$30B IT Stimulus Will Create Almost 1 Million Jobs

itif writes "This report takes a look at how many jobs you get if you invest $10 billion each in three different IT infrastructure projects — broadband, health IT and the smart grid. It argues that if you are going to be spending billions on a stimulus package, investing in 'digital infrastructure' creates more jobs than physical infrastructure (e.g. roads and bridges) in the short-term, and you get a whole host of other benefits in the long-term."

Comments

Bad economics

[Joey Vegetables]

You will get NO net jobs. Every penny spent on a "stimulus" must be taken from taxpayers, either directly or indirectly, either now or in the future, and that penny will NOT be spent creating jobs elsewhere. At best, you are taking away future jobs to support current ones, or, to state exactly the same thing in different terms, you are borrowing from the future to support unsustainable lifestyles now . . . which is exactly what got us into this mess to begin with.

Re:Bad economics

[CTalkobt]

In a word, No.

If I borrow $100 now and put it to work now, that $100 will have a net effect of the $100 spent x the current multiplier (ie: I pay Paul, Paul pays the grocer, the grocer pays the mob boss, the mob boss pays the police comissioner, the police comissiner pays his bookie... but I digress).

So, borrowing $100 now is not the same as borrowing $100 in the future. The $100 now can be used to generate money that, in the future, will simply have never existed.

And you'll still be left, with the $100, somewhere in the system, unless it's been exported overseas. (joy)

Re:Bad economics

[DragonWriter]

You will get NO net jobs. Every penny spent on a "stimulus" must be taken from taxpayers, either directly or indirectly, either now or in the future, and that penny will NOT be spent creating jobs elsewhere.

If every use of money (including taking it in cash and stuffing it in a mattress or lighting it on fire) were equally effective at creating jobs, this argument might be relevant (except that the relevant thing isn't that every penny must be taken from taxpayers now or in the potentially-infinitely-distant future, but that every penny must be taken from some other use right now, whether its in the form of taxation or borrowing from someone who has money and would use it for something else if they weren't lending it to the government.)

Of course, not every use of money is equally effective at creating jobs, and even moreso not every use of money is equally effective at creating jobs within the US economy, so its pretty clear that changing how money is used by either taxing or borrowing money that would be used for one purpose if it were not taxed or borrowed and applying to a different purpose can create more (or less, depending on the uses the money is taken from and the uses it is put to) jobs than would otherwise be the case, and even more certainly the case that doing so can create more jobs in the US economy than would otherwise be the case.

Re:Bad economics

[Shakrai]

The point of a stimulus is to take that cash from the people who are currently holding it and use it to try and get those millions of adults productive again.

Fixed that for you.

Re:Bad economics

[mc6809e]

If the $100 is spent now, and the multiplier effect takes place now then it's worth say, $100 x R.

If the $100 is simply saved, and spent at a future point then at that future point in time, $100 is still only worth $100.

The net effect of the future $100 would be delayed an additional time until it is actually utilized.

But even saved money gets spent by those that borrowed it from savers. There is very little money sitting idle.

All the government is doing here is diverting saved money that would be spent by borrowers in other parts of the economy and redirecting it to government projects.

It doesn't create jobs. It reallocates jobs.

Re:Bad economics

[MickLinux]

You are also forgetting that we are living in the bursting of the largest credit bubble in human history. So every dollar taken in taxes right now is *not* an additional expenditure now.

Rather, every dollar taken in taxes right now is a dollar that will not be spent in a different way, now.

Now, where that is nonapplicable, is in the fact that a lot of dollars are spent in "investment", and those dollars are evaporating at an amazing rate. In other words, if you leave the dollars with the rich, then they will disappear with no net benefit at all. On the other hand, redistributing them to new jobs gives a current net benefit.

But unfortunately, dollars spent in electronics basically are the easiest for the rich to cull from. Almost as easy is dollars spent in construction contracts (or any contracts). If you really want to stimulate the economy, you have to spend the dollars directly to the wages (that is, massive government hiring).

But all that is neither here nor there. Any number of theories about what *should* be done have nothing to do with what *will* happen.

Re:Bad economics

[CannonballHead]

Hi, I'm Paul, I would like to be paid!

