion was already well under way.
Obama has invoked Eisenhower’s investment in the interstate highway system as evidence that his plan can work, but as I’ve pointed out before that argument is based on a rather weak grasp of history.
Eisenhower’s highway project stimulated the economy not because of the government spending but because of the improved infrastructure the highway system provided. Because the highways made people more mobile, and because it made it cheaper to move goods and services around the country, our economy became more flexible. And thus it thrived.
Given that we’re already a mobile society, Obama’s infrastructure investments aren’t going to have the same impact. I’m not going to say that we don’t need to invest in fixing some roads and bridges, but we’re already spending a lot of money on that sort of thing. Obama’s plan seems to be spending tax dollars for the sake of spending them and then just hoping that all that spending creates some jobs.
If Obama were smart, he’d start talking tax cuts right now. Because tax cuts, which leave more money in the pockets of business owners to hire more workers and average citizens to spend more at those business, have a proven track record when it comes to stimulating economic growth.
Unfortunately, Obama has a far-left liberal base that isn’t about to let him cut back on the amount of money tied up in government.
