According to the American Society of Civilo Engineers the country’s infrastrucutre is in poor shape (granted they want to make iot seem bad to make business). They give out overall infrastructure a grade of D.
It just seems to me that if we are going to have an almost trillion dollar stimulus package, infrastructure is the way to go.
Freakonomics has a nice bit on this:
Economists have not been studying Fiscal policy - they have focused on monetary policy instead. That could be part of the problem when deciding what to do, and what the effect will be.
At the risk of getting in over my head (again), I’ll attempt to summarize the theory you are missing in one word: Incentive.
If the government fucks up and loses all their (our) money, they just blame someone else and demand more cash. Private businesess (except for banks and automobile manufacturers?) fuck up and their kids’ college funds, their life savings, houses, cars – potentially everything – are gone. While I’m sure the fine men and women in Congress mean well… it is really no big deal (to them) if they fail.
You’re kidding, right? The people who make policy in business, the CEOs, know they have nice severance plans so that if they fuck up they get fired and get multimillion dollar parting gifts.
But that is not the real cause of the problem. Legislators actually have to face election, and so can lose their jobs quickly if they screw up. If you doubt me, take a look at the Republican ranks. In business you are driven by competition and increasing profits. That works fine in most cases, but if a competitor takes a risk, and gets a bigger payout, you need to take even a bigger one, and so on and on until the whole thing collapses. Indeed all that stuff gets screwed up - but for the workers. Even if by some miracle the bosses get kicked out without a nice package, they’ve made a bundle in the past on playing this dangerous game.
There certainly doesn’t seem to be a lot of evidence that this caution you speak of was driving anyone. No, if you were a Countryside mortgage broker wondering about whether you should push a loan a client couldn’t afford, you got told to do it or be replaced by someone who did. There was an interview on Marketplace with a high exec from Countryside, who still thinks they did people favors by helping them buy homes and can’t understand why people are mad at them.
Bubbles don’t happen because people are evil or even stupid - they happen because the current rules encourage them, and because someone outside the game - the government, won’t step in to keep things under control.
Sure, because as we can all see after this election cycle, the Republicans don’t mind even a tiny little bit being voted out of power for their failures. 
CEOs make up such a minuscule part of the private sector that this statement is ridiculous. I don’t think anybody has ever argued (except for CEO applicants) that CEOs deserve to make $27 million for running a major corporation into the ground. That screws up the incentives, too. When it happens it is a failure on the part of that company’s leadership and not on the private sector as a whole.
The rules that encouraged the bubble were set by the government. And the government is most definitely “in the game”.
Incumbents tend to be voted out when the economy goes bad, otherwise they tend to stay in office. It doesn’t really matter what they do in office outside of flagrant corruption. Politicians know this, so when the economy goes south they bust their balls to look like they’re doing something about it, so maybe they’ll be one of the lucky incumbents to keep their job. It’s a popularity contest. I mean, has the government every really fixed the economy? Ever? I’m not talking about the Fed, here, I’m talking about elected officials. Have you ever heard of the ‘Volcker Recession’? Sometimes the pill is pretty tough to swallow. Elected officials just want the good times to roll on until the next election, consequences be damned.
Well I agree that monetary incentives are generally stronger in the private sector. But that doesn’t necessarily mean incentives are better, just different. There are lots of non-monetary incentives in the public sectors. Politicians who mess up may lose election.Bureaucrats who mess up may not get a promotion or in an extreme case get fired. There is also a lot more media scrutiny of the public sector. Weaker monetary incentives mean less incentive to take crazy risks like the financial “innovations” that have virtually destroyed the entire banking industry in the US.
And private-sector incentive are very skewed especially for CEO’s of big corporations. Chuck Prince probably made decisions that lost his shareholders hundreds of billions of dollars and walked away with a 67 million dollar severance package. Unless they commit a crime, CEO’s don’t have to worry about their college funds and life savings at all.
Anyway all this is largely irrelevant to the main point which is about public sector producing goods which the private sector isn’t producing enough of for various reasons like , as I mentioned, pre-school education for poor children. Even if you believe that the private sector is more efficient in general than the public sector, that doesn’t tell you anything about how much to fund public goods which the private sector isn’t producing.