On a serious note, though... it's still true that if you tax to create something, you're not exactly creating wealth in such a way that you are able to now pay someone to do something... you're just taking money (a tax) in order to pay someone to do something else.

The point is that you aren't exactly creating a new job, you're almost ... splitting someone else's job. You're taking someone else's worked-for-money to pay someone else to work. Yeah, it's a "new job" but it's not creating a new income, it's taking it from someone else's income. Or many someone else's.

Either way, it's significantly different from starting a business and "creating jobs" that way. Now, if they do a stimulus where the money comes from other canceled projects, that might be nicer. In other words, more efficiently use existing revenue, not try to take more in an effort to give more.

Which reminds me of one other point. I take $100 from everyone. I pay the people that I had to hire to take the $100, and the huge organization that is now required to run this new operation. By the time I actually get around to paying the "new hired" people, how much of that $100-per-person do I have left? I've paid a bunch of superfluous people. In other words, I'm taking money, paying some un-necessary people, and finally getting around to paying someone else with it. The taxpayer is losing money on this deal while making more bureaucratic jobs. That's ... stupid.

Re:Bad economics

[plasmacutter]

Wrong. The mess we are in right now is a result of millions of people left unproductive because others are hoarding their cash. The point of a stimulus is to take that cash and use it to get those millions of adults productive again.

BINGO!

This is what most reaganites simply fail to grasp, but people who actually own their own businesses understand.

If you have a corporation, you use that corporation as a tax shelter. The higher the tax on your income, the less you will claim as an official salary from your company. That money stays WITHIN the company, and must be used in some way to avoid loss to taxes, which means investment (more credit for everyone), higher wages (more consumption->GROWTH), or more jobs (again, Growth).

What's more, those taxes taken from what they do claim don't affect their lifestyle, and the plan is to produce subsidized infrastructure.. for businesses! --They get all their tax money back indirectly.

I don't know of any competent business owner who would have a problem with the proposed policies.

By pushing down taxes on INCOME for the wealthy, reaganomics does nothing for the business OWNER.

Now, on the other hand. the executives who run but don't OWN large companies benefit a lot from these policies. Note how these types are the same types who create scandals like enron. Their motivation is not the health and well being of a company, but to siphon off as much in salary and bonuses as they can then cut loose before the collapse.

Obviously it's hard for those types to get rich if taxes on income over..say.. 1 million a year are in the 80%+ bracket.

Re:Bad economics

[nine-times]

By that logic, no expense of money will ever lead to a net creation of jobs-- since that money is always being taken out of something else somewhere else in the system. At best, you're taking away jobs from someplace else to support the ones you're "creating".

Of course, it doesn't really work out. Money can be spent on good things that improve the economy, or can be spent on stupid things that harm the economy.

Re:Bad economics

[Anonymous Coward]

People sitting around doing nothing is wasted capital. Even if you have to borrow to get them to do work, you have produced something greater than your investment.

The idea that the private sector would more efficiently allocate human capital is irrelevant in deep recessions. In these cases, the private sector is quite literally sitting around waiting for someone else to take the risks.

Re:Bad economics

[beanyk]

As someone who might be an H1B visa holder in the not-too-distant future, what's your problem with them? Is it that we didn't -start out- in the U.S., or that we might leave in the future, or that we're sending envelopes stuffed with cash back home in the mean time? While here, we're paying taxes and consuming locally bought (not locally produced, usually) products just like everyone else ...

Re:Bad economics

[Lumpy]

$100 saved is $100 + interest earned on it - Inflation.

$100 kept in a box is $100 - inflation.

$100 invested is a gamble. It might be $10,000 in a few years or it might be $0 in a couple of weeks. you can not guarantee anything when it comes to money. that's how a lot of the problems we have today started. It all depends on the odds of the investment.

Re:Bad economics

[ip_fired]

I think the majority problem that people have with H1B visas is that the H1B visa holders end up working for less than a similarly skilled US worker would normally ask for. As a result it is seen as having their wages pushed down for those who are already here in that particular industry.

So, when you come over as an H1B, don't settle for a reduced wage. Find out how much they are paying for someone with your experience in the area and then ask for that.

Re:Bad economics

[garett_spencley]

"Absolutely! But, back in the 1990s there was a statistic that was floating about that indicated that 90% of all small businesses fail in the first five years. That's why bank, at that time, were loath to loan to a small business that had not been around for at least five years."

