It’s way too soon to comment on the evolving bailout of the Big Three automakers, but it’s right to hope it will work. Those of us who oppose, on principle, such a vast rescue don’t want any of these companies to fail, but rather think it would be far more effective for investors to wager their own money on this project than for the whole domestic industry to be put under the authority of whomever happens to have earned seats on the relevant Congressional committees.
However, the economic atmosphere is so filled with tension and confusion that people seem to be reassured by interventionism. In fact, there seems to be a widespread belief that the forthcoming New New Deal is what’s needed to jump start the economy.
The notion that, as a nation, we need more “infrastructure” spending is a sort of myth that defies examination. You see, "infrastructure” is defined as whatever you think needs more investor support, so government money is needed because the free market hasn't got behind it (yet!) If roads and bridges need to be maintained better or rebuilt, that’s infrastructure. But, then, why haven't these projects been properly funded all along?
If you’re a believer in wind farms as a replacement for oil and natural gas, that’s an infrastructure project, too. Never mind if it's feasible or sensible. All sorts of “green” technologies that need backing are infrastructure, naturally. And, if you think your Web or wireless service isn't good enough, that's infrastructure, too.
The standard comparisons for all sorts of “infrastructure” dreams is the interstate highway system begun in the 1950s, or the public buildings and hydroelectric projects started in the 1930s. Few people ever mention the federal funding debacles, like Boston's Central Artery/Tunnel project (the so-called Big Dig.)
The first fallacy is found in the fact that the federal government spends huge amounts of money all the time, so it’s hard to understand how scaling up the amount of federal disbursements is going to reignite the vast U.S. economy. In one bill alone, the 2005 federal transportation bill, the government laid out $286.4 billion. "What's left to fund?" you might wonder. Moreover, the past year has seen repeated examples of federal stimulus efforts and interventions, to "jump start" the economy, or to "calm the markets." We're still waiting for that, even though we're hundreds of billions of dollars poorer while we wait.
Another aspect of the myth is that it will be very simple for the feds to greenlight thousands of worthy projects, which will open the door to prosperity for all. More realistically, it ought to be obvious that all those monies could take years to become fully available. And, projects will start, and stop, and go back to the drawing board throughout these efforts.
On the other hand, it should be obvious that those federal dollars will quickly find their way to many of the same approved companies and organizations who have long ago established themselves as federal contractors and suppliers. And, that the pay-offs will happen before the “investments.”
Another aspect of the myth that ought to be reasonably obvious is that any new federal funds will be tied up with new thickets of regulatory and legal burdens. If this is the same approach that will be used to revive the domestic auto industry, the notion of an auto-industry reorganization is the next myth that needs to be debunked.
We operate with a lot of effective myths in this country, and in this world. But, the notion that a more federal spending can alone guide or inspire financial growth is a dangerous delusion.