Stimulus Plan Part Two: Investing In Infrastructure

TW: There is increasing chatter about a 2nd stimulus plan. Personally rather than sending folks checks for a few hundred bucks like last time I would prefer to see a plan to stimulate based on investment rather than consumption. Government accounting unlike private accounting counts all spending the same regardless of its use, this systematically encourages consumption type expenditures at the expense of investment type expenditures. Furthermore market economics has a huge flaw in that externalities (either positive or negative) are not fully incorporated into markets prices. Governments have a role in stimulating investments with positive externalities (e.g. parks, alternative energy). I believe few would argue that our infrastructure of bridges, roads, ports, airports etc. is over-invested. The markets have answered resoundingly that the housing market was over-invested. As the article points out civil engineers have a vested interest in encouraging infrastructure spending but it is time to address an under-funded (arguably embarrassingly under-funded) sector of our economy while stimulating job creation.

From Kevin Drum at Mother Jones:
"Public officials, engineers and policy experts have been warning for years that crumbling infrastructure is a ticking time bomb....A third of the nation's major highways are in poor shape, according to the Department of Transportation. The list of unsafe dams is growing. Mass-transit systems, water-treatment plants, hazardous-waste sites and more are falling apart...The civil engineers association gave the country a "D" on its 2005 infrastructure Report Card. It called for a $1.6 trillion five-year improvement program...The usual argument against infrastructure projects as fiscal stimulus is that they take too long: you have to identify projects and draw up plans first, and only then do you put people to work building stuff. By the time the projects get started, the recession is over...But not this time. The recession we're going into now promises to be deep and long"

http://www.motherjones.com/kevin-drum/2008/10/infrastructure.html