Presidential election, 2016

[Warren Dew]

(11-13-2016, 10:11 PM)Kinser79 Wrote: In the case of borrowing and taxing the state is taking capital that could be put to work elsewhere and using it it for whatever.  I will grant that not all spending is equal.  A tax cut for the extremely wealthy (and I mean on their take home income, low corporate and capital gains taxes push money into investment and re-investment given a higher personal income tax rate) is a poor way to spend that capital.  The same would be true of a tax cut for the poor.  Or welfare.  Or subsidies for insurance.

Spending that same capital on public infrastructure, either new construction or refurbishing existing infrastructure, while not glamorous has a rate of return much much higher than a mere tax cut or a welfare check.

I agree with much of what you have to say, but I have to disagree on this.  The problem is that government spending is often extremely inefficient, because the government has no profit motive.  Refurbishing failing infrastructure may be done efficiently, but any extra money allocated is still spent, but almost entirely on gold plating or patronage.

Massachusetts is a good example of this.  When Obama passed his infrastructure spending bill, we had a Democrat governor and got more than our share of the money.  Lots of it was spent on unproductive things, like moving curbs in or out by a couple of feet in various places.  Yes, new curbing was involved, but the old curbing was also granite and in fine shape.

There were also bridges and interchanges that needed fixing, but the work was interminable; for six years the return on the investment was negative as traffic lanes remained closed to permit the "work".

Then we got a Republican governor, and the projects that had taken six years to fail to complete all started getting completed in a matter of months.  It's quite clear that they could have been completed with a tenth the money, and the extra money was just spent on unproductive patronage employment.

Tax cuts that would encourage investment in private infrastructure would be far more efficient, if you really wanted infrastructure.

Personally I think there is also, currently, a lot of excess capacity due to lack of consumption, so I think tax cuts for wage earners to boost consumption would also make sense at present.  As the following graph indicates, taking up the slack in the economy - which granted, might involve more than just tax cuts - would make everyone about 10% better off.



But even if you don't believe in keynesian deficits, massive government spending on infrastructure is not the way to go.