Krugman: Infrastructure

[ProSense]

Infrastructure

Some bleary-eyed thoughts from Japan on the reported administration proposal for $50 billion in new spending:

1. It’s a good idea
2. It’s much too small
3. It won’t pass anyway — which makes you wonder why the administration didn’t propose a bigger plan, so as to at least make the point that the other party is standing in the way of much needed repair to our roads, ports, sewers, and more– not to mention creating jobs. Once again, they’re striking right at the capillaries.

<...>

So suppose we’re going to put $50 billion of resources that would otherwise be idle to work. Is it better to use them to produce public goods like improved roads, or private goods like more consumer durables? That’s not at all obvious — and anyone who tells you that basic economics settles the question, that is says that devoting more resources to production of private goods is better, doesn’t understand Econ 101.

And there’s a pretty good argument to be made that we are, in fact, starved for public goods in this country, so that it would actually be a good idea to shift some resources to public goods production even if we were at full employment; in that case, we should definitely give priority to public goods when trying to put unemployed resources to work.

Anyway, it’s all academic right now. My response to the administration plan, at least as best as I can respond given a massive case of jet lag, is a big eh.

Krugman likes the idea and thinks it's too small, but I think he missed that it is designed to jumpstart a larger long-term commitment.

He also doesn't think it will pass, but it just might. Also, I don't get Krugman's logic here: "It won’t pass anyway — which makes you wonder why the administration didn’t propose a bigger plan..."

Maybe it's the right size to be able to pass. If it's not going to pass, nothing is nothing.

[vaberella]

1. I do have to wonder if Krugman has ever heard of "low-hanging fruit"

Especially if there is a small chance it might pass---especially with upcoming elections. I do think it's too small though. I figure 250 Billion would really be doing some great stuff.

[zipplewrath]

4. He understands "too small"

He understands that the original stimulus was about 500 - 800 billion too small. And since it was poorly spent, it only made it worse. Another 50 billion is spitting in the ocean.

[vaberella]

6. It wasn't poorly spent.

You could keep track of the spending easily and it was spent in many places. I won't deny it was too small. But again there would be no way that kind of money would have even passed Congress. In any event...I rest my case, he knows there's a problem with Congress and getting anything from them---so the Administration is trying to get what they think they can get. Because they know they won't get larger, like they didn't get last time.

[zipplewrath]

17. Spent in many places

Many of them either way later than it should have been, or in some of the less effective places it could have been spent. Some of the tax cuts were down right pointless.

[vaberella]

37. The money that was spent was to be spent on infrastructure.

Which it was and it was up to the discretion of the states as to how to allocate the funding they received. So you can say it's less effective...however I doubt that's true--especially across the board. As for the tax cuts---it didn't make up the bulk of the bill to marginalize as you're doing.

[zipplewrath]

38. It's not marginalizing

The stimulus was too small, and it was made even smaller by the fact that the money that was spent wasn't focused on the most effective methods. Some weren't done at all, and some were done later in the program. As such, Krugman is making the point now that more stimulus is needed, potentially even more than if a larger, more focused, stimulus had been pursued from the beginning. More over, if they had at least outlined the size that was needed, and where it was needed, they could be credibly coming back now with the explanation of "we told you so" and arguing for additional stimulus. Now, they can't even use the word stimulus because they already defended what they passed as "big enough".

[ProSense]

10. "And since it was poorly spent, it only made it worse." Guess you

really don't understand where Krugman is coming from.

Krugman: Too Little of a Good Thing

The good news is that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, is working just about the way textbook macroeconomics said it would. But that’s also the bad news — because the same textbook analysis says that the stimulus was far too small given the scale of our economic problems. Unless something changes drastically, we’re looking at many years of high unemployment.

<...>

About that good news: not that long ago the U.S. economy was in free fall. Without the recovery act, the free fall would probably have continued, as unemployed workers slashed their spending, cash-strapped state and local governments engaged in mass layoffs, and more.

The stimulus didn’t completely eliminate these effects, but it was enough to break the vicious circle of economic decline. Aid to the unemployed and help for state and local governments were probably the most important factors. If you want to see the recovery act in action, visit a classroom: your local school probably would have had to fire a lot of teachers if the stimulus hadn’t been enacted.

<...>

What I keep hearing from Washington is one of two arguments: either (1) the stimulus has failed, unemployment is still rising, so we shouldn’t do any more, or (2) the stimulus has succeeded, G.D.P. is growing, so we don’t need to do any more. The truth, which is that the stimulus was too little of a good thing — that it helped, but it wasn’t big enough — seems to be too complicated for an era of sound-bite politics.

