Thursday, May 26, 2011
Road to Nowhere
Brad DeLong (via Paul Krugman) points out that for the past six quarters our economy has just been treading water. Considering the incredible plunge we had in 2008 treading water just isn't good enough. DeLong gives a few good options for closing the output gap, and all of them would probably work to varying degrees. If I were Emperor of America I would start putting people to work fixing roads and building new high speed rail. The fact that we aren't doing this is just baffling to me. Even if we weren't in the middle of a possible depression, fixing our infrastructure would be a good idea. Right now US borrowing costs are at record lows, and at the same time our rail system is hopelessly out of date (we're trying to play catch up to 1960's Japan) and our roads and bridges are literally falling apart. Since the Republicans who are blocking additional spending on infrastructure are so fond of trying to run government like a business, I'll use a business as an analogy. Ignoring our infrastructure right now would be like a factory with rusting machines refusing to borrow money at 2% interest because they refuse to go into debt. Even if you hate Keynesian economics refusing to borrow to strengthen the backbone of America is absurd.
If increased spending is off the table my second favorite alternative would be for Ben Bernanke to walk down streets throughout the country stuffing huge wodges of cash into mailboxes. Or maybe he could live up to his nickname, Helicopter Ben, and actually airlift palettes of money into town squares everywhere.
Right now America is on the road to nowhere (and it's crumbling fast), but no one in power wants to do anything about it. I guess it's because rich people don't like inflation and hate deficit spending (unless it's on tax cuts, natch) so the politicians aren't acting on anything but grand bargains. It's a real tragedy, especially since we have the power to stop it.