Unused U.S. Shovels

    Yesterday’s diatribe from Paul Krugman (NYT, 1/29/10) concerned the federal government’s failure to fix the unemployment problem, which he called short-term, and the looming deficit, which is a long-term problem.  As for the short-term fix, he felt it was a virtual no-brainer that we should pump up the deficit in order to create jobs now.  But he knows that’s not going to happen. He blamed the “political culture” that rewards hypocrisy and punishes serious efforts to reform the economy.  Specifically, he thinks the job-creation program was simply too weak to have an impact on growing unemployment.

   I have my doubts about that.  The “stimulus” was meant to fund these “shovel-ready” projects that would fix our crumbling infrastructure.  For the most part, these had to be short-term and small-scale, and were probably heavily involved with transportation.  You couldn’t count on many permanent jobs from them, and the benefits to the overall economy would be small, and not immediate.  With that in mind, why should we have thought a bigger stimulus would have had better results?  Local bureaucracies can be as slow as Washington, and local business leaders and politicians want their own piece of the pie, often killing these projects at the outset.

   I was glad to see that President Obama is taking a different approach now (NYT, B1, 1/30/10).  He’s looking to private companies for the answer, using tax credits and Social Security payroll holidays when they hire new employees.  He’s also watching out that they don’t “game the system” by laying off workers in order to get these breaks when they hire the new ones.

   Government is simply not efficient when it moves into a dynamic, marketplace economy.  If Obama can implement these changes in the tax code and regulations,  and do it quickly, we might see better results, dollar-for-dollar, than we saw in the stimulus program.

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2 Responses to “Unused U.S. Shovels”

  1. Alan Chorney Says:

    I think the above diatribe from igpres misses important benefits of the stimulus, long term or short term. Even though some of the jobs created in infrastructure projects might have a finite feature they will benefit the economy by creating jobs that will pump money into the economy which will create long term growth. Further for decades now we have been hearing from politicians and journalists about the sorry state of the infrastructure in the U.S., so now would be the perfect time to start to do something about it, even if the jobs may not be permanent. If the government is not efficient in its incursions into the marketplace economy, it is still needed because of the stupidity of the dynamic movers and shakers of the free enterprise system that drove the economy off the cliff during the past several years. I think the ideas put forth in Mr. Krugman’s “diatribe” outline what is needed to lift the American and worldwide economy out of the mess that was caused by the misguided and underregulated business leaders and other “tycoons” who were involved in manipulating the dynamic marketplace economy.

  2. igpres Says:

    Thank you, Alan, for your response.

    Although the results aren’t in yet about the stimulus, I expect it will have done more good than people think right now, and that includes jobs. But the stimulus was expected to prevent the unemployment we’re seeing now, which it has not done. Krugman blames this on it being too small to do that job. My point of disagreement with that is that it was designed as a government project, which means that it starts slow, and then gets slower. For fast/fast relief, get the money into the hands of business owners who have an ongoing enterprise. They already know how to profit with a larger workforce; they just haven’t done it because of the cost and tight credit. Sure, we need infrastructure repair, and the surplus helped. But to kick-start the economy, the new jobs should be in companies that earn a profit, and then expand.

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