I'm a small business owner myself. In fact, this past year marked my 5 year mile-stone :) I understand this fact quite well.

First of all, lets use the appropriate terminology. We're not talking about money we're talking about credit. A creditor takes risk by lending capital to an entrepreneur and expects to collect interest. However, there is the very real risk that the loan may be defaulted on. Let's assume that happens. The creditor is definitely out the capital, but where did it go ? Again, we're being short-sighted by thinking of the poor creditor who made the bad risk and is now out the money and may even lose his job. However, the question still remains. Where did the money go ?

Did it vanish ? No.

It went to pay the wages of the business owner's employees. It went to pay for equipment and leasing and licenses. The money was put back into the system. The net effect on the economy is nil. You can make a point that in this case jobs were relocated, just as government relocates jobs. Yet my point was not that it doesn't happen in private industry. It happens all the time. My point was that government, despite all of it's power, does not have the power to alter the laws of economics and thus can not "create" jobs.

"Hell, even Alaska's famous "Bridge to Nowhere" created some jobs during construction. It actually created ONE real job that persists."

Here we go using that word "create" again. It did not create that job. If that woman is being paid by the government the tax payers are using money that they could use to hire their own hypothetical employee for their own hypothetical business. Every government dollar spent is a tax dollar taken. Every government job "created" is a job destroyed somewhere else. I'm not saying that this is always bad. There are services we demand of the government. We want to have our garbage collected and a fire department to put out our fires and for various reasons we've decided the government will do a better job of these tasks than private enterprise. The point is that these aren't jobs created. They've been taken from somewhere else and put where they are now. Whether or not they persist after the government cancels it's original program is irrelevant.

I have to assume that your point was that "sometimes the government makes choices that aren't so bad". That's certainly true but it's still like throwing darts at a dart-board while blind-folded and hitting the board sooner or later. The economy is complex and totally intertwined. Thinking that the government can somehow control it and get it to produce results that it wants is absurd. Economics is a social study of human behaviour. If we trust the government to control the economy we trust the government to control people and when you put it like that I don't think anyone would ever go along with it. Yet people do because they want a magic bullet to solve all of their financial troubles.

Re:Bad economics

[Austerity Empowers]

And a good amount of our economy and it's "health" is based on perceptions of the market versus actual value. So if you could effectively broker hope, you could actually drive positive change.

On the other hand if we believe that money given to corps is going to be spent overseas (and it will, as things stand today), and that the company you work for is big, bloated, inefficient, bogged down by a cross of greedy executives and misguided laws/standards that deserves to fail...then you're just flushing the money.

It's part of high school history..."What ended the great depression?" (in the US, for me) Some think FDR and his public works, some think industrial capacity increase for WWII, some think victory in WWII...some think just the act of winning it. My thought is probably the ability of the masses to align to, and achieve a common objective that could be agreed upon, something that took us out of the greed/fear rut we were in.

I don't think merely spending a money, even an epic amount of money, is itself going to unify what is a very divided nation. Something else needs to get going in the mean time, and we have to believe in it, however ridiculous it might be. Hopefully not a war...great engineering projects have sufficed in the past, not just in the recent past either. Something that stimulates many industries, and involves a wide array of people and that is...very expensive and requires the resources of a large nation (or the world, if we're bent on the "global economy" angle).

Re:Bad economics

[Curunir_wolf]

Paul Krugman wrote on this topic a bit ago:
http://krugman.blogs.nytimes.com/2008/12/22/bad-anti-stimulus-arguments/

Krugman? Seriously? That guy is still stubbornly refusing to acknowledge the failure of the philosophy that he has been espousing for years. You know, the one that created the economic mess we're in right now.

Why even when Keynesian economics has been proven a failure do people keep trying to claim it works?

Re:Bad economics

[Mattsson]

It doesn't create jobs. It reallocates jobs.

Depends.
If you use the money on X instead of Y and X create exactly the same amount of jobs as Y, then it simply is a reallocation.
If X creates one more job than Y, then more jobs are indeed being created.

It's all about how to most wisely spend what is collected as tax.

