Unsexy Stimulus Spending

By: Mr. Wilson on February 20, 2009
Mayor Chris Beutler wants to spend $9.3 million worth of "stimulus" money on roadway repair and street signal replacement. It's not exactly spending that will stimulate the economy, but if you've been following the debate over the Federal "stimulus" package at all, you won't be surprised; there's not nearly as much stimulation activity in the bill as the Feds would have you believe. I digress. Mayor Beutler makes a valid point when he asserts that roadway repair will take the money farther than new roadway construction. And repairs are needed: Lincoln has seen barely a dollar go toward major street repair since 2004. We do need new construction in parts of the city -- South 56th Street between Pine Lake and Old Cheney comes to mind -- but is it wise to build more roads when we can't maintain what we've got? Do you concur with Mayor Beutler's assessment? Or should we take the money in a different direction?

Comments

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Fletch
February 20, 2009 at 2:59PM

I think your assessment is valid. I’d prefer some new roads, but I think repairing would be more of a need, and new ones would be more of a want.

beerorkid
February 20, 2009 at 3:19PM

Seems the Beutler might be actually listening to what folks are saying.  So many online comments have mentioned repairing streets as the biggest priority.

Peter
February 20, 2009 at 4:07PM

How can you think that 9+ million dollars pumped into the local economy isn’t stimulative?

Money spent on salaries, materials, fuel, equipment maintenance and we end up with fewer potholes, safer streets and roads, and money flowing to local businesses and government in the form of sales taxes (way down).

And don’t forget the tax credits for 1st time home buyers (construction jobs), car buyers (dealers stay in business) tuition payments (university doesn’t lay off)

The last ‘stimulus’, consisting of checks to individuals,  reportedly went largely to paying off debt.  THAT is not stimulus.

JT
February 20, 2009 at 5:05PM

I’m with Peter on this one, any government spending is stimulative by nature. I also agree with Mayor Beutler, we have to take care of our city core before we worry about subdivisions.

Mr. Wilson
February 20, 2009 at 5:26PM

I don’t mean to sound blunt, but the notion that “any government spending is stimulative by nature” is laughably naive. If that were true, there would be a direct correlation between a government’s spending and economic output. That is simply not the case. Ask the folks in North Korea or the former Soviet Union, to name two examples, how stimulative all of their governments’ spending has been to their economies.

Certain types of government spending are stimulative. World War II and related spending was extraordinarily stimulative, at least in the United States. Certain aspects of the New Deal were stimulative (while at the same time other government policies unnecessarily slowed recovery).

But “any” government spending? In a word: no.

Mr. Wilson
February 20, 2009 at 5:40PM

Except in outlier cases, infrastructure repair is orders of magnitude less stimulative to an economy than the construction of new infrastructure. Repairing a road means your trip to work is less bumpy; building a road means new businesses have new places to build, new transportation links are established resulting in improved travel efficiencies, and new land is opened up for new housing.

Rehabilitation doesn’t have zero stimulative effects, of course. The benefits just tend to be less, well, sexy.

Neal
February 20, 2009 at 6:58PM

In a deflationary situation like this one, I fall much closer to JT and Peter. Laughably naive? The economy is most definitely shrinking, and spending is spending. That does not in any way say that there aren’t degrees of effectiveness, which I think is your revised point, Mr. Wilson, but I’d like to see what you’ve been reading, because I completely disagree with your initial claim, “It

Peter
February 20, 2009 at 7:07PM

“Businesses having new places to build..”

Have you walked around downtown Lincoln lately and seen the closed and abandoned businesses?  Numerous businesses on O Street, used car dealers, O Asian Market,  the multi-square blocks that were that food distributor between O and L, the area south of the Haymarket.  There’s plenty of space for new businesses.

Lincoln runs the risk of becoming what my hometown of St. Louis has become… a shrinking core surrounded by suburbs.  Since 1950 the population of the city has gone from 855,000 to less than 355,000 with a corresponding loss of tax base, services, homeowners and safety.

Neal
February 20, 2009 at 7:22PM

Except in outlier cases, infrastructure repair is orders of magnitude less stimulative to an economy than the construction of new infrastructure.

In case it got lost in my post below, can you link me to what you’ve been reading? I’m very curious about the circumstances behind what made those situations outliers rather than the other way around.

Matthew Platte
February 20, 2009 at 10:33PM

Mark Zandi of Moody’s Economy.com on Stimulus:
The boost to GDP from every dollar spent on public infrastructure is large - an estimated $1.59 - and there is little doubt that the nation has underinvested in infrastructure for some time, to the increasing detriment of the nation’s long-term growth prospects.

Fiscal stimulus does carry substantial costs. The federal budget deficit, which topped $450 billion in fiscal year 2008, could reach $2 trillion in fiscal 2009 and remain as high in 2010. Borrowing by the Treasury will top $2 trillion this year. There will also be substantial long-term costs to extricate the government from the financial system. Unintended consequences of all the actions taken in such a short period will be considerable. These are problems for another day, however. The financial system is in disarray, and the economy’s struggles are intensifying. Policymakers are working hard to quell the panic and shore up the economy; but considering the magnitude of the crisis and the continuing risks, policymakers must be aggressive. Whether from a natural disaster, a terrorist attack, or a financial calamity, crises end only with overwhelming government action.

Extending unemployment insurance and expanding food stamps are the most effective ways to prime the economy’s pump. A $1 increase in UI benefits generates an estimated $1.64 in near-term GDP; increasing food stamp payments by $1 boosts GDP by $1.73 (see table). People who receive these benefits are very hard-pressed and will spend any financial aid they receive within a few weeks. These programs are also already operating, and a benefit increase can be quickly delivered to recipients.

Increasing food stamp benefits also has the added benefit of helping many low-income households ineligible for UI, such as part-time workers. It also helps those who do not pay income tax and thus will not receive a rebate.

Fiscal Economic Bang for the Buck
One year $ change in real GDP for a given $ increase in spending
$1.73 - Temporary Increase in Food Stamps
$1.64 - Extending Unemployment Insurance Benefits
$1.59 - Increased Infrastructure Spending
$1.36 - General Aid to State Governments

Matthew Platte
February 20, 2009 at 10:36PM

The preview action seems to substitute the submitter’s carefully-worded title with the first part of the comment.

Which was, “Don’t just take my word for it.” 😉

Neal
February 20, 2009 at 11:32PM

And where General Aid to State Government lacks in increasing GDP, it helps prevent further declines precipitated by state cutbacks, which made Nelson’s “stimulative” revisions to the bill that much more frustrating. Three of those four were victims of the compromise, weren’t they?

Mr. T
February 21, 2009 at 1:54AM

I definitely support the spending on repairing existing infrastructure. Considerations about funding Antelope Valley aside, the work that has been done in revamping some of the routes in the downtown/campus area have really done good things for traffic flow and atmosphere in the area.

Eric
February 21, 2009 at 8:36PM

Since we have the stimulus money, I’d say go ahead and put it to best use. At this point, I think it would be wise to fix up our streets in established neighborhoods. In the next decade, Lincoln needs to concentrate its growth on downtown and keeping existing areas of the city well preserved. If we play our cards right with the Antelope Valley Project, we could attract well-paying businesses that are looking for an affordable location that has perks of both a larger city and a smaller town. Lincoln currently has both of that. Building further out and neglecting existing areas will take us away from that goal.

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