“It is not enough just to hire workers to dig holes and then fill them in again,” said Toshihiro Ihori, an economics professor at the University of Tokyo. “One lesson from Japan is that public works get the best results when they create something useful for the future.” February 6th New York Times.
As Senators debate amongst themselves, tearing at tax cuts versus spending incentives, infrastructure development versus scientific research, it does seem clear that we have a government that really, really knows how to waste money. Pork lurks behind every program; lobbyists know that the pork can’t addressed in the legislation itself, but that the earmarks will be taken care of later when the individual spending decisions are made by the administrators in charge. We’ve pretty much tanked the first half of our TARP funds as earlier blogs have sadly illustrated. But mistakes like that will take us from this horrible meltdown into a much more devastating, sustained and very real depression. The sands in the hourglass are almost gone.
Critics charge that the American Recovery and Reinvestment Plan – the big bailout currently pending before Congress – is infrastructure-light. It may be, but if history is to provide us with a lesson, we can turn to Japan – mired in a deep recession for years following their real estate bubble at the end of the 1980s, before the government finally reacted, mostly with “make work” dream infrastructure projects that included building big bridges and highways in relatively sparsely populated areas. It didn’t work; the economy remained stagnant, but it sure raised Japan’s national debt. Economists learned that it isn’t just about putting people to work; it’s really about putting people to work to build a future.
As the Times notes: “[I]t matters what gets built: Japan spent too much on increasingly wasteful roads and bridges, and not enough in areas like education and social services, which studies show deliver more bang for the buck than infrastructure spending.” Repairing existing infrastructure that is immediate and necessary to improve economic efficiency, building levees and dams to prevent future calamities and designing new infrastructure that will enable future economic growth – these are desirable targets, elusive, since many chunks of pork are buried in the seemingly useful. Training your population to build and sustain a future is even more valuable.
By a quirk of history, there was a young American financial attaché working at the U.S. embassy in Japan back during that period of economic collapse and subsequent stagnation: Timothy F. Geithner, now Obama’s Treasury Secretary. The Times: “One lesson Mr. Geithner has said he took away from that experience is that spending must come in quick, massive doses, and be continued until recovery takes firm root.” For those of us who wonder what, if anything, can lift us out of this downward spiral to economic hell, Mr. Geithner’s thoughts should tell us that we can expect: more economic pushes from Washington for a long time.
If the public only had the confidence that the money wouldn’t be squandered on overpaid executives with outrageous perks, on companies that cannot survive into the future or on private pork barrel politics that have little benefit to a nation seeking life support systems, we might just let them. But first, they must earn our trust.
I’m Peter Dekom, and I approve this message.
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