Re:Bad economics

[Anonymous Coward]

Krugman? Seriously? That guy is still stubbornly refusing to acknowledge the failure of the philosophy that he has been espousing for years. You know, the one that created the economic mess we're in right now.

I'm sorry, but you're just wrong. The "economic mess" we're in right now is almost entirely the fault of the government. The Federal Reserve, Fannie Mae, and Freddie Mac are the government institutions that created the current "mess." If they weren't buying up shit loans en masse, the investment banks never would have made so many shit loans.

Government interfering with the market is the exact opposite of what Krugman's philosophy. Nice try, though.

To explain a little further: By buying bad loans, Fannie and Freddie took the responsibility from the banks, more or less telling them not to worry about bad loans because the tax payers would foot the bill. Now that things have gone bad, guess what's happened? The taxpayers are footing the bill. Big surprise.

The funny part is that people like you are using this to make the case for even more government control and interference. Undoubtedly the next round of government caused mayhem will be even worse, which you'll no doubt use as evidence that the government still isn't doing enough.

Re:Bad economics

[jbolden]

How has Keynesian economics been proven a failure? Be specific please.

Re:Bad economics

[Flavio]

(...) or the ability of the government to stimulate by borrowing dollars from domestic and foreign holders of dollars and spending it in particular, focussed areas (since such policy does not rely on manipulate M1.)

The Fed's balance sheet was spent on the first bailouts, and the US is now printing money to cover the current bailouts. The government is manipulating M1.

The author of that piece attempts to confuse the issue by posting a different graph that shows a falling trend in how effective stimulative government deficit spending has been on average recently, and attempting to suggest, without any real reason, that the two graphs are directly related

You're confusing the issue by implying that they are not directly related. Manipulation of M1 leads to an even worse trend on the second graph.

The second graph does show a long-term problem, and particularly does show why, once this recession ends, the US government must, in the subsequent expansion, begin to pay down the debt or at least stop expanding the debt faster than the GDP during expansions

I love how people like yourself, Bernanke and Paulson concede under pressure that deficit spending is disturbing, but at the same time hold a Keynesian attitude of printing money to "stimulate" the economy.

There's only one correct attitude during a recession: liquidate bad debt and expose fraud. Deficit spending during a recession only drains money from healthy sectors of the economy.

Re:Bad economics

[shaitand]

All of this pretends creating jobs is a magical and wonderful thing. In an ideal economy no jobs would be needed, machines would do the work and wealth would just be distributed to citizens who merely invested it in their choice of machine warehouses.

Net Value is what must be increased. Our economy has gone astray in a number of areas. A service-based economy is a great choice for a poor nation with limited resources because it is cheap to educated individuals to perform services. A service-based economy is great for banks which siphon off money as its exchanged, the more fluid money the better banks do and service is fluid as can be (banks don't increase net value). Refining and utilizing natural resources is what increases value. Clean a floor and get paid $100 and you've moved $100 around. After the fact you still have one floor and $100. Make a blanket and sell it for $100 and you've turned $20 of raw materials in $100 worth of raw materials leaving you with $100 and $100 worth of materials, or a net value gain for the nation of $80. When as a nation you have a largest pool of national resources in the world, this is the only way to go.

The U.S. shouldn't be investing in IP generating ventures, IP is artificial value that depends upon regulation to maintain its artificial scarcity. A scarcity that our competitors will not honor. The U.S. should be investing in its own manufacturing and resource infrastructure. Stop taxing the production and profits from materials that qualify for a "Made in the USA" tag and eliminate taxes on the pay of workers who make said products.

Re:Bad economics

[DragonWriter]

All of this pretends creating jobs is a magical and wonderful thing.

No, it is based on the fact that, in the real world, creating jobs is a good thing. Neither "magical" nor "wonderful" are relevant.

In an ideal economy no jobs would be needed

No, in an ideal world no jobs would be needed, but since such a scenario would not involve scarcity, it would arguably not even have an economy, which is a means by which limited resources are distributed.

machines would do the work and wealth would just be distributed to citizens who merely invested it in their choice of machine warehouses.

Certainly, there is some attraction to such a pure-capital economy (though I wouldn't call it ideal.) But its not the real world, nor is it something realistically attainable in the short term. Consequently, in the short-term, dealing with the actual consequence the actual recession has for actual people, creating jobs is a good things.

