You don't need to be a Keynesian to see a lot of potential government expenditures for which the benefits would far outweight the costs

Imagine you're in debt well past your eyebrows and then lose your job.  The only thing you can do to pay down your debt is collect aluminum cans and recyclable plastic bottles from trash bins and redeem them for pennies.  You'll never repay your debt at this rate, but you dutifully send your pennies to your lenders and live off food stamps.

Now suppose there's another alternative.  A high paying job across town is available for you, but to accept this job requires that you buy a car for the commute, a car that you can only buy by going deeper into debt.   Lenders trust you deeply and are not only willing to lend to you but are willing to lend to you cheaply, at a near-zero rate of interest.  And the job pays well enough to pay off both new car loan debt and contribute significantly more to paying down your current debt.

Should you take out the loan, buy the car and take the job across town?

Obviously, yes.  But some would claim that you're already deep into debt, so you should stop digging.

This, in fact, is the world we live in:

Ezra Klein
People say that the government should be run more like a business. So imagine you are CEO of the government. Your bridges are crumbling. Your schools are falling apart. Your air traffic control system doesn't even use GPS. The Society of Civil Engineers gave your infrastructure a D grade and estimated that you need to make more than $2 trillion in repairs and upgrades.

Sorry, chief. No one said being CEO was easy.

But there's good news, too. Because of the recession, construction materials are cheap. So, too, is the labor. And your borrowing costs? They've never been lower. That means a dollar of investment today will go much further than it would have five years ago -- or is likely to go five years from now. So what do you do?

If you're thinking like a CEO, the answer is easy: You invest. You get it done. Happily, that's what the administration is proposing to do. But its plan is too modest. The $50 billion bump in infrastructure spending it has proposed is only for surface transportation. The infrastructure bank envisioned in the proposal is also likely to be limited to transportation. And as for our water systems, our schools, our levees? This is not a time for half-measures. It's a rare opportunity to do what we need to do and to save money doing it.
Ezra certainly has a point.  But where his emphasis is on infrastructure, even more I lament disinvestiment in human capital, which is the larger public good.  Private returns to education are large and have increased over time.   The social returns to education are even larger.  And government borrowing costs are very low.  Economically speaking, it seems a bad time for furlough Fridays in primary schools, where educational returns are the greatest.

Furthermore, this kind of spending would likely spur growth, including tax revenue growth, in both the short run [if you do have a Keynesian bone], through positive feedback and employment of idle capacity, and in the long run with greater productivity, all of which could ultimately help shrink the deficit.

This isn't complicated.  So why are so few pointing out the obvious?


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