Stimulus -2

According to news reports this morning, President obama is about to unveil a plan for increase construction of infrastructure projects across the country. The spending for the next year is supposed to total 50 billion dollars, and the projects involved are reconstruction and rehabilitation of roads, rail lines and runways. There is also to be a new air traffic control system installed nationwide. To pay for the program, the government will remove certain tax breaks now enjoyed by the oil and gas industries.

While this program moves towards the proper response to the current economic slowdown, it still makes a major mistake. First the good part: instead of shoveling money to Democratic constituencies like state and local employee unions, the money bing spent here is for items that will have a lasting positive impact on economic growth. Better air travel will reduce the costs both in time and money for travel. Better roads and rails will make shipping goods both easier and less expensive. These projects will pay dividends for years to come. Now the bad part: At the same time that Obama finally moves towards a rational spending proposal, he also pushes to raise taxes on energy producers. This will inevitably raise the cost of energy across the entire American economy. In other words, those who use energy (EVERYONE!!!) will face higher prices which will pull funds out of the economy and slow its growth. Depending on the exact structure of the the tax increases and the construction work, the net effect of the package may be a negative for economic growth.

The best way to fund the spending on the infrastructure projects in Obama's plan would be to cut government spending elsewhere. If there was half a trillion dollars of waste in just Medicare, imagine what there is in the Veteran's Administration, the Interior Department, the Commerce Department, and everything else. Let's go through the budget, find 50 or 100 billion dollars of needless programs and cut them out. Then let's redirect those funds towards the infrastructure projects. In my opinion, it would be preferable to return the funds to the people and let them decide how to spend them, but I know that Obama is not of that mind. In Obama's world, the government has to be the one who acts; he does not trut the people to decide for themselves. Nevertheless, if Obama is hoping for a good result from this program, he must change the source of the funds away from higher taxes on energy.