Inasmuch as it is possible for people to even begin to approach the kind of life they would have in your proposed pure-capital utopia, they need investable capital -- i.e., money to invest beyond that necessary to spend for self-maintenance. For most people that haven't inherited large sums of money or won the lottery, that means they need a job. So, even if we accept that what you propose is the ideal economy we should be striving for, we need people to have jobs now so that they could have capital to invest in the "machine warehouses" if those ever get built, or in real productive enterprises which actually exist in the interim.

Clean a floor and get paid $100 and you've moved $100 around. After the fact you still have one floor and $100.

You are presuming that a clean floor has the same value as a dirty floor, which is exactly the same mistake as assuming that a block of gold ore has the same value as the gold it could be refined into which has the same value as, say, the spacesuit helmet visor screen that could be produced from the refined gold.

Also, you have $100, and the person who paid you to clean their floor has a clean floor that used to be a dirty floor; and clearly, the clean floor is worth $100 more than the dirty floor to them, otherwise the exchange wouldn't have taken place.

Make a blanket and sell it for $100 and you've turned $20 of raw materials in $100 worth of raw materials leaving you with $100 and $100 worth of materials

Wrong. Make a blanket and sell it for $100 and you've turned some quantity of raw materials into $100 of finished product, leaving you with $100, and the person who bought the blanket with a product worth $100 to them. In either case, the person paying you has received something worth $100 to them, and given $100 to you.

If services didn't produce value, no one would pay for them.

It can't all be digital

[Ristoril]

The Internet isn't very useful if the delivery guy can't bring your ThinkGeek toys to you because the roads are broken.

Not "punywage"

[Stile 65]

"punywage" is a bad tag for this.

This would also create jobs (at least in the short term) indirectly, as those who get the high-paying jobs directly related to this "stimulus" will demand additional production and services to fill their personal needs, which will create other jobs, and so on. In this way, each dollar invested in this infrastructure will actually be spent multiple times.

Of course, the way this is financed is inflationary and backed by the public debt, etc. etc. so in the long term, we'll have to pay all that back and then some.

Bad assumptions

[StikyPad]

On the other hand, upgrading roads and bridges keeps us from falling into sinkholes and ravines en masse.

At any rate, this is a false dichotomy, and there's every indication that Obama plans to focus on improving both forms of infrastructure.

Re:Or...

[El Torico]

Simple solutions don't create new Agencies and don't give bureaucrats more power and more money. The problem occurred because "civil servants" failed to do their jobs. The best way to restore faith in the markets would be to quickly convict those that committed these frauds, seize their assets, and ban them and the bureaucrats that failed to do their jobs from ever holding a position of public trust, in corporate management, or in finance.

Fix the roads.

[snarfies]

I quote from the report, bolding mine: "An additional $10 billion investment
in health IT in 1 year would create as many as 212,000 new or retained U.S. jobs for a year."

Similar wording is on the other two prongs as well. I stopped reading at that point. The report is therefore saying that investing 30 billion could result in ZERO "new" jobs, it will merely allow the retention of existing jobs.

BTW, what good will your retained job will do you little good when you can't drive to the grocery store to buy food to eat due to the bridge to the store having collapsed? I'd rather see the old-fashioned boring infrastructure fixed/updated before the new-fangled stuff.

Re:High numbers

[moderatorrater]

You're assuming that the money will be alone and that it won't be used for something sustainable. Let's say, for instance, that the government were to give money to a car company to build a factory. It's not likely that the government will give more than 60% of the money necessary to build the factory in the first place. Then, once that factory's built, it will be able to support itself by building cars that wouldn't have been built otherwise and is self sustaining.

In the same way, the government can give Verizon (or similar) 60% of the cost to wire California with fiber to the house. It's enough to convince Verizon to undertake the project in the first place and to gather funding from other sources so that they can complete it. Once complete, they're providing a service that wasn't there beforehand, and is well worth buying. The project after that would be sustained by the subscribers, and it could be sold for less money per month since Verizon doesn't have as much money to recoup. Not all of the jobs which were created for that project will stick around, but more jobs will be created due to the higher available bandwidth in the area.

Re:do the math.

