The Unintended Consequences Of Government Programs

The administration is now wanting to roll out another of its supposed jobs programs using infrastructure as the excuse. The latest $50 billion payoff to unions and government employees is not only not going to provide any jobs in the short run, but it will just add to the deficit. More importantly it will hurt commercial real estate development. The $50 billion is available inside the existing so called stimulus bill by just moving out some of the waste that was nothing more than pork used by Pelosi to reward Congressmen who voted for healthcare and other of her pet programs. There is way more than $50 billion of unspent funds allocated to those things. Second, the original stimulus was billed as shovel ready programs. Of course they were not shovel ready, but if the statement by Obama and Pelosi were true then there would be another $50 billion of “shovel ready” projects just awaiting funding.

Here is the problem even if there were programs ready to go. While the country does badly need a major expenditure on infrastructure upgrade including roads, rail, airport and water, just throwing money around is not the answer. There seems to be no real strategic plan by the federal government to either prioritize, nor to integrate the projects since many go across state lines. So instead of something resembling the interstate highway program of the fifties, which did great things for the country, we get a lot of little local fix it spending by Congressmen in their district regardless of the bigger picture.

The other problem which will impact private sector development for many years is the tremendous flood of cash going to government projects over the next 5 years will drive up construction costs and materials costs for concrete, steel, and other basic construction materials. It will also eat up labor in the trades. This will start to make an impact in 2011 and after just as the economy is hopefully picking up some tailwind and pushing up costs.

Like everything else there is always the trade off. The country badly needs the infrastructure to be improved in order to keep transport and other costs down, but the other side is the construction cost increases that will inevitably be driven up by these spending programs.

What we really need is a strategic plan for national infrastructure and possibly a government operated funding plan which could issue bonds similar to the savings bonds of World War II era. It needs to be independent of Congress-similar to the Fed to the extent possible. This way if the agency were run by professional planners and construction experts, and transport experts, instead of by Pelosi type politicians, then money could get allocated in a systematic and integrated manner and the end result would hopefully be a series of major projects that would create new private sector opportunities for transit oriented development, and costs could be better controlled. Capital costs would be lower and instead of being deficit producing as we now have under Obama, it could potentially be partially self funded through tolls, fares or other user charges. Funding could come from world bond markets instead of taxpayers. It would also potentially provide a place for individuals to safely park some portion of their savings, just as was done in the forties and fifties.

I am sure this program has no chance since it would mean Washington could not control the spending and that is anathema to those people. If they can’t payoff the people who contribute to their campaign, they might actually have raise money on their record and that would mean they would have no money.

Instant Insights /

The Unintended Consequences Of Government Programs

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