Spitzer Stimulates Us

Eliot Spitzer gets his oar in the stimulus debate. In a classic bit of mavericky Slate-think, the former Governor goes after the administrations emphasis on meat-and-potatoes public works projects:

The “off the shelf” infrastructure projects that can be funded immediately and provide immediate demand-side stimulus are almost by definition not the transformative investments we really need. [ . . . ] These projects by and large are building or patching the same economy with the same flaws that got us where we are.

Huh, you think. Until you get to the fairly conventional argument lower down that the economy would be better-served by smart utility meters and non-gas cars. (Now that’s out-of-the-box thinking!)

Of course, he’s right. But the bait-and-switch obscures a more important issue, one feeds into real issue with the stimulus and a source of resistance to it. Although the US economy needs a long-term investment that will reshape its foundations, we’ve gotten past the point where we can just take today’s pain and look toward tomorrow. That’s why the immediate stimulus is focused on immediate fixes.

Spitzer worries: “This moment presents the administration with what is likely to be its best—and perhaps only—opportunity to have essentially unlimited capital (both fiscal and political) to spend on a transformative economic agenda.”

The capacity of even the U.S. government to affect the overall global economy is limited. Suppose the package is $800 billion over two years: $400 billion is less than 1 percent of the global economy and a mere 3 percent of the U.S. economy. In relative terms, $400 billion isn’t all that much more than the $152 billion spent on the 2008 stimulus, which had nary an impact on the economy. Here is where the New Deal analogies are instructive. The New Deal probably didn’t pull us out of the Depression; World War II did that.

Spitzer thinks its a choice between saving the old economy and building a new one. But this now-or-never, a crisis-is-a-terrible-thing-to-waste attitude will be Democrats downfall. There’s a long road ahead to a new economy. And history is somewhat instructive. We’ve heard this refrain a lot recently–it was the war, not the New Deal–but we haven’t bothered to look at what that means.

World War II ended the Depression because it did two things: drew upon the surplus manpower and through the destruction of materiel re-deployed the industrial base. The war itself didn’t just solve the problem. The period after the war was an economic disaster as the country struggled with surplus labor power and idle capacity again. The GI Bill and Marshall Plan were two responses to that problem that set up the expansion of the 50s.

In other words, there’s more than one bite at this apple. And we’ve got a long list of jobs to address.

Source:

Robots, Not Roads
The Obama stimulus package should be spent on transformative investments, not bridges and buildings.
ELIOT SPITZER
Slate; January 6, 2009
http://www.slate.com/id/2207920/