[Average]

With the layoffs out there there are *plenty* of IT people who will work for $30k or $35k if you won't. Maybe not in California or New York. But, if work could be outsourced (badly) to India, it can be outsourced (with better oversight) to Sioux City or Tuscaloosa. $35k, plus a part-time-working spouse, means you can afford a $100k house (which is perfectly believable in most of the country), pay off reasonable student loans, and eat. People will take that. Plus, you're working indoors in a nice office, not busting your back in the cold.

Yeah, it's Walmart wages. There are people lining up for those jobs, too.

where are the workers?

[cliffski]

Are there one million trained and skilled IT workers in the USA that are currently unemployed?
If not, this is just a great jobs package for China and India.

Re:where are the workers?

[Average]

Demanding US workers in the deal might mean more 'trained and skilled'. Many, many jobs are looking for "3 years this, 5 years that, plus the degree", and uninterested in growing in-house talent. Employers don't do that, since workers aren't loyal anymore, because employers aren't loyal, and so the cycle goes. A demand for US IT workers might mean more companies willing to hire a fresh face and do more training.

Bad assumptions

[DaveV1.0]

They figure only one third of the manufacturing jobs, and only the manufacturing jobs, created by this $10 billion IT stimulus will "leak" out of the country.

I think they underestimate the number of jobs that will "leak" out of the country in all parts due to H1B visas, outsourcing, and, of course, the off-shoring of IT equipment manufacturing jobs.

Re:High numbers

[L0rdJedi]

The project after that would be sustained by the subscribers, and it could be sold for less money per month since Verizon doesn't have as much money to recoup.

Hahahaha! You think Verizon is going to sell the service for less just because they got some money from the government? Hahahaha! They will more likely keep the cost the same and the rest is profit (they'll make even more money faster). The cost to maintain the infrastructure will be the same anyway, so why would they lower the end cost? All a govt infusion will do is get the infrastructure built quicker.

Like many, I'd rather see physical infrastructure updated/maintained sooner than digital infrastructure. You can't even deploy the digital stuff if your physical stuff isn't in good condition.

Print and borrow. Destroy savings.

[Anonymous Coward]

The theory here is that jobs and things that people value can be created by printing money and taking more loans. It didn't work so well for Rome, Germany, Argentina, and Zimbabwe.

Mod parent up.

[khasim]

Congratulations. Very nicely stated.

And the way I see it, it IS all about using the taxes gathered by our government (or money borrowed by our government) to improve OUR economy in the most effective and efficient fashion.

It's very simple. If you reduce the taxes of a billionaire by a million dollars, he will spend it differently than if that million dollars was spread amongst people making $20,000 a year.

Re:Mod parent up.

[Anonymous Coward]

It's very simple. If you reduce the taxes of a billionaire by a million dollars, he will spend it differently than if that million dollars was spread amongst people making $20,000 a year.

Not only that, but it will actually get SPENT. The growing social divide in this country has created a decent number of super-rich people. Not the handful that there once was (even though it's always been an issue), but a good number of people with so much money that they can't really spend it all. That money just sitting dormant until they die (when it then gets split amongst their heirs who hopefully can squander it) is incredibly wasteful. It's capital that's been siphoned out of the economy and unless it's spent or reinvested, it's been made useless. Even then it needs to be spent in such a way that it doesn't end up just jumping straight into another static pot of money belonging to some other mega millionaire.

Don't get me wrong, I'm not going Marxist here and suggesting that everyone be on equal terms. Rich people deserve to be rich, but as Forest Gump said, "There's only so much money a man can use, and the rest is for show.". Let them spend all they want but some of that show money needs to get injected back into the economy - forcefully if necessary. Taxes + government programs do that.

Sucks for the super rich, but in reality, it's not likely to alter their lifestyles anyways. You just don't have to make many cutbacks to live on 20 million per year rather than 30.

And the flip side?

[booyabazooka]

Can we calculate how many jobs are lost as the indirect result of pulling $30 billion out of the economy via taxation?

Re:Love it!

[thermian]

Pretty soon they'll own your health care too. If you thought arguing with the insurance company was bad just wait until you get to argue with a bureaucrat instead. At least you can choose to do business with the insurance company......

