« 'Why are Unions Unpopular?' | Main | Links for 07-07-2013 »

Saturday, July 06, 2013

'Austerity Won’t Work if the Roof Is Leaking'

Robert Frank:

Austerity Won’t Work if the Roof Is Leaking, by robert Frank, Commentary, NY Times: I Recently spent a week in Berlin, where the entire city seemed under construction. In every direction, cranes and other heavy equipment dominated the landscape. Although many projects are in the private sector, innumerable others — including bridge and highway repairs, new subway stations and other infrastructure work — are financed by taxpayers.
But wait. Hasn’t Germany been one of the most outspoken advocates of fiscal austerity after the financial crisis? Yes... But they also understand the distinction between consumption and investment. By borrowing, they’ve made investments whose future benefits will far outweigh repayment costs. There’s nothing foolhardy about that. ...
The Germans didn’t become bogged down in debate over stimulus policy, and they didn’t explicitly portray their infrastructure push as stimulus. But that didn’t hamper their strategy’s remarkable effectiveness at putting people to work. ...
Now austerity backers urge — preposterously — that infrastructure repairs be postponed until government budgets are in balance. But would they also tell an indebted family to postpone fixing a leaky roof until it paid off all its debts? Not only would the repair grow more costly with the delay, but the water damage would mount in the interim. ... The logic is the same for infrastructure.
Austerity advocates, who have been wrong at virtually every turn, are unlikely to change their minds about stimulus policy. But... Our best available option, by far, is to rebuild our tattered infrastructure at fire-sale prices. If the austerity crowd disagrees, it should explain why in plain English.

    Posted by on Saturday, July 6, 2013 at 02:14 PM in Economics, Fiscal Policy | Permalink  Comments (30)

          


    Comments

    Feed You can follow this conversation by subscribing to the comment feed for this post.