It has to be bi-partisan, because its not going to work. We will not return to our previous level of “prosperity”, because it didn’t really exist, we had credit as our primary export. The stimulus is aimed at preventing a catastrophe, not at an economic recovery, if “recovery” means a return to status quo ante.
Each party must have cover, because by next election time, there is no chance, none whatsoever, that all will be peachy-dandy again. Therefore, Pubbies must be in a position to blame spending, Dems in a position to blame tax cuts.
And why are the Pubbies so red, rough and sore? Seeing rabid rats? Because they sent someone to sidle up to Obama and whisper “You know, we should let bygones be bygones, let dead dogs lie, no reason to dredge up all this stuff, let’s just move along…”
And Obama started in talking “transparency” and “opening files” and “accountability”, stuff like that there. And the Pubbies sphincters slammed shut with a click! you could hear across the room.
Politicizing Justice? Torture? Spying, lying, lying about spying? The odd and sundry scandal? Well, that’s just Obama trying to distract the people from the terrible mess he made of the economy…
Bet me.
You were talking about people not screwing up because their company will fail. That doesn’t involve your average worker - only the top brass. I agree that it is just as silly to talk about the private sector as a monolith as it is to talk about the government the same way. But, unchecked, the private sector naturally oscillates into bad territory. Government too - that’s why we need separation of powers, despite what Cheney thinks.
Oh? The government set rules encouraging Countrywide to write crap mortgages. They weren’t covered by CRA, by the way, so you don’t have to blame that. The dot com bubble had nothing to do with the government, neither did the tulip bubble. Greenspan should have done things to let the air out of this one early. If that is the rule you mean, sure.
I lived through that recession. In fact, I had to finance the buyer of my house at 12% interest before it, since mortgage rates were even higher. Your cite credits Volcker with fixing stagflation, which I think is correct. That mess took strong medicine, which he, not being elected, was able to administer. I don’t think anyone is claiming that serious economic problems can be solved with pixie dust. It will suck to spend a trillion bucks to fix the fix Bush got us into, but it has to be done.
These guys make more than 27 million. The new level of compensation puts corporate executives along with investment bankers in a new class of wealth. It is a small group, but these are the people who own most of the capital.
Executives negotiate billions in stock options, millions in pensions, hundreds of millions in salary, and plenty of perks. Corporations even pay for the CEO’s financial planning. Tax policy designed to protect personal wealth has allowed CEOs to become richer.
William McGuire of United Health Care left with 1.8 billion in stock options, 5 million annual pension, and 125 million salary. Hedge fund manager, James Simmons, made 1.7 billion in 2006. Jack Welch retired from GE with 250 billion in stock, 9 million annual retirement, and perks worth millions, including unlimited personal use of the Boeing 737.
Corporate control fraud has become a regular saga. Everyone on Wall Street avoids or evades taxes. Corruption is almost normal behavior and Congress encourages it with policy and inaction. Ultimately, it is fraud and reckless behavior that will undermine American Capitalism.
http://www.chron.com/disp/story.mpl/business/steffy/4318193.html
http://money.cnn.com/2002/09/16/news/companies/welch_wsj/
It doesn’t have bi-partisan support because the extremists want it to fail.
It could work if Americans were willing to think outside the box and take a chance on a completely different economic approach. Unless Obama is bold and the money is also used for sweeping reform, it seems pointless.
I am not extremely optimistic.
One of Keynes’s most clever insights was to narrow the scope of his study to an economy in crisis regardless of how it got into that situation. The economics of stimulus is not dependent on what caused the downturn.
This has been pointed out to you at least two times before this thread. Lantern has already explained the mechanism in thread, but I’m repeating it because your arguments are like a bad idea jack-in-the-box. No matter how many times we put that ugly mug away where it belongs, it jumps out again somewhere else. So for the third (fourth? fifth?) time: the sort of recession we’re in doesn’t affect the economics of stimulus.
This is not an argument against stimulus. It’s an argument against using tax cuts for stimulus.
