Is Larry Summers an Infrastructure Spending Skeptic?
by Tom Bozzo
whose Facebook status currently reads, “Tom is feeling an unaccustomed sense of not-shame, at least pending some action on the economics, energy/environment, and transportation fronts.”
Meanwhile, over at FDL, they find Rep. Peter DeFazio saying:
I think [Obama]’s ill-advised by Larry Summers.[*] Larry Summers hates infrastructure.
And some of these other economists — they were very much part of creating the problem, now they’re going to solve the problem? And they don’t like infrastructure. So they want to have a consumer driven recovery.
Others in the econoblogiverse ought to know (or at least offer a well-educated guess) as to whether DeFazio is right about Summers. Paging Prof. DeLong? A little more rant below the fold.
Whatever the case with Summers, the sentiments DeFazio mentions are kicking around notionally respectable provinces of the profession. E.g. Plus it’s easy to find rail- and transit-phobic op-eds arguing that because 90% of commuters drive even the transit funding under the SAFETEA-LU regime is too generous.
The underlying problem is that helicoptering money to “consumers” by way of tax cuts or lump-sum grants a la last year’s stimulus payments does little or nothing to help satisfy demands that are latent due to incomplete markets. Give me $100 and I can drive to Chicago for the day, not insignificantly because past public infrastructure spending built the roads from here to there. Give everyone in Madison $100 and it still does sod all for extending the Amtrak Hiawatha service, seeing as the city was cut off from such passenger rail network as still exists in the upper Midwest and reconnecting it requires a substantial investment. Maybe in libertarian fantasyland, there are no such things as collective action problems, but elsewhere overcoming them may be considered to be a useful function of government.
I’ve argued, and will say again, that it isn’t necessarily desirable to rely too heavily on the stimulus for rail and transit expansion, partly because useful large expenditures a la CA and Midwest high-speed rail aren’t necessarily very good as short-term stimulus [**] and partly because it may be politically undesirable to foster the impression that the expenditures are only worthwhile when the economy is in extremis. (Plugging holes blown in transit agencies budgets is another matter entirely.) So I’m agnostic pending information on what the surface transportation bill to follow SAFETEA-LU will look like. If rail and transit get short shrift there, then I’ll be putting my analyst on danger money (baby).
[*] At least I wouldn’t expect (a) that Summers’s advisory role is telling President Obama what he wants to hear under pain of banishment, or that (b) the advisory role implies that the Summers view of anything is necessarily the Obama view.
[**] But committing funds to be spent in the near if not immediate future may nevertheless signal to firms that it’s safe to expand or at least not contract.