I agree with Alan Blinder that stimulus is not a dirty word. But waste and rent-seeking are. Here are his prescriptions:
Unlike private investment, inadequate public investment is part of the problem. America’s infrastructure needs are so huge, and so painfully obvious, that it’s mind-boggling we’re not investing more. The U.S. government can now borrow for five years at about 0.75% and for 10 years at about 1.7%. Both rates are far below expected inflation, making real interest rates sharply negative. Yet legions of skilled construction workers remain unemployed while we drive our cars over pothole-laden roads and creaky bridges. Does this make sense?
Everyone knows that the returns to education, while large, are long delayed. That means we have no time to waste. We should be doing a much better job of building a better educated, more productive work force for the future. A Council on Foreign Relations task force co-chaired by former Secretary of State Condoleezza Rice and former New York City Schools Chancellor Joel Klein recently argued that better K-12 education is critical to American leadership in the world and therefore to our national security.
Dr. Blinder continues to live in a dream world in which the skills of homebuilders and roadbuilders are completely interchangeable and infrastructure projects are executed by cobbling together gangs of unemployed workers rather than being let to large, politically-connected construction companies that will drag them out as long as possible. He also apparently missed the tremendous run-up in real education spending without an appreciable effect on things like on-time graduation rates, test scores, or other measures of achievement.
Will an interstate that runs directly between Quincy and Peoria really increase U. S. productivity? Can that decision be made reasonably in Washington, DC? The unemployment and underemployment rates for recent college grads tops 50%. Will increasing that make us better or worse off?
We don’t really know how to cram more education into the skulls of the 50% of young people in Chicago, New York, and Los Angeles who don’t graduate from high school on time. Pointing to the benefits of doing so is an exercise in nihilism. We do know that simply spending more money isn’t enough.
The problem we face today is that the actual solutions to the problems we face run afoul of the preconceived notions and shibboleths of our elected officials on both sides of the aisle. Throwing more slogans at me doesn’t change that but it does bolster the case for waste and rent-seeking.