Infrastructure production essentially has a minimum multiplier of 1.0. The money is spent at least once. After the money is received, it might disappear into bank vaults, but it will do some good one time. Tax cuts could theoretically have a minimum multiplier of 0.0. Just give away money, and you risk it disappearing in the financial black hole without ever having bought a single thing. Tax breaks for consumption are a little better, but there’s no guarantee of how many people will bite, so again, they’re less reliable.
Thank you for pointing out this argument in favor of infrastructure spending compared to tax cuts. I still think tax cuts should be part of the plan, since they’re quicker and can be a good supplement, but you make an excellent point here that infrastructure is more reliable.
Okay, I understand your frustration here. I’m as guilty as anyone of parroting “NobelNobelNobel”, and it’s hard to resist since he’s the newest winner and even before he won, he was one of the most important liberal voices in America. But it’s right that his arguments should be evaluated on their own merits, so I for one will shut up now about his shiny prize.
Your lack of attentiveness is not a sign that people are ignoring it. It just means you’re willing to criticize others without taking the time to figure out what they’re actually saying.
This topic has been discussed by liberal economists. Debt and interest payments are a valid concern, but I don’t consider them an overriding one. Maybe this is wrong, but I seriously doubt it. We’re not a nation of volcanic rock and fish. We have extensive resources, both natural and manmade, for which demand would likely surge if the prices became favorable. This would be a buffer to dollar demand. I’m not going to claim that you’ll inevitably be proven wrong on this, but I just don’t see the concern here. Regardless of that reasonable disagreement, the debt concern has not been ignored, as your weak throw-everything-and-the-kitchen-sink debate strategy leads you to claim.
This is technically true, but also mostly irrelevant.
I don’t need to say that we should be using every single one of our idle factories. Yes, it is certainly likely that some of them shouldn’t be producing. But a lot of them sure as hell should be, and yet they still aren’t. They’re right there, waiting, and a certain percentage of them would be phenomenally more efficient if they were buzzing with activity instead of providing homes for stray cats. They are a sign that we’re not producing as much as we oughtta.
In addition, these idle resources (not just factories) are the single best defense against all those “distortions” you complain about from government spending. You can’t misallocate what’s not being used in the first place. This does not mean that government spending will be perfect, but it does mean that government spending will be a great improvement on doing nothing. There’s a lot of real production out there that could be made, and isn’t being made, for no good reason.
Some of these “risks” are ass-backwards. The dollar could use a touch of devaluing right now. I mean, hell, the whole problem with traditional monetary policy at present is that the dollar is too strong. We’ve got deflation instead of inflation, and it’s screwing up everything. Bernanke would give up his left lung if he could find a reliable way to inflate our currency. Hyperinflation is not wanted, nor a sudden spike in interest rates, but it would be a godsend if we could reliably shred a moderate amount of the dollar’s value. And since traditional monetary policy has failed, some fiscal oomph is one good way to warm things up.
If I don’t have to read news reports about bridge collapses, then I might believe that there’s not enough work out there. Until that point, I’m going to listen to the engineers and economists who are suggesting that much more should be done.
We’ve got at least one genuine data point from Japan. When they brought the full force of stimulus to bear, it worked. When they stopped doing that, it stopped working. That’s not proof, of course, but neither are all those years of futzing around proof that stimulus doesn’t work. The available evidence indicates that this stuff works if you actually do it, and doesn’t work if you don’t.
I reread it. My rereading confirmed my original statements.
You have not faithfully related the results of the paper. Your statements flatly contradict Romer’s own beliefs.
You claim that the paper demonstrates that tax-cuts are more effective than govt spending. The paper does not compare tax cuts and government spending multipliers.
You claim earlier that the paper suggests a multiplier of 1.4 for govt spending. The paper does not have any data on spending multipliers. It’s a tax paper, not a spending paper.
You have obviously misread the important points of the paper, and funnily enough, your mistakes happen to mirror Greg Mankiw’s extremely closely. Nate Silver already called him out for mischaracterizing Romer’s positions. Mankiw responded with an empty, huffy, I’m-a-professional-economist-and-you’re-not sort of answer. Romer’s colleague at Berkeley, Brad Delong, backed up Silver’s interpretation. Mankiw used a lazy apples-and-oranges comparison. And now you’re here repeating Mankiw’s old errors.
