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Jun 9, 201511:21 AMMad @ Mgmt

with Walter Simson

Making the case for another stimulus package

(page 2 of 2)

Before we debate the costs of the materials and labor, let’s agree that the cost of U.S. government borrowing is at an all-time low. At this writing, it is about 3% for a 30-year loan. A businessperson would see the opportunities in the growth of the economy — and the dangers that lie in not investing in the basics — and would go for it. The timing for favorable financing is compelling.

That’s what I’m advocating. Let’s borrow at 3% and invest in 30-year assets.

The business case is found in the reduced cost of transport (all those flat tires and lost time waiting for tows); the cost of diverting traffic away from crumbling bridges; the lives saved that would otherwise be lost to traffic and bridge accidents; the time recovered from avoiding delayed or canceled flights, and missed air connections; and perhaps, most importantly, ensuring against catastrophic loss of electricity, water, and other key services.

Are these benefits greater than the 3% cost? Almost certainly. So, why don’t we do it? I think the answer lies in a misunderstood accounting measurement system — the deficit.

But we just agreed (well, I just agreed) that economic benefits would cover the investment — and please note that I’m not counting the economic stimulus of the projects themselves. Aside from that, let’s stipulate that the way we account for the deficit is as a statement of funds flows — what comes in, what goes out. By that measure, many Americans long-term deficit is, say, 25% of income, simply because they bought a house using credit. However, buying a house as an investment makes sense if the investment is a tangible asset, which the deficit doesn’t measure.

So, let’s get on with this infrastructure investment. We’re ready for shovels.

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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.)



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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