<...>

[zipplewrath]

16. Krugman doesn't deny it was poorly spent

He's stated before that he thought that some of the best parts were cut, much of the most effective spending was in the later years, and the bulk of it was put in some of the most inefficient places it could possibly go. That doesn't negate that he thinks it helped, and reduced the potential unemployment levels.

[ProSense]

18. "He's stated before that he thought that some of the best parts were cut"

That is not saying it was spent poorly. That is simply acknowledging that it wasn't large enough.

[zipplewrath]

19. He's also said the "kept" the wrong portions

His claim is a bit more than that. They cut the better parts, kept some of the less effective parts, AND it was too small.

[ProSense]

22. You keep saying that, but the fact remains

that Krugman believes the stimulus worked.

But I hope their stomachs start rumbling soon. We now know that stimulus works, but we aren’t doing nearly enough of it. For the sake of today’s unemployed, and for the sake of the nation’s future, we need to do much more.

link

Krugman's primary issue was always with the size of the package.

[zipplewrath]

32. I'm not disputing that

The stimulus had an effect. The only assertion is that the money was not "spent" in the most effective manner, and it was smaller than it needed to be to achieve the goals. Employment did not get below 8% as they had planned.

[MannyGoldstein]

2. +1

As usual, Krugman nails it.

[zipplewrath]

3. They are backing "failure" again

Krugman pointed out a couple of years ago, that if you passed a stimulus that was too small, what you'd get is apparent "failure" and there would be no argument left for more stimulus spending. The administration was left arguing that the stimulus was big enough, and it wasn't. So now they have no credibility in arguing for more. If they had come out, arguing that a larger stimulus was needed, and then "accepted" that a smaller one was "all the GOP would allow", they could now be arguing that they were right all along and the GOP is the obstacle.

Of course part of their problem is that it wasn't the "GOP" that was the problem, it was conservative democrats. It was the administrations desire to try to bring on more members of the GOP that got them to water down and limit what they did do so much because they couldn't count on the conservative democrats to support the plan, much less a larger one.

[ProSense]

7. "Krugman pointed out a couple of years ago, that if you passed a stimulus that was too small"

Krugman knows the stimulus should have been larger. He also knows that there was no chance of passing a larger package.

He did not advocated all or nothing, epecially since the stimulus package was at nearly $1 trillion, but was reduced to nearly $800 billion.

[zipplewrath]

15. It should have started at about 1.4 trillion

And it's not even clear that was big enough. Would they have gotten it? Probably not. But it would have established what WAS needed, and they could have then argued for additional stimulus down the road. Now they are stuck arguing that it sorta kinda worked, but not enough, and now we need just a little bit more, that won't work, so then they'll be back agains saying just another smidge.

Better to be in the position of saying that we knew it was too small, and we've proved it, so now we're gonna do more.

[ProSense]

33. Krugman was calling for $1.2 billion

$600 Billion

Oy, it seems that another out-of-context quote of mine is being used to claim that I thought the Obama stimulus plan was just dandy. So: back in 2008, I wrote this piece in which I called for stimulus of 4 percent of GDP, or $600 billion. Didn’t we get that, and more?

No. If you read the actual argument — which explains in detail how I arrived at the number — you’ll see that I was thinking in terms of a one-year program; $600 billion is 4 percent of one year’s GDP. I wasn’t clear about the issue of stimulus spread out over 2 years; but if you apply the math in that post, you’ll see that it implies a two-year program twice that size, which was just about what Christina Romer concluded was appropriate.

And by January it was already apparent that the slump was going to be deeper than I expected when I wrote that original post.

[zipplewrath]

36. Trillion not Billion

And in other contexts he's admitted that even that number could have been too low.

[flpoljunkie]

5. Even Joe Scarborough said how can Republicans justify voting against these proposals and pretend

they want the economy to get better? He was specifically referring to this $50 billion infrastructure proposal and making the Research & Development tax credit permanent.

Make them vote no so the American people can see what how far the Republicans will go for short-term political gain.

[flamingdem]

9. I'm looking forward to that vote! nt

[chimpymustgo]

12. The party of NO has spoken.

-edit-

Senate Republican Leader Mitch McConnell of Kentucky said the plan "should be met with justifiable skepticism." He said it would raise taxes while Americans are "still looking for the 'shovel-ready' jobs they were promised more than a year ago" in the $814 billion economic stimulus measure.

The House Republican leader, John Boehner of Ohio, added "We don't need more government 'stimulus' spending. We need to end Washington Democrats' out-of-control spending spree, stop their tax hikes, and create jobs by eliminating the job-killing uncertainty that is hampering our small businesses."