The 1.4 multiplier for government spending cited by Mankiw comes from a different paper. This other bit of research does not have the same controls. You can’t compare two multipliers when the underlying conditions aren’t consistent. It’s like comparing a 22 year old man and a 12 year old girl throwing baseballs, with the man on earth and the girl on the moon. Just because her ball went farther doesn’t mean the girl is stronger.
My cites, which you apparently didn’t read, hashed through these problems. Delong goes on to say that the paper shows that all multipliers are stronger than are traditionally assumed. I’m not quite sure he’s right on that, which is why I added the “sometimes” earlier. More than that, though, my cites established Romer’s actual position (which was also cited earlier in the thread). When it comes to the present stimulus, Romer believes that spending is stronger. Her figures on the current stimulus package are clear: 1.6 for spending, 1.0 for tax decreases.
Naturally, you’re going to stick with the conservatives as they continue low-balling what we need to spend. I don’t have a problem with that. But I do have a problem with the jack-in-the-box wrong answers and other misinterpretations that keep showing up. It’s like somebody poisoned Lake Michigan, and all the freshwater economists have lost their fucking minds. Although in the end, I suppose it’s fine if the Chicago school wants to flush their reputations down the toilet. The Keynesians out there are all well versed in the conservative arguments. Milton Friedman was just too damn smart to ignore. Apparently, his proteges got too caught up in themselves and now they lack the same cross discipline exposure.
Fine by me.
Missed this bit earlier ; CEO’s themselves may be a very small part of the private sector but the decisions they make have a big impact on the rest of the private sector. This is particularly true of CEO’s in the financial sector which collectively allocates capital to the rest of the economy and therefore lies at the heart of the capitalist system.
The larger point about incentives is strong incentives are no good if they are the wrong incentives. A few years ago loan officers were receiving strong incentives to relax appraisal norms for real estate loans. Financial whiz kids were receiving strong incentives to produce complex CDO’s which would hide the risk and producing great trading profits in the short run. These incentives were created by the CEO’s who themselves had strong incentives to run up short-term profits without worrying about the long-run risks. So the market was doing a great job of providing strong incentives and that is a significant reason for the current mess.
Keynes has said that you get a stimulus even if you pay one person to stuff money in a jar and bury it, and pay another to dig it up. If that’s not a broken window fallacy, I don’t know what is.
Look, I understand the logic behind the fiscal multiplier. I also know that there are a lot of very good economists who think the fundamental logic of Keynes’ ‘consumption drives production’ insight is wrong. I lean more to the Austrian school of thought, which says that while you can play games with money to cause temporary spurts of activity, the ultimate long-term wealth of an economy is determined by how efficiently it produces things that people want and need. Temporary stimulus of inefficient or unnecessary production resources will eventually harm the economy. Keynes’ famous rejoinder, “In the long run we are all dead” does not hold much water with me. The long run has a habit of eventually showing up.
Okay, let me approach this from another angle. Now, perhaps my logic is wrong, and you can tell me.
Let’s say the government decides to build a road. So it spends 200 million dollars as a ‘fiscal stimulus’ for road building. Now let’s further assume that in the geographic location where this road needs to be be built, there is no unemployment of road-builders. Where does the fiscal multiplier come in? Let’s assume the money can actually be spent (i.e. the project doesn’t just sit idle for lack of labor). How was that labor achieved? Answer: It was pulled from other companies employing those workers. To attract those employees, let’s say they were paid $50,000 each instead of $45,000 each. So each employee gets an extra $5,000. With a generous Keynesian multiplier of 3, this generates $15,000 in economic output - from a government outlay of $50,000.
But what of the money that is no longer being paid to them? Isn’t that going to go somewhere else? That depends. The company that lost its employees has now taken a loss. They have to make up labor or stretch out their project, all at additional cost. Perhaps that other project simply fails, and a whole lot of THOSE resources are now sitting idle. Or perhaps, because the company is in debt up to its eyeballs, it simply saves the money.
