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Jun 9, 201511:21 AMMad @ Mgmt

with Walter Simson

Making the case for another stimulus package

(page 1 of 2)

In the aftermath of the 2008 Lehman collapse, most banks froze lending and, in fact, requested their money back. At one point, 74.5% of the banks said they were tightening their lending standards. This caused a full-blown banking crisis, in which money was leaving the economy at an alarming rate. In human terms, there was a lot of distress — after all, every dollar going to repay the bank’s call notice is a dollar that doesn’t go into the purchase of goods and services.

In response to the 2008 crisis, the government entered into an emergency spending program. This was much derided in some partisan circles, but my thinking was that we needed stimulus to avoid an economic collapse.

That being said, the stimulus program had a slapdash feel to it, with all the talk of shovel-ready. Shovels? The people who needed economic help were mortgage brokers, printers, restaurateurs, construction companies, and the like. The “shovel” designation might have helped the construction guys in the short term, but somehow the economic stimulus package seemed to miss the point that the larger economy — all the rest of us — needed stimulus and confidence. Except for a tax rate cut (which I miss dearly, now that it has expired) there was not a lot of stimulus for the majority of Americans.

Five years later, I’d like to make the case for another stimulus package. Not because the economy is in the tank now, but because it will be again if we don’t get our act together. Yes, I am talking infrastructure.

  • Roads. I’ve had two nighttime flat tires in the past year due to potholes. In one case, I was en route to a youth hockey tournament, and my passenger was not appreciative of the delay, to say the least. Then I needed to pay for a tow, a new run-flat, and a rim. The new joke in some quarters is that only the drunks drive straight. Drivers who pay attention to the road are weaving.
  • Bridges. Are we waiting for another Minneapolis-style bridge collapse? The streaks of rust, crumbling cement, and peeking curls of rebar tell us bridges that need help can be found every few miles, and in every American city. I once mused out loud that our bridges are worse than Brazil’s, and a man next to me corrected this. “Brazil’s bridges and roads are beautiful,” he said. So, at least we have something to aspire to — Brazil.
  • Air travel. Communications, radar, gates, and weather systems are overloaded. Time waits for no man, unless the man is changing planes in Chicago, where a key domestic route, for example, averages 71% on-time and 8% canceled flights. And that’s considered good! The chairman of United never would have passed Miss Howe’s 4th grade class, where timeliness was prized, but I guess he understands the term “butts in seats.” He just adds the words “and waiting…”
  • Cyber security. By all accounts, attacks on the private sector are costing $100 billion per year, including losses by theft of intellectual property. Experts say that the real risk is in cyber attacks is in the area of electricity generation, water distribution, petroleum refining, and air traffic control. If these areas are not protected, experts say that a determined enemy — the known ones are Russia and China — can actually interfere with key economic drivers. I would add a joke here, but the prospect of life without running water is too frightening to jest about.

(Continued)

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Jun 9, 2015 02:52 pm
 Posted by  John

If only we hadn't wasted the FIRST stimulus ... sigh.

But let's look at your plan in detail:

Roads. Were your flat tires on the Interstate system? I bet not. Americans are paying more taxes than ever before but our local roads suffer because the largest portion of our taxes go to the Federal gov't instead of staying here where we need it. A national stimulus program is exactly the wrong solution. Instead, petition your state and local gov'ts to use a bigger portion of their budgets for road repair.

Bridges. See Roads.

Air travel. The Feds are ALREADY spending more than ever before on air travel so why is it still terrible? Because their increased spending goes to the huge, intrusive, and completely ineffective TSA. Step 1, abolish the TSA. Step 2, apply savings to making air travel more efficient. No stimulus required.

Cyber security. You want the Federal gov't, who just lost 4 million records in what CNN dubbed "the biggest hack" ever to be in charge of increasing cyber security? Hahaha. How about leaving those millions of dollars with individual and corporate taxpayers so they can afford to increase their OWN security? And besides, the Feds already have the world's leading experts on security in the NSA ... they just refuse to release any usable information to the rest of us. No cost for them to share what they know.

Additionally, Federal taxation and spending slows economic growth; Stimulus One made for the slowest recovery from a recession in US history. What, do you hate jobs?? (Kidding!)

Finally, if asked, everyone will tell you they oppose money in politics. But what do you think happens when you say we should send billions or trillions of additional dollars to Washington to be doled out by politicians for political favors?? You want smart infrastructure spending? Better keep it here, close to home, where you can keep an eye on it.

Jun 9, 2015 04:06 pm
 Posted by  Anonymous

The most useful thing for economic development in Dane would be to keep as much tax money here and spend it . My guess is if you looked at state formulas you would find that in terms of local government (which is where infrastructure is)is getting less state aid per capita than many parts of the state - a process that ends up with a higher cost of living and bad infrastructure for Dane. We pour a lot of subsidies into rural portions of the state as well as Milwaukee.

Jun 9, 2015 05:51 pm
 Posted by  Anonymous

You forget to mention that we did recover from the worst recession since the Great Depression. Maybe that's why it took a little longer. And whose watch did that start on? And what bank has accepted responsibiluty, or not accepted government bailouts to prevent a greater crisis?

Jun 10, 2015 02:11 pm
 Posted by  Anonymous

John--I did not expect this to be so controversial, although my editor did (he put 'stimulus' in the headline to provoke). Thanks for the respectful tone. I am going to argue a bit but it is not meant to disrespect.

Point 1. Roads. Correct. Local. I caught the petition for greater use of local resources comment.' And you caught that I suggested we borrow cheap and long. I think this is big enough so that we need the incremental dollars.

Point 2. Bridges. As above.

Point 3. Air travel. I think you are pulling the long bow. Abolish our security apparatus? No going to happen. Make it more effective? A must. We pay for it through GA taxes and through user fees on tickets. But I am talking hard assets. Radar. Gates. Runways. Better to finance them over the long haul.

Point 4. Yes some departments of government have been hacked. So have our most sophisticated companies. It is a war, and in wars you lose battles. I think war footing is required, and that is a government job.

Let me put my argument this way: we as a people have a chance to act the way a business would. Address critical needs at historic lows in borrowing costs.

(Sometime over a beer I'll tell you how my dad, a printer, always expanded during recessions. He locked in low rent, borrowing costs and supply contracts for long term use later.)

Thanks

Walter

Jun 12, 2015 08:57 pm
 Posted by  John

Thanks for the thoughtful reply, Walter. I'm sure we'd find more to agree on than disagree about over that beer.

Here at my own company we have also been able to make great hay during the down economy because we were well positioned going in. But I guess that's the difference in my opinion: your dad and I SAVED during good times and were able to invest during bad. The Federal Gov't in contrast, spends like a drunken sailor in good times and then doubles down on the profligacy during the bad because there is no incentive for a distant politician to invest well or wisely and they know no other mantra than "spend more".

I'm sure you know the Milton Friedman axiom: “When a man spends his own money to buy something for himself, he is very careful how much he spends and how he spends it. When a man spends his own money to buy something for someone else, he is still careful about how much he spends, but somewhat less what he spends it on. When a man spends someone else’s money on someone else, he does not care how much he spends or what he spends it on…and that is government for you.” So again, let's keep our money local where we have some influence on how it's spent.

As for the TSA ... a guy can hope can't he?

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