January 28, 2009
Can public works stimulate the economy
By Jim Babka

Media Alert! Jim Babka will appear on Straight Talk w/ Gary Nolan this evening. See the Postscript for details.

Quotes of the Day: “Is it too much to ask that someone criticizing (John Maynard) Keynes actually, you know, read Keynes…?” -- Paul Krugman

Okay Mr. Krugman, let's read what Keynes wrote in 1942 . . .

“Organized public works, at home and abroad, may be the right cure for a chronic tendency to a deficiency of effective demand. But they are not capable of sufficiently rapid organisation (and above all cannot be reversed or undone at a later date), to be the most serviceable instrument for the prevention of the trade cycle.” -- Keynes, Collected Works, vol. XXVII, p.122

Subject: Can public works stimulate the economy?

John Maynard Keynes originated the idea that government spending could reverse an economic downturn, but even he was skeptical of using government construction projects for this purpose.

Nevertheless, Congress, and people like Paul Krugman, want to spend hundreds of billions on public works.

Sheldon Richman, of the Foundation for Economic Education, gives us more reasons to be skeptical. He draws attention to a major investigation of public works projects by David Leonhardt of the "New York Times." Three points stand out . . .

First, it's a myth that the government has neglected public infrastructure. Politicians point to the collapsed bridge in Minnesota as evidence that we need more spending on roads and bridges, but if the Minnesota bridge is evidence of anything, it's government incompetence, and not a lack of infrastructure spending. According to Mr. Leonhardt . . .

“(Infrastructure) spending is up 50 percent over the last 10 years, after adjusting for inflation. As a share of the economy, it will be higher this year (2008) than in any year since 1981.”

What have the politicians done with this money? They've done what politicians do, politics. As Mr. Leonhardt notes . . .

"In one recent survey of local officials, almost 80 percent said they had based their decisions (about public works spending) largely on politics, while fewer than 20 percent cited a project’s potential benefits."

It gets worse. There's a large element of hypocrisy in the government's approach to public works. Private firms have to jump through regulatory and environmental hoops before they can start building, but the government doesn't. As Mr. Leonhardt points out . . .

"It’s hard to exaggerate how scattershot the current (public works) system is. Government agencies usually don’t even have to do a rigorous analysis of a project or how it would affect traffic and the environment, relative to its cost and to the alternatives — before deciding whether to proceed."

Each of the points above can be used in a message to Congress. Cut and paste the quotes from the "New York Times" into your personal comments. You can do the same with the quote from John Maynard Keynes. Use our quick and easy Educate the Powerful System to send another message opposing the stimulus bill.

Each fact and argument we share with you is a new opportunity to pressure Congress. Use the opportunity. Congressional staffs read and count your messages. The more messages they receive the more likely your concerns will be reported up the chain of command. Keep sending messages!

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Thank you for being a part of the growing Downsize DC Army.

Jim Babka
President, Inc.

P.S. Jim Babka is a guest on Gary Nolan's talk show this evening. Details are available at the Downsize DC blog.

P.P.S. Not all new office holders have Internet contact pages yet. We're updating our system as the new contact pages come on line. Your message will go through to any of your representatives that remain the same, or for which we've received new information. Don't let this transition slow you down. Your message will get through to someone. It will make a difference. Take action!

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