The point is that the Keynesian multiplier assumes that the resource is sitting idle. In some cases that is true. If the stimulus were directed straight at the unemployed, it’s close to being true, assuming they don’t save the money. But in the case of infrastructure, it’s not even close to being true. With a national unemployment rate currently at 7.2%, most of which comes from the service, home construction, and financial industries, a lot of the ‘stimulus’ money will not be directed at idle resources - it will be used to compete with other productive uses.
This would be why the stimulus bill has a condition in it that all infrastructure projects must use American-sourced steel and copper and labor. Not only does this violate various trade agreements the U.S. has around the world, but it will be sure to drive up prices and supply shortfalls and make these projects more inefficient. And let’s all hope that other countries do not respond to this trade aggression by instituting their own tariffs and barriers to American products. Did you factor the cost of a trade war into your stimulus?
Simplistic, theoretical financial models tend to fall apart when applied to the messy real world.
And of course, there’s the long run. Even if you get your multiplier, you’ve now created distortions in the infrastructure, and lowered long-term wealth. For long-term wealth to be increased by infrastructure spending, the infrastructure you build has to generate enough wealth that it can pay for itself, plus interest. There is plenty of evidence that this type of emergency infrastructure spending will not do that.
I can give you specific examples of things I believe will be a complete waste of money in the current bill, or at least be highly likely to cost far more than planned or fail (for example, the 20 billion to be spent on medical records digitization, or the tens of billions to be given to the Dept. of Education).
The onerous rules on federal government spending (Davis-Bacon act, ‘buy American’ rules, diversity rules, etc) make this type of infrastructure even more expensive, and the haphazard, politically-charged, and rapid manner in which these projects are selected is certain to make them especially inefficient.
Plus, there is evidence that infrastructure spending comes with diminishing returns (i.e. it’s more cost-effective to build an interstate highway system or build a power grid than it is to make the existing highway system a little nicer or build a new skating rink).
More later.
Sam, you are absolutely right. If no one was unemployed, we don’t need a stimulus package.
However, it might have escaped you that the unemployment rate is on its way up. Here is a cite from December when the rate was “only” 6.7%, which says that the underemployment rate was 12.5% Plus, the US lost 75,000 jobs last Monday alone. I don’t know how many Tuesday and Wednesday, every day comes with new announcements. They haven’t even shown up yet - the layoffs announced at my company last November only hit last week. I’ve heard people predicting double digit unemployment, and I believe it. Plus, the figures count only those actively looking for work. People might be excused from not thinking this is all that productive at the moment. The companies doing well in the semiconductor and computer businesses here have hiring freezes only. Even companies with near monopoly positions in a segment are forecasting losses.
In California the official unemployment rate is well over 9%, and a number of projects just about to start have been stopped due to the budget crisis. Unless they were planning to clone the road builders, I think we have enough unemployed construction people to make you happy.
You’re not getting my point - I’m talking strictly about a fiscal multiplier. Let’s be generous and say that 20% of the resources put to use by an infrastructure project are truly idle. That’s only 20% of the money spent that would truly have a full Keynesian multiplier effect, at best. Other resources would have to be diverted from other uses. Whether there’s a multiplier effect here depends on many variables, such as whether replacements can be found for the other uses they were pulled from, how necessary the other use was, how much more money is going into the new project overall than is lost from the other project, etc. In other words, the real-world situation is more complex and nuanced than the pure math would indicate.
There are even other factors, such as the fact that unemployed workers are not completely valueless. They may be doing renovations at home, or volunteering, or studying and improving their skills, or whatever. The true value of the work the unemployed do is not well known.
If there were jobs that were ready to start, and had workers in place, and then were canceled, putting 100% of those workers on unemployment, and none of them found jobs, then yes, that would be a situation where you could expect a pretty good multiplier. Just how many of those kinds of projects do you think are in this infrastructure bill? Given that it was cobbled together almost overnight by people in Washington, just how likely do you think it is that it excellently targets such high-value projects?
Yeah, that’s the sort of thing Tyler Cowen calls GDP fetishization.
But you get the whole country involved in work, and you can actually start getting money velocity up. If those dollars start bouncing around fast enough, you can burn away some of their value. That’s a fiscal road to recovery in situations (like ours) when the central bank is just too damn responsible that it can’t manage to convince the world that it truly wants to start being irresponsible. This is an especially easy argument to make if you think, as the early Keynesians did, that the fiscal multipliers are 4 or 5. Ah, but such is not the case.
