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Gabby101's avatar

Why don't we create jobs through infrastructure improvement projects (like during the Great Depression)

Asked by Gabby101 (2433 points ) September 8th, 2011

I know some money is going for this type of work, but with all the recent talk about how bad our roads, dams and bridges have become, why not stimulate the economy by spending money on these types of works instead of giving companies tax breaks, etc.? Does anyone know why these projects aren’t used as much as during the Great Depression? Just curious.

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11 Answers

marinelife's avatar

That is a part of the President’s plan.

Jaxk's avatar

It’s a good question and I know many people that would support that type of program. The problem is they really don’t work to stimulate the economy. During the ‘30s FDR did a lot of this and the infrastructure that was built was good stuff. Unfortunately after 8 years of these projects unemployment in 1939 was still 19%. These projects take a long time to get started, are very expensive, don’t create enough jobs to move the economy, and are not self sustaining.

When private enterprise invests money, it may go to new products which have an ongoing revenue stream. Or it may go to cost savings which will in turn become and ongoing cost saving. Or it could go to any number of things to increase the customer base which results in ongoing revenue. In other words self sustaining. The investment becomes a long term economic boost. Government projects aren’t like that. Build a road but when it’s done there is no ongoing revenue or cost savings and the workers are laid off when it’s over. The added benefit of government spending only lasts as long as the spending. And if the last one was any gauge, each job costs several hundred thousand dollars. Not very productive.

Aethelflaed's avatar

Because it’s seen as “big government”, and there’s a huge backlash against such big government.

wundayatta's avatar

I think @Jaxk argument would be on point if he was looking at military spending. There is really no purpose in military spending. It can’t be recycled. It has the lowest job multipier rate of any kind of spending there is. On the other hand, he points at road building spending and completely ignores the benefit to the overall economy that occurs when goods and services can be delivered more efficiently.

Just about all federal infrastructure building projects are of this nature. They are subsidies for private business, not revenue generators on their own. You have to wonder why businesses all cluster near the major exits to roadways or to train stations or airports or other major transportation routes. Or do you? Without public infrastructure, the economy would suffer horribly.

In fact, one has to wonder the economy’s current woes aren’t due to a lack of federal spending on infrastructure projects in the last decade or so since the Shrub got elected. We know he was willing to spend a lot on Defense and Homeland Security, but we already know that is the least job producing work there is. Our misplaced priorities has done more to give the terrorists an ongoing victory than anything they managed to do themselves.

Anyway, there will be no new deal because the Republicans have selective vision and let ideology prevail before scientific data. Hell, they don’t even believe in science. I wonder where they think technological advances come from. Never mind.

There will be no change in Washington, or if there is change, it will be for the worse. If the Republicans get in, we can expect a recession that lasts and lasts. Scary, eh?

woodcutter's avatar

It’s the TP ers. They don’t want to spend any money. Until a bridge falls on them and then they will come up with a need in a round about way. But disaster has to happen involving them. Do bad things ever happen in a typical TP er’s life ever, or do these people have the most favored “god’s children’s” club benefits? Something has to hurt them. Oh yeah I forgot, it’s taxes.

Qingu's avatar

Naturally @Jaxk doesn’t mention how the unemployment rate changed through the great depression.

19% is obviously still high, but at the peak of the great depression in 1933 it was 25%.

Also—more importantly I’d argue—FDR’s spending actually drove the rate from 25% to a low (relative) of 14% in 1937. Then the government pulled back on spending… and unemployment rose back to 19% in 1939.

in 1929: 3.2%
in 1930: 8.9%
in 1931: 16.3%
in 1932: 24.1%
in 1933: 24.9%
in 1934: 21.7%
in 1935: 20.1%
in 1936: 16.9%
in 1937: 14.3%
in 1938: 19.0%
in 1939: 17.2%

The details imply the exact opposite of what @Jaxk claims.

Qingu's avatar

@gabby94805, they’re not used as much as in the Great Depression because of Republican obstructionism.

Republicans were just as opposed to government spending during the Great Depression as they are now. But when FDR got elected the Dems controlled like 67 senate seats! So R’s couldn’t even filibuster.

Today Dems controled 60 at most, then 59 almost immediately after Obama got elected… and some Dems are conservative (or controlled by corporate conservative interests). And the conservatives have succeeded in blocking any attempts to spend much money to revive the economy. Even the stimulus had to be watered down; a huge chunk of it was tax cuts.

Jaxk's avatar

@Qingu

There are many arguments that dispute your claim but let me take your point at face value. If, as you claim, the rise in unemployment was due to a reduction in spending, then that would imply spending has no permanent effect. In other words the effect only lasts as long as the spending continues. A point I think I made above. It is not self sustaining.

Qingu's avatar

@Jaxk, what are you talking about? When government spending was sustained, it did stimulate the economy.

It’s not self-sustaining because the choice of whether to sustain it is a political choice—one which people like you vociferously object to.

Jaxk's avatar

@Qingu

Stimulus is supposed to be a shot in the arm. Something to get the economy going. If you have to continue the shots it is an addiction not stimulus. We can’t continue the deficit spending at rates of $trillion+ forever. As we can see by the spending in the ‘30s spending rose under Hoover and continued to rise under FDR. We spent more and more each year from 1929 til 1937, took a breath and then began deficit spending again. We tried spending our way out of the depression while the unemployment rate was going up and while it was going down. We could never spend enough to fix the problem. Because deficit spending doesn’t fix anything. It only masks the symptoms.

The decision to lower the deficit is a financial one. With $15 trillion in debt going to $25 by the end of the decade, it’s unsustainable. Even Obama and most Democrats recognise that.

Qingu's avatar

@Jaxk I don’t think infrastructure spending should be a “shot in the arm” one-off. We should do much more infrastructure spending; and we should keep an “infrastructure bank” in reserve with projects pre-approved in case of recession so we can quickly put idle labor to work.

Also, you have repeatedly argued that tax cuts can increase revenue because they stimulate economic activity. If spending also stimulates economic activity it is completely disengenous to whine about the deficit at this point.

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