Tuesday, February 17, 2009

Better Than Doing Nothing

Today President Obama signs the Stimulus Bill into law. Many economists say that the package is not big enough to do all the infrastructure building that our country needs. That is correct, but the political reality required that less not more be placed in the Bill. Infrastructure is not spending, infrastructure is an investment in our country. The New Deal built infrastructure that carried this country’s needs for a few generations, but now new infrastructure needs are necessary for our country to continue to grow in the 21st century.

The Republican Party could have pushed for more infrastructure spending, but their political game plan is to do nothing when they are out of power. The Republican Party has no rational political philosophy because they have taken the view that government is not the right vehicle for such projects. Other than defense spending, where their supporters reside, everything else should be taken care of by each individual or left to the states.

For those of you too young to remember the 1960’s, or from outside the USA and not familiar with our history, this country fought a second civil war in the 1960s. This war was not as bloody as the first Civil War, as far fewer people died, but people died. The second Civil War was known as the Civil Rights Movement. The signing of the Civil Rights Act by President Johnson gave the Republican Party the political victories that they could never have achieved without President Johnson doing the right thing and signing the Civil Rights Bill. With the signing of the Civil Rights Bill, the Republican Party’s Southern Strategy was born. Nixon was the first presidential candidate to employ the Southern Strategy in a presidential campaign. On November 4, 2008, presidential candidate Obama defeated the Republican candidate and defeated a political strategy that had lasted more than a generation.

Below I have listed 11 projects printed in The New York Times this past Sunday so some can see what an infrastructure project looks like.

1) California High-Speed Rail $45 billion
2) NextGen(eration) Air Traffic Control $15 to $22 billion
3) California Drinking Water - tens of billions of dollars
4) Gulf Ports $1.04 billion for New Orleans, $1 billion for Gulfport, Miss.
5) Seattle Highway Tunnel $4.24 billion
6) Hudson Rail Tunnel $8.75 billion
7) Chicago Rail Network $2.5 billion
8) Miami Port Tunnel $1 billion
9) Second Avenue Subway $4.35 billion
10) Bridge to Canada $1.8 billion
11) Dulles Airport Train $5.2 billion

There is no doubt in my mind that more not less infrastructure building is necessary today given the fact that our country has not made the necessary infrastructure investments over the last 29 years.

Perhaps a clever economist would be so kind as to convert these 2009 U.S. dollars into 1933 U.S. dollars so we could have a fair comparison of the actual spending that will take place some 76 years later. Knowing how much inflation has occurred in the last 76 years, makes me think that the New Deal may have been bigger.

Stay tuned.


winslow said...

What I was hoping for in the stimulus bill was more forward thinking. Instead of just repairing roads, bridges, etc., I wanted to see an emphasis on different modes of transportation in the future. An ultra-high speed rail system developed between major cities. An efficient local transportation system in major cities (inexpensive Smart Car rentals at each rail hub until these systems are developed over the years).

The bill should have included a huge incentive to purchase a new car that exceeds 35mpg. How about a subsidized purchase price between $5k-$10k.

I know Obama is trying to please the "free-enterprise" system, but how about instead of giving out unemployment checks, these individuals are given jobs with the local municipalities..such as cleaning up neighborhoods, crime control.

Six-eight months ago,I had an idea for 3-4% mortgages offered directly by the government for anyone (non-investors) purchasing a home in the next 18 months. The government can then sell this paper.

Maybe I'm inpatient, but I want to see immediate action in the regulatory area. Bring back the uptick rule, ban short selling unless the shares are already owned, ban double and triple short ETF's. Begin the procedure for idictments for financial crimes

I want to see a cabinet post for breach of ethics (hey..Ethic Compliance Officer) - both in business and government.

And there has to be an untangling of derivatives. This needs to be talked about and not continued in it's present form.

And lastly, as you have suggested, we need a new rating system for bonds.

Why does it seem the leaders in the US are afraid to make bold moves?

moneythoughts said...

I don't think the leaders are afraid to make bold moves, but I think they have to compromise to get a bill passed. I am sure each of us would write a different stimulus bill, emphasizing those things we felt were more important than others. I think the fact that Obama got this bill passed and signed in less than a month from the time he took office is a good sign. There will be more bills. I wonder what Wall Street will do if they can't play "gotcha" or shoot fish in a barrel like they have been allowed to do for so many years. Perhaps, we may live to see a new business ethic when it comes to the whole securities industry.