Today we have more data, and that argument would never fly by itself. The mechanism still exists, though, even if our current understanding of multipliers undercuts Keynes’s rhetorical flair. The point is not to advocate useless work. It’s to emphasize that there’s value in turning a deflationary recession into a humming economy, even ignoring the real value of work done. You can use your hypotheticals to huff and puff and try to undercut the fiscal numbers however you want, but there are other good arguments that indicate that the actual measured GDP increase might be an underestimate of our real gains when you consider a broader picture.
Okay. That’s fine. But let’s be clear on that point. They’re not rejecting stimulus based on the type of recession, which doesn’t matter, and they’re not just repeating the old (valid) monetarist criticisms about the early post-war Keynesians’ over-confidence in fiscal policy, especially the early overestimates of bang-for-the-buck and speed of implementation. This sort of attack on stimulus is nothing so mild as adding friction to a physics equation. They’re rejecting mainstream macro wholesale.
This is a really amazing argument. Your hypothetical insists on completely ignoring job training and worker migration when we’re losing half a million jobs a month. And this in the road construction industry, a great deal of whose workers are accustomed to working in remote locations.
Well, no, I’m not going to accept that resources are unavailable when resources are in fact available. Construction owners have not all forgotten how to call in outside people or train eager locals who are desperate for a job in these hard times. There’s a recession on. You can throw whatever new strict hypotheticals you want out there, but that doesn’t mean anyone else should play along. Voyager, I notice, can relate the real crisis in California where there’s no competition for road work at all because their budget is in such bad shape. To repeat for emphasis: this is not an argument for perfect efficiency. But productive work manages to compete with other productive work just fine in private markets, and the same can be true when government production enters the mix, especially if you consider that the marginal value of extra dollars in public goods can be just as high as the marginal dollar in private goods.
Of course, you don’t believe that. But I do, and not without reason. Crumbling infrastructure is not the way to go.
No, I don’t. But I accept your correction. Labor and domestic transport are all local, but materials certainly don’t have to be.
I haven’t had time to look real close at the House stimulus “compromise” either. The political process is too involved to follow closely and reliably. When they pass a final version, I’ll take a gander. But I don’t particularly trust anyone’s interpretations of the political decision-making process. I’m interested most in what they end up with.
At healthy per-diems which tend to explode costs. Get ready for big cost over-runs if that’s your plan.
No, I’m not. I accept that some workers will move in to make up a shortfall. I’m saying that specifically to infastructure building, there are factors that are going to shrink your multiplier. I didn’t say by how much.
Long gone are the days of Keynes, when ‘putting people to work’ meant handing out shovels to ex-accountants. Today’s labor force, most especially in infrastructure, is technical and does not easily cross job boundaries. Government contracting rules and union rules make this much tougher. The Davis-Bacon act prohibits hiring workers at less than the prevailing wage for a union man, and other rules prevent hiring non-union employees into union-affiliated trades.
And you can’t just wave ‘job training’ and magically turn an ex-financial guy into a mechanical insulator, welder, or a structural engineer. In some regions, necessary trades are going to already be close to full employment, even in a recession. Or the trade base will be so small in a region that even if 20% of them are unemployed it won’t be enough for a large project.
I’m not willing to put any numbers to this, because I don’t know how big the problem will be. You would be foolish to simply hand-wave it away as a non-concern, since you don’t know either.
Labor is most decidedly not all local. Here in Alberta, we’re flooded with temporary migrants working on infrastructure. There are companies that specialize in providing trained work crews from out-of-country to areas who can not find local expertise. My brother works with an entire team of Somalis who travel from country to country doing very specialized labor they are good at. And that’s not just because Alberta is booming - even in normal times or recessions, you’ll find that some trades just aren’t available in quantity when you’re doing specialty work. Sometimes special equipment has to be leased from out of country, and comes with its own trained operators.
I’m heading out of the country myself to the U.S. in a few weeks to do consulting work on an engineering project. Trust me - there is plenty of foreign labor imported for some types of infrastructure. Bechtel and Siemens, for example, do a ton of infrastructure-type consulting work in the U.S. This is even more true in the early stages of a project when engineering consultants are part of the mix.
