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Alexander William Salter
18. April 20, 2021, 6:00 p.m. Eastern Time.
Construction workers replace and upgrade a portion of a bridge in Miami, 13. April.
Photo:
Joe Redl/Getty Images
President Biden’s $2.3 trillion infrastructure plan has excited many economists, who see it as a return to old school Keynesian allocation. Fiscal policy is back, Nobel laureates.
Joe Stiglitz.
happy. This will create more demand and give people more confidence to invest. But economic growth, as even Mr Stiglitz might agree, is the best way to fight poverty – it comes down to supply, not demand. And Biden’s plan could stifle the innovation that drives it.
Whether public or private spending, they do not lead to growth. Mr Stiglitz and his supporters have got it all wrong: Consumption – downstream of production. Growth is about increasing the supply of goods over time; you can’t spend if no goods have been produced. As technology and manufacturing processes improve, so does production. Such an improvement requires saving and investing rather than consuming.
The initial details of Mr. Biden’s infrastructure plan are not promising when it comes to encouraging savings and investment. The bill would significantly increase taxes on businesses, which would also affect households and investors. The president and his team deserve praise for their effort to fund the plan. But higher taxes, especially on businesses, weaken the incentive to invest. The result is a loss of growth.
Sir, I want to thank you for your support. Biden’s plan also drains many resources from applications that could improve productivity. Improved roads and bridges can increase production, and thus growth, by facilitating the movement of labor and goods throughout the country. But this is the minority of expenditures in the bill; the other expenditures would have the opposite effect. Adopt a proposal to invest in the development of clean energy and electric vehicle charging stations. It’s a pretty elastic interpretation of infrastructure, and it’s rich too.
The government does not know how to choose investments. President Obama has promised smart green projects. What we got was the Solyndra debacle, which gobbled up hundreds of millions of taxpayer dollars but yielded little. Those dollars are resources that could have been invested elsewhere. What Mr. Biden is suggesting is that this amounts to a lot of Solyndras. This is a huge amount of productive capital being wasted.
Sir, I want to thank you for your support. Biden positions himself as the founder of the New Deal and the Great Society, but the politicization of investment is nothing new or great. Policymakers have tried many times, and it is clear that all the resources in the world will not increase productivity if they are misspent. More efficient producers, no partisan spending, create economic prosperity. The president’s plans will eat a lot, but will only cause frustration.
Dr. Salter is an associate professor of economics in the Rawls College of Business at Texas Tech University and a member of the Texas Tech Free Market Institute.
Main Street: Pete Buttigieg’s definition of infrastructure is not what Americans think it is. Images : Bloomberg/AP/Getty Images Compiled: Mark Kelly
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Released in print at 19. April 2021.
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