Forgingmagazine 383 83379robertpng00000055363

Dont believe it

Dec. 14, 2008
The notion that an enormous federal spending spree will reinvigorate our economy and spur prosperity is a dangerous delusion.

If we must surrender our principles about private enterprise and personal responsibility in order to survive our financial crisis, is it too much to ask that we also preserve an element of truth about the plans we make and the projects we endorse?

Many of us who object to the recent interventions by federal officials to guarantee investment banks, “insure” insurance companies, or bail out automakers don’t want those companies to fail, but we realize that without some failure there is no way to understand what the real value is of these assets and/or enterprises. More specifically, we believe that it would be fairer, and more effective for investors to wager their own money on this project than for segments of the economy to be managed by whoever happens to have earned seats on the relevant Congressional committees.

Nevertheless, the economic atmosphere is so filled with tension and confusion that people apparently are encouraged by interventionism — the more ambitious the proposal, the more reassuring it seems to be. Even though federal interventions over the past year seem to have had little stabilizing effect on the economy, it’s generally accepted that a new New Deal of “infrastructure” spending will ensure our prosperity.

The notion that we need more “infrastructure” spending is a myth that defies examination. The federal government is so efficient at collecting money through taxation and regulation that representatives believe they can spend it just as effectively. And, because they seem so confident we listen when they propose big ideas. As a result, “infrastructure” turns out to mean any grand idea that private investors have turned down as too risky or ridiculous, but that will proceed with federal government sponsorship.

If you believe wind farms generating electricity are the solution to our shortage of oil and natural gas, that’s an infrastructure project you’ll support. All sorts of “green” technologies are infrastructure, too, naturally, as are computer and broadband networks.

“Infrastructure” also describes the various essential, and expensive things that government is required to pay for anyway (roads, bridges, etc.), but that never seem to be as well designed or well built as their costs imply. So, naturally, more “infrastructure” investment is needed.

The standard analogy for all “infrastructure” dreams is the interstate highway system begun in the 1950s, or the public buildings and hydroelectric projects started in the 1930s. If we weren’t already investing and financing such projects, it might be easier to accept that grand new levels of public spending would be effective. But, we are doing those things, and we see the results.

An even bigger part of the myth is that it overlooks how federal spending actually works. Even if the feds green-light thousands of worthy projects, it ought to be obvious that all those monies could take years to become fully available. It should be obvious, too, that federal dollars will quickly find their way to many of the same approved companies and organizations who long ago established themselves as federal contractors and suppliers, and who will extract their cut of the revenue stream. Don’t forget, too, that any new federal funds will be tied up in the same old thickets of regulatory and legal burdens that already slow results.

Every society has a number of effective myths that unify and inspire the individual citizens, but these have to be grounded by some element of truth. The notion that an enormous federal spending spree will reinvigorate our economy and spur prosperity is a dangerous delusion.