By William F. Shughart II on 1.8.09 @ 6:05AM
Obama's "new" New Deal will provide political but not economic
benefits.
OXFORD, Miss. -- President-elect Obama has announced plans for a
new stimulus package containing $500 billion to $700 billion
worth of public works projects. The package would be "the single
largest new investment in our national infrastructure since the
federal highway system," he said.
America's governors already are scrambling to compose lists of
"shovel-ready" projects so no bridge or highway is left behind.
But while a "new" New Deal will produce certain visible results
-- more construction materials will be sold, more construction
workers will be employed and some of the nation's infrastructure
may indeed be improved -- it is unlikely to give the economy much
of a boost.
Most projects qualifying for funding will be selected not because
they are urgent national or regional priorities, or because they
are likely to produce the greatest benefit at the most reasonable
cost, but because they please important political constituencies:
organized labor, for example.
Let's be honest: Anybody who has seen a "work" crew on an
Interstate knows full well that the federal highway program is a
poster child for pork barrel spending. Owing to lax oversight,
public works projects have always been plagued by delays,
corruption, shoddy workmanship and cost overruns. Remember
Boston's "Big Dig?"
Because Congress likely will require contractors to pay union
scale -- the euphemism is "prevailing wages" -- the costs of the
projects will be bloated, even if the stimulus package doesn't
lead to sensational scandals. While unionized workers may
benefit, union wages will price less-skilled workers out of
construction jobs, meaning that many of the "new" hires will
replace other workers, producing something significantly less
than an employment boom.
In addition, Obama's proposed massive transfer of resources to
the construction industry will shift funding away from other
potentially more-valuable uses. America's future is still the
knowledge industries, not road building.
The truth is government cannot "create" jobs or wealth in one
sector of the economy without destroying them in others. Look no
further than the old New Deal for proof.
Despite all the credit given to Franklin D. Roosevelt's bold
experimentation in confronting the economic freefall of the Great
Depression, prosperity didn't return to the United States until
after World War II.
Nearly a decade of then-unprecedented increases in federal
spending on public relief and public works projects never managed
during the Depression to lower the unemployment rate into single
digits or restore our gross domestic product (GDP) to the level
it had achieved in 1929.
Attentive students of the New Deal now understand that FDR's
willingness to try something and, if that didn't work, try
something else, created a climate of uncertainty that discouraged
private investment in the factories and equipment that could have
put America back to work. It should not be forgotten that it is
Roosevelt's Works Progress Administration, the WPA, to which we
owe the word "boondoggle."
With this year's federal budget deficit now being forecast to be
north of $1 trillion, perhaps even a spendthrift Congress will
hesitate to add a minimum of $500 billion to the burden that will
fall on the shoulders of our children and grandchildren.
But don't bet on it. Another election is just two years away and
politicians will be eager to claim credit for bringing Obama's
infrastructure largesse to their states. Taxpayer money could be
better spent elsewhere than on Obama's infrastructure plan.
topics:
Unions, Stimulus Package
