Monday, October 17, 2011

The Upside to a Sluggish Economy: "Robert Shiller Joins the Build While It's Cheap Chorus"

 There are quite a few details that niggle in this piece.

For example: residential construction workers don't have skill directly applicable to large-scale infrastructure; because of mechanization you don't get near as many jobs per unit of concrete poured, electric line strung etc.; the companies that own those machines aren't small, think Peter Kiewit rater than Pete's Plumbling; the red tape is orders of magnitude denser e.g. a couple years ago environmentalists were suing to stop solar energy projects in California; unionization tends to focus the benefits on a smaller percentage of the unemployed than in past depressions; and on, and on.

Still, Schiller is a sharp guy and can get the neurons firing.
From the New York Times:
Making the Most of Our Financial Winter
ON a traditional farm, when winter comes and there’s no need for planting, fertilizing or harvesting, it’s time for infrastructure projects. Farmers fix their barns, build fences or dig wells — important tasks that could be done in any season if there weren’t more pressing jobs to do. 

If the winter is unusually long and cold, planting time is delayed and additional projects are undertaken. It’s all very simple and sensible: the idea is not to let people sit around idle, and to use down time to get important things done.

The farm needn’t go into debt to do this. All able-bodied people on the farm are expected to contribute their labor, an imposition we can view as an informal tax. Later, everyone on the farm enjoys the benefits of all that work, by participating in the various benefits — the economic growth — it helps to create.

In many respects, the American Jobs Act, proposed by President Obama but blocked in its full form by the Senate last week — would do much the same thing for the nation during the current economic winter. Parts of the plan would provide for projects like school modernization, airport and highway improvements, high-speed rail systems and redevelopment of abandoned and foreclosed-upon properties to stabilize neighborhoods. Those are the modern national equivalents of fixing the barn and building a fence.

And these projects would be made possible by taxes. As Mr. Obama said last month: “Everything in this bill will be paid for. Everything.” The bill would start public improvement projects in 2012, and raise taxes, in the form of a 5.6 percent surtax on millionaires, in 2013, more than paying for the public improvements part of the bill.

In every depression the nation has faced, there have been proposals for the government to do just this: increase spending on public improvements to create jobs for the unemployed.

An article in The St. Louis Post-Dispatch, written in 1877, during the 1873-79 depression, argued that the government could create a great many infrastructure jobs. “There are many needed improvements: the construction of the Texas and Pacific Railroad, the widening of the entrances to the Mississippi, the diking of its alluvial blanks, the clearing of obstructions from the beds of the great rivers of the West, the improvement of the harbors and rivers in the East, the completion of the post offices, custom houses, seawalls, breakwaters and other useful works of a national character,” the article said.

An article in The New York Times, written in 1893, during the 1893-97 depression, described public improvements to relieve unemployment and said there were plenty of things that could be done to create jobs: “building of lines of rapid transit, widening and deepening the Erie Canal, improving the Mississippi, and building canals across the peninsula of Michigan.”

BUT neither of those proposals got very far back then, because either substantial tax increases or substantial debt increases were politically unacceptable. State, local and federal governments were limited mainly to accelerating the use of existing revenue (or only slightly increasing their borrowing) or to coordinating voluntary donations for infrastructure projects. One observer wrote in The Chicago Daily Tribune in 1877 that it was an outrage “when the government exacts a tax for subsidizing any business scheme, for providing public improvements that are not needed, or in any other enterprise which is intended merely to furnish work for the unemployed.” 
In 1894 in St. Louis, the city government backed a campaign to secure private donations to create an artificial recreational lake with picturesque islands in Forest Park. Called the “Lake Poor Fund,” it appealed to dual motives: to improve the city and to hire the unemployed. It paid 750 of the jobless to dig with shovels and picks. (The steam shovel hadn’t yet fully emerged as a dominant technology.) The lake was completed within the year, and city residents still enjoy it today....MORE

HT: Capital Gains and Games