-edit-

http://news.yahoo.com/s/ap/us_obama_economy

[izquierdista]

26. They got what they wanted

They got to vote no, and then quick, hurry home and get their picture taken with a giant-sized stimulus check to be printed in the Daily Fishwrap.

[Jeff In Milwaukee]

8. You have to start somewhere

The American Society of Civil Engineers estimates the five-year investment in America's infrastructure will cost....


Drumroll...

$2.2 Trillion!!

That would be just north of $400 BILLION PER YEAR.

Even though it's a drop in the bucket, a drop in the bucket beats nothing at all. The ASCE issused a statement this morning supporting the investment.

[ProSense]

13. It's $2.2 trillion for the entire infrastructure.

That's on everything, including hazardous waste, drinking water, levees and parks.

Roads

Americans spend 4.2 billion hours a year stuck in traffic at a cost of $78.2 billion a year--$710 per motorist. Roadway conditions are a significant factor in about one-third of traffic fatalities. Poor road conditions cost U.S. motorists $67 billion a year in repairs and operating costs--$333 per motorist; 33% of America's major roads are in poor or mediocre condition and 36% of the nation's major urban highways are congested. 1 The current spending level of $70.3 billion for highway capital improvements 2 is well below the estimated $186 billion needed annually to substantially improve the nation's highways. 3

<...>

Compounding the problem are steadily increasing demands on the system. From 1980-2005, while automobile VMT increased 94% and truck VMT increased 105%, highway lane-miles grew by only 3.5%. From 1994-2004, ton miles of freight moved by truck grew 33%. 6 The increase in freight traffic is of particular concern because of the increased dependency of commerce upon the efficiency of the roadways and the added wear and tear caused by trucks. Without adequate investment and attention, the negative trends will continue, as will the adverse consequences. It is clear that significant improvements and system maintenance will require significant investments.

The National Surface Transportation Policy and Revenue Commission studied the impact of varying investment levels (medium and high) and produced the following ranges of average annual capital investment needs (in 2006 dollars):

• $130 billion-$240 billion for the 15 year period 2005-2020;
  
• $133 billion-$250 billion for the 30 year period 2005-2035;
  
• $146 billion-$276 billion for the 50 year period 2005-2055.

The lower end of the ranges reflect the estimated costs of maintaining key conditions and performance measures at current levels, (the status quo), while the higher end ranges would allow for an aggressive expansion of the highway system, which would provide improved conditions and performance in light of increasing travel demand. 3 Even at the lower range of estimates, an enormous gap exists between the current level of capital investment and the investment needed to improve the nation’s highways and roads.

<...>

Civil Engineers Respond to President's New Infrastructure Plan

RESTON, Va., Sept. 6 /PRNewswire-USNewswire/ -- Response from the American Society of Civil Engineers (ASCE) to President Obama's new transportation infrastructure investment plan:

"Out nation's economy can't survive without the stable foundation infrastructure provides. It allows goods to move across the country, water to flow from our taps and energy to be accessed with the flip of a switch. But, for decades, we have allowed that foundation to crumble," said Patrick J. Natale, P.E., F.ASCE, CAE, ASCE executive director. "The solution to reversing the trend, and creating a better reality for our children and our grandchildren, requires that we have a dedicated source of funding and an increase in federal leadership to actually put it into use. The President's new investment plan has the potential to be a real part of such a solution. We applaud him for taking a leadership position, and we encourage Congress to work with the administration on this critical national issue. We also look forward to learning more about the details of the plan, in particular, whether or not it will be paid for by the users, as has successfully been done since the beginning of the interstate system in the 1950s."

[phantom power]

11. Regarding Krugman's logic, I think this is an incredibly important point...

and I think it is the point that causes the most confusion here at DU.

There are at least two goals to proposing legislation that "won't pass."

The 1st is that this is how bargaining works: you propose more than what you want to get. not less.

The 2nd is that you use this legislation to define what your party stands for. This is even more important if you suspect your bill can't pass.

In other words, all this business of proposing legislation to be "built upon" is exactly backwards. Propose the moon! Worry about "building on what you get" *after* you haggle. I'll say it again: the GOP gets this, and it's why they've moved the goalposts over the last 30 years. They proposed all kinds of crazy shit back in the 80s and 90s that nobody took seriously back then. But now... we've got the *democrats* proposing SS cuts.


Those of us who are "complaining" that the Obama admin and the Dems aren't pushing hard enough aren't doing it because we're impossible to please, it's because we see that pushing for hard-left legislation is how you haggle effectively, and it's also how you eventually move the country leftward over the long haul.

[ProSense]

21. How does one

reconcile "propose the moon" even if it fails with something smaller is destined to fail anyway?

