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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