Non-Sequitur of the Day

by on December 7, 2008 at 5:33 pm in Economics | Permalink

Mr. Obama also responded to criticism of waste and inefficiency in such
programs by promising new spending rules, like a requirement that
states act quickly to invest in roads and bridges or sacrifice federal
money.

From the NYTimes.

1 a_c December 7, 2008 at 5:36 pm

Haha, nice.

2 S. Ryan December 7, 2008 at 6:08 pm

Very nice catch! I read the article and it had me scratching my head also. The government (both sides) never ceases to amaze.

3 dWj December 7, 2008 at 6:38 pm

Was the criticism that there isn’t enough waste and inefficiency?

4 Mercutio.Mont December 7, 2008 at 8:00 pm

This Presidency is totally going to rock.

5 David December 7, 2008 at 8:21 pm

Smells like things are taken out of context. I think the “spend it fast” idea is related to the spending being justified as a stimulus. One argument against spending on infrastructure as a form of stimulus is that it takes too long for the projects to get going. I think a better responds is that this recession/depression looks like it will last long enough that a sustained stimulus is called for (probably true).

The truth is, however, that what we’re really seeing is an adjustment of values away from republican priorities (war in Iraq) to democratic priorities (bridges and roads in the US).

6 a student of economics December 7, 2008 at 9:38 pm

Alex,

Sometimes waiting to spend money can be wasteful and inefficient.

During a recession, when many resources are idle, spending on roads and bridges has a low opportunity cost.

If the state waits and spends the money later, when employment is full and no resources are idle, then the opportunity cost is much higher.

In other words, it is wasteful and inefficient for a state to wait too long to spend the money.

One way to respond to this criticism is via a use it or lose it rule.

7 Doug December 8, 2008 at 12:26 am

I saw this too and my head exploded. Anyone who has dealt with public sector projects knows that “use it or lose it” is a recipe for rampant, intentional, and grotesque waste.

8 bushequalhitler December 8, 2008 at 1:55 am

Hold on, weren’t we supposed to worship the One here?

9 Andrew December 8, 2008 at 4:08 am

Those are a lot of “ifs” student. Too many for government work, in fact. I don’t even think it works logically as you are implying. Doing anything in a hurry is the path to innefficiency, regardless of market timing or government rules that increase innefficiency. The right time to build a bridge is when you can do it right.

I don’t think there is a lot of idle capital. Capital went poof. Government is one of the only sectors that HAS been growing all along. States are already strapped for cash, not giving them back their cash by calling it “Fed money” and saying there’s a new “use it our way or we keep it” won’t keep Cali from going bankrupt. I may be out of work in a few months, but I have no interest building superfluous roads in my state or moving to a state where there are actually more roads needed- I suspect I’m one of those “opportunity costs” Andy refers to.

Have the bureaucrats been dutifully drawing up plans while they wait patiently for a downturn to spend tax money? Hell No. For example, tax advocates around here have had to sue counties over the “fiscal innovation” of the government setting up shell corporations to get around bond limits.

Oh, and he smokes. I really hope this guy gets caught getting a Hummer.

10 srp December 8, 2008 at 4:24 am

If we really need fiscal stimulus then a mass mailing of gift cards with a six-month expiration date should do the trick. Let any retailer with stores near a minimum population threshold, or any retailer willing to put up the fixed set-up costs of a run, apply to receive government funding for gift cards worth up to 10% of 2007 sales. The government borrows the money to do this; if we’re really worried about deflation, we have the Fed create money and buy the bonds issued.

I tend to doubt the need for fiscal stimulus and I don’t think the liquidity trap argument is correct, but either this or a payroll tax cut seem like the way to go. “investments” in infrastructure will not work quickly or spread the stimulus widely. And I am aware of no shred of evidence that rebuilding schools is a useful investment (if schools are to be judged by student learning).

11 8 December 8, 2008 at 9:36 am

Who knew that America’s three biggest problems were high transportation costs, ugly schools, and slow download rates.

12 Anonymous December 8, 2008 at 3:35 pm

Hey – let’s cut out the middle man. Larry Ellison can just cut me a check for the 20 grand straight away.

Comments on this entry are closed.

Previous post:

Next post: