Image via WikipediaWhen you see a “jobs creation” approach that didn’t work, doesn’t work, and can never work, why urge Congress to try it again?Back in March of this year Eric Jaffe at Infrastructurist.com wrote
Democrats John Kerry and Mark Warner joined Republican Kay Bailey Hutchison to propose the BUILD Act yesterday. The bipartisan legislation would create a national infrastructure bank the senators are calling the American Infrastructure Financing Authority — the term “bank” being anathema these days. [1]
I’ve always admired Sen. Hutchison, but this may be evidence that her decision to retire from the Senate is a good one.
This proposal didn’t get anywhere at the time, but the “Infrastructure Bank” is on President Obama’s list of ideas for job creation. According to Jaffe’s article, the Federal Government would provide billions of dollars and many billions more would come from private investors (Wall Street, etc.) and these funds would be invested and applied to infrastructure projects. Wow, what an idea.
According to Jaffe, “The upside is clearly good. Less clear is whether the plan can get off the ground.” Of course it didn’t, fortunately, at the time.
Conn Carroll at The Washington Examiner (08/14/2011), has a better evaluation of the idea: it’s just another “stimulus.”
The first thing to note about this proposal is that it's not really a bank. Banks use deposits from some customers to fund loans to other customers, and they make money by charging interest to borrowers at higher rates than they offer to depositors.Obama would run his bank a little differently. Instead of forcing borrowers to pay money back, Obama's National Infrastructure Innovation and Finance Fund would “directly provide resources for projects through grants, loans, or a blend of both.” Another word for “grant” is “gift,” so basically Obama's infrastructure bank would be just giving money away.But then how would Obama's bank stay in business? Simple. Congress would give it $5 billion to spend every year…. [2]
Tackling those “shovel ready” jobs, I suppose.
Carroll mentions other similar failed measures associated with “stimulus” projects. The article is well worth reading.
It’s clear that Keynesian spending will not bring about the desired recovery, but will likely put us back into recession. The August jobs figures (zero net jobs added, prior month revised downward, nominal unemployment rate still 9.1%) suggest that nothing being done now is helping much at all. And more billions added to the debt? As Victor Davis Hanson observes, the ever-present Keynesian excuse is that we haven’t spent enough.
But how much would be enough? We already have so much debt it will never be paid back except through massive inflation.
The entire approach of government intervention, and Federal Reserve intervention in the free market not only doesn’t help the situation, but promotes the false idea that somehow the free market has failed. In fact, the entire financial crisis and the current economic downturn are the fault of government and the Fed. Private sector blame consists of failing to adequately protest bad government policies, creating bad securities, and, understandably, accepting the bailouts when bankruptcy was deserved, which would have liquidated the debts rather than sticking the taxpayers with them.
But Keynesianism, as currently practiced, knows no real limit of spending to try to stimulate the economy. See how it has stimulated things so far.
[1] Eric Jaffe, “Kerry, Hutchison Propose National Infrastructure Bank,” 03/16/2011, Infrastructurist.com.
[2] Conn Carroll, “Infrastructure bank is just another stimulus boondoggle,” 08/14/2011, The Washington Examiner.
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