At Business Insider, Henry Blodget offers a plan to save the economy. In the process, he says that he's choosing sides in a religious-econo war, between the big-spending Keynesians on one side and the no-spending Austrian School economists on the other (this is a super-shorthand version of the major economics debate of the past 100 years). His solution? Massive infrastructure spending:
- The government should construct and pass a long-term budget plan that
- Minimizes short-term pain, while
- Getting the long-term deficit under control
- This budget plan should be designed to benefit all Americans, not just special-interest groups or different classes or industries
- This budget plan can theoretically include an increase in short-term spending designed to minimize the country's pain, as long as it also includes a decrease in long-term spending (again, right now, the world is willing to lend us as much money as we want)
- One form of government spending that unequivocally benefits all Americans is infrastructure spending (when the projects are finished, America has the infrastructure)
- Infrastructure spending would help America address another reality that has emerged in the past three decades—the reality that the infrastructure of many countries in Europe, Asia, and other regions has vaulted past that in the US and made the US look like a second-world country
- Infrastructure spending would boost employment in one sector of the economy hammered by the recession—construction
- Infrastructure spending would involve fewer of the conflicts and misaligned incentives that infuriate many Americans about "entitlement programs," extended unemployment benefits, welfare, food stamps, and other government expenditures that seem to encourage sloth and laziness and "socialism"
- The 10-year government budget designed to get us out of our current predicament, therefore, should probably include a massive, multi-year infrastructure spending program.
This makes a lot of sense and sticks to the Great Depression playbook, when Harold Ickes oversaw the Public Works Administration and built much of the heavy-duty infrastructure that we assoiciate with that period and the recovery from the crisis. But just as it wasn't enough on its own in the 1930s, it won't be enough in the 2010s.
For that, the other half of the Great Depression playbook needs to be used. This is the Works Progress Administration, overseen by Harry Hopkins. Its focus was simple and short-term: jobs, jobs, jobs.
Infrastructure spending is the perfect way to find detente between the Keynesian spenders and the Austrian no-spenders because it represents investment rather that, bluntly stated, waste. If you're going to spend, spend long-term and build what the country needs to be competitive in the future. Who can argue with that? In fact, there's aready bipartisan enthusiasm for infrastructure spending.
But what do you do about, for example, 12 percent unemployment in California — right now? If you follow the Hopkins rules, you throw money at the problem, spending now and asking questions later. At best, you restore dignity and save citizens from the threat of long-term unemployment; at worst, you pump money into some pointless endeavors that won't yield much of anything in 30 years, but will at least attack the problem of idle human capital.
Occupy Wall Street and its offshoots have shown us that there's a lot of rage and frustration in the land. Rebuilding the nation's infrastructure is a great, partial solution. But if we're going to stave off the potential social fracture that now looms, we need to get the unemployed to work, and we need to do it a lot faster than the time we'll need to approve bridges, tunnels, and roads.
[I'm indebted to Michael Hiltzik's "The New Deal: A Modern History" for its excellent summary of Ickes' PWA and Hopkins' WPA and how their differening approaches each served to attack the Great Depression.]