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Monday, October 27, 2014

Paul Krugman: Ideology and Investment

What's really behind the GOP's opposition to infrastructure investment?:

Ideology and Investment, by Paul Krugman, Commentary, NY Times: America used to be a country that built for the future. Sometimes the government built directly: Public projects, from the Erie Canal to the Interstate Highway System, provided the backbone for economic growth. Sometimes it provided incentives to the private sector, like land grants to spur railroad construction. Either way, there was broad support for spending that would make us richer.
But nowadays we simply won’t invest, even when the need is obvious and the timing couldn’t be better. And don’t tell me that the problem is “political dysfunction” or some other weasel phrase that diffuses the blame. Our inability to invest doesn’t reflect something wrong with “Washington”; it reflects the destructive ideology that has taken over the Republican Party.
Some background: More than seven years have passed since the housing bubble burst, and ever since, America has been awash in savings ... with nowhere to go. ...
There’s an obvious policy response to this situation: public investment. We have huge infrastructure needs,... and the federal government can borrow incredibly cheaply... So borrowing to build roads, repair sewers and more seems like a no-brainer. But what has actually happened is the reverse. After briefly rising after the Obama stimulus went into effect, public construction spending has plunged. ...
Yet this didn’t have to happen. ... But once the G.O.P. took control of the House, any chance of ... money for infrastructure vanished. Once in a while Republicans would talk about wanting to spend more, but they blocked every Obama administration initiative.
And it’s all about ideology, an overwhelming hostility to government spending of any kind. This hostility began as an attack on social programs, especially those that aid the poor, but over time it has broadened into opposition to any kind of spending, no matter how necessary and no matter what the state of the economy. ... Never mind the obvious point that the private sector doesn’t and won’t supply most kinds of infrastructure, from local roads to sewer systems; such distinctions have been lost amid the chants of private sector good, government bad.
And the result, as I said, is that America has turned its back on its own history. We need public investment; at a time of very low interest rates, we could easily afford it. But build we won’t.

    Posted by on Monday, October 27, 2014 at 12:24 AM in Economics, Fiscal Policy, Politics | Permalink  Comments (101)


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