That's like wishing for something and then concluding that there is no chance anything remotely positive will happen.

The economy isn't going to recover on political games or posturing. Something has to be done.

[phantom power]

23. The thing is, it *is* a game, and you play it like this:

(just to take this $50b infrastructure stimulus as an example)

0) Realize you really need at least an additional $750b to make a serious dent in the problem, from a jobs-creation perspective (see: Krugman, Paul)

1) Propose $1 trillion(*)

2) The GOP (and, I suppose, the blue-dogs) will piss and moan and call it Socialism, yada yada yada

3) Obama begins making weekly press conferences, asking why the GOP (and blue dogs) hate America and want its infrastructure to crumble so we become a 3rd world country. And why do they not want to provide jobs for millions of desperate families?

4) Use your liberal talking heads (Olberman, Ugyur, Maddow, etc) to also ask Why Do Republicans Hate American Workers, and then because they aren't directly party-affiliated, they also get to ask Why Do Republicans Want Your Babies To Starve?

5) One of two things happens:

5a) the GOP gets nervous, and tacks to the Left: you get at least $500 billion -- win!
5b) the GOP holds fast. Your bill doesn't pass. Next campaign cycle, you run fifty thousand ads reminding voters (who are now 20% unemployed and can't flush their toilets) who it was that shut down the infrastructure/jobs stimulus bill. -- win!

6) Actually, even if the GOP gave you what you want, you take credit for it and bash the GOP for not caring about American workers, since it wasn't *their* bill. The GOP may run ads taking credit for voting for it, but now they are taking credit for supporting Dem legislation! Win!



(*) there are estimates that we have at least $2 trillion worth of infrastructure repairs that need doing, so even this is conservative.

[ProSense]

24. No

5) One of two things happens:

5a) the GOP gets nervous, and tacks to the Left: you get at least $500 billion -- win!
5b) the GOP holds fast. Your bill doesn't pass. Next campaign cycle, you run fifty thousand ads reminding voters (who are now 20% unemployed and can't flush their toilets) who it was that shut down the infrastructure/jobs stimulus bill. -- win!

It isn't a game. Do you really believe that failing to pass a stimulus would have made this a viable strategy?

[phantom power]

27. In a word, Yes...

because I believe any other strategy will neither work in the short term or the long term.

:shrug:

[ProSense]

28. "I believe any other strategy will neither work in the short term or the long term."

You thing reminding voters, "who are now 20% unemployed and can't flush their toilets," that Democrats failed to accomplish anything, not a single stimulus package, and blaming the Republicans would have been a winning strategy?

Really?

[phantom power]

35. Indeed I do.

[MadHound]

14. Once again, the 'Pugs will threaten a filibuster,

And Congressional Dems will run and hide. Nothing positive is going to happen until the Dems grow a spine, force the 'Pugs into a real, talk all night, pee in a bottle filibuster. Do that a couple of times, using the bully pulpit to beat the 'Pugs over the head with their obstructionism and it will become easier to pass future legislation.

But continuing down this path of trying to be bipartisan and inclusive is destroying this country. What needs to be done is to crank that number up ten times to 500 billion and ram it through. This notion that the Dems can't do anything without sixty votes is simply a ploy that lets the Dems off the hook, enables them to not fight, and continues the destruction of this country.

[gkhouston]

20. They absolutely can't run and hide on this one. Even if they don't have the votes

for this one, they have to go down swinging and be seen to go down fighting for jobs for Americans while Republicans and conservaDems vote against jobs for Americans.

[Phx_Dem]

25. Exactly. If it's too small and won't pass anyway, then proposing a bigger one

that would be even less likely to pass is just stupid. What exactly is the point of proposing something you know is too big to pass?

Sorry, Paul but that's a really bad argument.

[paulk]

29. it's not a bad argument

if it's not going to pass anyway - you propose the program that will fix the problem - you define what your party stands for

and when the Republicans reject it - they are also defined.

The whole time - as a poster above makes the case - you have Obama out there selling this.

I mean really, I don't understand - Obama has to know that this proposal is not big enough

it's, once again, to quote Krugman, "going for the capillaries"



Obama is like a poker player who is telling the other players exactly what's in his hand before the betting starts

[Phx_Dem]

30. It's a ridiculous, self-defeating argument.

[paulk]

31. I can see you've put a lot of thought into it...

[Cha]

34. Yeah, right Krugman..

"He also doesn't think it will pass, but it just might. Also, I don't get Krugman's logic here: "It won’t pass anyway — which makes you wonder why the administration didn’t propose a bigger plan..."

I'm thinking the Admin wants this to pass..and has a Yes attitude.