Driving about these days it’s hard to miss (… at least in my area) the impact of the American Recovery and Reinvestment Act.Road projects are littered throughout Massachusetts and it doesn’t seem to matter what hour of the day or night you are out, crews (…including state police) are on site toiling away “reinvesting” our and future generations tax dollars in roads, bridges, sidewalks and all manner of decrepit infrastructure.
While this is certainly a means of pushing out dollars into the economy, is it fundamentally effective?
From the looks on the faces of road crews and state police they are simply going about their business, many likely vaguely aware of the government hand sponsoring the recent boom in demand for their labor but few stopping to ask questions.
To them, this is a boom and like all booms, active participants become complacent about their good fortune neither dwelling on the artificial forces driving it nor considering the possibility of its end.
Like a massive wave of prosperity, booms wash over what by contrast looks like a dry and desolate beach of economic malaise lifting a commodity, equity, asset class or even a whole industry along with its labor force high into what appears to be a limitless stratosphere of economic expansion.
Of course, we know very well that no boom lasts forever.
So, what good is this boom in infrastructure spending actually doing?
The projects themselves are investments but only in a limited sense… infrastructure starts to deteriorate immediately upon use with each hour marking a step closer to future rounds of “reinvestment”.
Infrastructure is more of a liability… it needs continuous costly upkeep otherwise its defective state would be counterproductive and even, in some cases, dangerous.
Also, it’s not as if the government mandated a re-design of existing infrastructure… that might actually lead to real fundamental improvement… instead government is simply looking for a quick and dirty means of pushing dollars (… future borrowed or current taxed and printed) into the economy under the guise of “investment”.
Participants aren’t any better off either.
Road crews and state police are working overtime likely making more money and bettering themselves for the moment but what did they really do to deserve this opportunity and good fortune?
Nothing … and how well they will manage the fruits of their labor will likely be a direct reflection of the ease at which it was produced.
But the government is counting on this as well… they ultimately want the “reinvestment boom” recipients to SPEND this phony prosperity NOT save it or use it to pay down prior debts.
But, are service providers, retailers, manufacturing and construction really any better off if the dollars funneled through “reinvestment” projects actually promote a temporary and artificial jump in consumption?
So you see, we keep pushing the questions on up the chain… What is the actual benefit of an artificial boom on false “investments” driving artificial earnings and artificial consumption?
