A key part of Barack Obama’s economic recovery plan is expected to involve a huge government spending program on infrastructure. Unfortunately, Obama doesn’t seem to know exactly what needs to be built and where, which means the ordinary political process of special interest lobbying will likely take control. That’s how it works in Washington: if you announce a plan to spend a trillion dollars but let everyone know you haven’t quite made up your mind about how it will be spent, you’re basically throwing open the door and inviting in the special interests.
There will be gnashing of teeth about lobbyists taking over the stimulus bill. You see, everyone hates lobbyists, special interests and their client politicians, especially in the abstract. But much of that hatred is simply based on an unrealistic view of how politics would work according to some kind of Gettysburgian delusion (of the people, by the blah, blah, blah) rather than any appreciation of actual political processes.
In truth, people don’t hate lobbyists who work with politicians for the special interests they support. Teachers, for instance, tend to think that the teachers unions are pretty good, the lobbyists working for them aren’t like those other lobbyists and politicians who cooperate with them are further an important national interest.
But the gnashing may be appropriate since control by lobbyists probably means the infrastructure spending won’t do much for the economy and will probably just build bridges to nowhere.
Does spending on infrastructure mean that the money is going to be spent filling potholes and repairing bridges? Or will it be spent creating new things?
One of the key reasons why infrastructure gets neglected, in the first place, is that there is very little political payoff to filling potholes and repairing bridges, compared with spending that same money creating community centres, bike paths and other things.
These new things create opportunities for ribbon-cutting ceremonies that give politicians favourable free publicity in the media. But nobody holds ribbon-cutting ceremonies for filling in potholes or repairing bridges.
The whole process is biased toward doing new things, even if the repair and maintenance of existing infrastructure would serve the public interest better.
But even in the unlikely event that the public interest triumphs over special interests, there is another very important difference between repair and maintenance activities, on the one hand, versus building new things on the other.
New things require long delays before they can get started, especially when they have to be done by politicians. Someone once said that Congress would take 30 days to make instant coffee – and Congress is just the beginning of the delays, as all sorts of competing interests jockey for position at the public trough.
Just putting together an environmental impact report for something new to be built can be a long process, especially if its findings are challenged by environmental extremists, who pay very little price for challenging, even if the delays caused by their challenges cost others millions of dollars.
In short, it can be years before the money that is supposed to stimulate the economy actually gets into the economy. And nobody knows what the economy will be like when that money finally gets into circulation.
A common problem with government economic policies in general is that it is very hard to predict how long it will be before the policy actually affects the economy. An economic stimulus policy created during a contraction in demand can take effect during an inflationary expansion of demand – and fuel still more inflation.