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The Road to Prosperity
Author: BobR
Date: 10/06/2010 12:08:15
Back at the height of the Great Depression, FDR created a public works program to help put Americans back to work. Eisenhower did the same, creating the interstate system in post-war America. The fruit of their labors was a greatly enhanced national infrastructure that we still enjoy today. However, along the way we didn't maintain much of it, and it's become more and more decrepit. With unemployment still high, it seems like a perfect time to invest in our infrastructure again. The problem, of course, is paying for it, or at least justifying a budget deficit to pay for it. It can be done without increasing the deficit, if people are willing to look beyond the "conventional wisdom".
One major justification for infrastructure investment is that our prosperity depends on it. Without a reliable electric grid, effective water and sewage systems, and transportation systems, we will lag behind other developed (and even under-developed) countries in the world:
With record budget deficits, it will be difficult to find dedicated federal funding for this. One silver lining in this cloud of debt is a new report indicating that the TARP program - rather than costing taxpayers $700B, will actually cost closer to $30B. That means that over $600B could be spent on infrastructure improvements and updates without adjusting the projected budget deficit.
But of course it doesn't work like that. Money's are allocated for certain budget line items - they can't just be moved from one to the other. It might actually be necessary to raise taxes. Nobody will support that, even though they should. Some of our most prosperous times in our country's history were because of high taxes, NOT in spite of them:
(NOTE: The article is a VERY good read - I highly recommend you read the whole thing; it's not very long).
So higher taxes will force businesses to reinvest in themselves, which is good for unemployment, and thus good for the economy (and will reduce the deficit). Higher taxes will allow us to bring our infrastructure into the 21st century, allowing us to maintain our presence on the global market. As WP columnist Ezra Klein notes: infrastructure is the best deal in this economy.
We used to build things in America - now's the time to invest and rebuild ourselves. It's not socialism - it's patriotic. We just have to be willing to pay for it - upfront.
One major justification for infrastructure investment is that our prosperity depends on it. Without a reliable electric grid, effective water and sewage systems, and transportation systems, we will lag behind other developed (and even under-developed) countries in the world:
The United States is saddled with a rapidly decaying and woefully underfunded transportation system that will undermine its status in the global economy unless Congress and the public embrace innovative reforms, a bipartisan panel of experts concludes in a report released Monday.
U.S. investment in preservation and development of transportation infrastructure lags so far behind that of China, Russia and European nations that it will lead to "a steady erosion of the social and economic foundations for American prosperity in the long run."
That is a central conclusion in a report issued on behalf of about 80 transportation experts who met for three days in September 2009 at the University of Virginia. Few of their conclusions were groundbreaking, but the weight of their credentials lends gravity to their findings...
With record budget deficits, it will be difficult to find dedicated federal funding for this. One silver lining in this cloud of debt is a new report indicating that the TARP program - rather than costing taxpayers $700B, will actually cost closer to $30B. That means that over $600B could be spent on infrastructure improvements and updates without adjusting the projected budget deficit.
But of course it doesn't work like that. Money's are allocated for certain budget line items - they can't just be moved from one to the other. It might actually be necessary to raise taxes. Nobody will support that, even though they should. Some of our most prosperous times in our country's history were because of high taxes, NOT in spite of them:
High taxes create an incentive to reinvest profits into long-term growth.
With high taxes, the only way to retain the bulk of the wealth created by a business is by reinvesting it in the business -- in plants, equipment, staff, research and development, new products and all the rest. The higher taxes are (and from 1940 to 1964 the top rates were around 90 percent), the more this is true. This creates a bias toward long-term planning.
If a business is planning for the long term, it wants a happy, stable work force. It becomes worthwhile to pay good wages and offer decent benefits.
Low taxes create an incentive for profit taking.
It is easy to confuse profitability with wealth creation. They are not the same.
President Eisenhower built the interstate highway system. There is no doubt that this gave the country an asset of great value, one that was very productive. It created great "wealth." But, aside from the construction companies that contracted the work, it was not profitable.
Selling subprime mortgages, trading in derivatives, packaging mortgage-backed securities and "flipping" condos were all very profitable but did not create wealth.
The theory is that if the rich can keep their money, they will invest in businesses that create jobs, more businesses, more tax revenue and greater "wealth" for the nation.
[...]
Proponents of tax cuts take the position that taxes take money out of the economy. That's flat out not true.
Governments don't keep the money they collect; they spend it. It goes right back in. It just takes a different route. It goes to different places...
(NOTE: The article is a VERY good read - I highly recommend you read the whole thing; it's not very long).
So higher taxes will force businesses to reinvest in themselves, which is good for unemployment, and thus good for the economy (and will reduce the deficit). Higher taxes will allow us to bring our infrastructure into the 21st century, allowing us to maintain our presence on the global market. As WP columnist Ezra Klein notes: infrastructure is the best deal in this economy.
We used to build things in America - now's the time to invest and rebuild ourselves. It's not socialism - it's patriotic. We just have to be willing to pay for it - upfront.