Again, the exact mix of this really depends on the type of project, the region, and how quickly it needs to be done. I’m not willing to state that the effect will be large or small - I really don’t kow. But it’s yet another unknown someone with training only in economics wouldn’t even know exists.
Agreed, and we can have a more specific debate about it then. But let me give you one item that’s sure to make the final cut that you can think about - Health Care Digitization. There’s 20 billion dollars in the house bill for it. Health care digitization is not something you can just do by waving money at the problem. It’s not like hospitals don’t know that it would be nice to digitize everything - it’s just that it’s a really difficult problem, and involves a host of issues congress certainly isn’t qualified to understand.
And any software project manager will tell you that you cannot solve such problems by just throwing money at them. The last time the government tried a similar program to digitize the post office, it went down as one of the biggest software project failures in history.
It’s also an example of the type of project that is not guaranteed to find local labor willing and qualified to do it. Even if there’s unemployment in IT, it’s not going to be of the type that can plan and build a nationwide hospital digitization system. And the big players that would be involved in this effort, should normal bidding be allowed, are very possibly going to come from out of country - labor and all.
Next, a project of that scope would certainly not be completed in the kind of time frame where it could reasonably be called a stimulus. Hell, if the project is done right they’ll still be doing requirements analysis a year from now. If anyone is hiring programmers to cut code within two years, they’re not doing due diligence.
As for the hardware, a lot of it would come from offshore. Unless, of course, they put contracting rules in place to ‘Buy American’, which will jack up prices and further pressure international trade relations. In addition, the hardware for this is still immature. Touch-screen computers are still at a state where they are changing rapidly. One of the things that has caused hospitals to hold back on digitization is that the technology has been moving so fast that they don’t want to get locked into some pen-top computer that’s obsolete before they role it out.
Then there are all the regulatory and privacy hurdles, which are part of what has kept digitization from moving forward. There’s also resistance from doctors and nurses who don’t want to have to re-learn their practices, and many other issues that come into play.
When you’re talking about modern infrastructure, the devil really is in the details.
Well you don't need to.You are taking the most extreme examples of specialized skills from disparate sectors whereas in reality most sectors of the economy use lots of people whose skills are pretty general. Infrastructure projects will require management which means secretaries, assitants, low-level programmers and a whole lot of other people whose skills are fairly general. Even for more specialized skills, it's not hard to imagine 6-12 months of re-training allowing people from one sector to become useful in another sector. The financial sector will have a whole lot of people who are skilled in accountancy and financial modelling which are skills of obvious use for project management. Many financial engineers started off as real engineers and will have serious programming and scientific skills which could be put to use in various government funded R&D projects. Real estate lawyers could be re-trained to become infrastructure lawyers. And so on. People may not be quite as productive in their new jobs but it's a lot better than being unemployed.
It’s not hard to construct extreme examples where a fiscal stimulus isn’t useful but it’s not really relevant to the real world where the stimulus is spread across a lot of geographical areas and sectors and where unemployment and falling demand are also spread across the economy.
Which brings us to the second point which has also been made several times on these board: the more prolonged the recession is the less important its precise origins become. As consumer and investor confidence dips and as job losses spread across the economy, demand will fall and unused resources will rise across most sectors all around the economy. So it's not a case of vast unused resources in the real estate and financial sector and full employment elsewhere. Therefore a broad stimulus will likely help put unemployed resources to use and help the economy.I’ve tried to find data on employment rates in the road construction industry, but haven’t found any. I have found quotes from people saying that infrastructure projects will create jobs. There is certainly high unemployment in the building trades industry because of the crash in new home purchases, and any infrastructure projects involving buildings will have a good pool of the unemployed But there is another advantage. Even if no new construction jobs were created, the bailout will inject money into state governments, and allow fewer cuts to state programs. Because almost all states are facing budget crises, and because they can’t run a deficit, means that there will be state layoffs and/or furloughs. Reducing or preventing these will have direct benefit to the economy.
Here is a cite about the canceled projects - this is from before they got canceled, but canceled they were. (Or actually delayed.) One of them is quite close to me.