Don't talk crap. I live in a country where the government controls the health service, and we have national health insurance that everyone pays.
You know what? It may not always be great, but its always there whenever you need it in an emergency, you can go for checkups without being afraid of your insurance premium going up, and you don't get stuck in a job you hate because you can't get new health insurance for a disease or illness you have developed.

Like I said, it isn't perfect, but compared to your system where its possible to have no health cover at all, its good enough.

Re:brokenwindowfallacy???

[nine-times]

Right. The old "war is good for the economy" line is more of an example of the broken window fallacy. Or rather, there's some kind of fallacy floating out there-- and I'm not sure whether it could be considered a "broken window fallacy"-- that "it doesn't matter what the economic activity is; any activity is good activity." That's the mindset that gets us into wars, or convinces people that borrowing money we don't have to buy crap we don't need is "good for the economy".

Building necessary infrastructure is a good counter-example to the broken window fallacy. Value is added into the system and good infrastructure actually improves economic conditions. It encourages investment, stabilizes operations, and allows businesses to operate more efficiently.

That's not to say we should build useless infrastructure for the sake of economic activity. The "bridge to nowhere" wouldn't provide value, and therefore it could be argued that it's an example of the broken-window fallacy. But ubiquitous broadband Internet (with speeds on the scale of FiOS, not just DSL), is something we need in order to stay economically competitive with the rest of the world.

Re:brokenwindowfallacy???

[4D6963]

Let's see, "mug him and take his wallet" = taxes? Let me guess, libertarian?

Good for employment, bad for productivity.

[khasim]

If you really want to stimulate the economy, you have to spend the dollars directly to the wages (that is, massive government hiring).

Yep. The problem is that the government is (with a few exceptions) extremely bad at producing anything other than paperwork and hindrances.

In my opinion, the government SHOULD hire some more people ... who will determine which citizens belong to the group that will spend the MOST money on legal, local services and start pumping the cash into that segment.

It's easier for the local pizza place to hire more cooks and delivery people if there is additional demand for pizza delivery due to the locals having more pizza money available.

Whereas is you just give the pizza store owner additional cash, he's not going to expand his business. There won't be additional demand for him to service.

Focus on funding the demand and let the supply grow itself.

Re:Good for employment, bad for productivity.

[serviscope_minor]

Yep. The problem is that the government is (with a few exceptions) extremely bad at producing anything other than paperwork and hindrances.

Why oh why oh why do people keep modding thus utter bullshit as insightful. It isn't it's an ignorant meme repeatedly spread by people with a bizarre faith in business.

Example of there the government produces something worthwhile: the road network. They produced it, and it basically works year in, year out and the country would fall to pieces without it. In many countries, governments run a significant fraction of the school system as well.

Example of big business failing miserably: Enron, the current financial crisis.

So, frankly, anyone spouting this miserable gibberish are unable to muster even the weakest powers of observation of the world around them today, never mind historically. In some cases, the government can do a better job, in some cases they foul up. In some cases businesses do a better job. In some cases they foul up.

Remember the current stink happened because the government stopped being a "hinderance" and let the businesses do what they wanted. Look where that landed us.

Re:Good for employment, bad for productivity.

[ThreeE]

The government doesn't produce anything -- not even the road network. The government takes the resources to build the road network at the barrel of a gun from taxpayers. The government then gives the money to a construction business to build the road network.

Worse, the government is terrible at allocating scare resources -- see also central planning. The best way to allocate scarce resources is the free market. It isn't perfect, but it's better than anything else.

Re:Good for employment, bad for productivity.

[tweek]

The current stink happened because the government didn't get out of the way enough.

It injected itself in private business affairs through things like the housing market.

This Keynesian bullshit that's been going on since FDR is going to just continue to fuck us.

Having the government artifically prop-up the economy only leads to bubbles and busts like we're seeing now.

Re:Good for employment, bad for productivity.

[arth1]

A few good examples of the governments doing a heck of a better job than the private companies that took over due to populist conservatism:

• British Railways. Look at the shambles the UK rail transit system is in now.
• Postal services of multiple countries. The costs to the end users have gone up, and the quality of service has gone down the drain. I have to send presents to relatives overseas through registered FedEx, because the privatized mail system can no longer be trusted to deliver anything.
• Energy providers, like formerly government owned hydroelectric plants. The cost to consumers have skyrocketed, while the safety guards that were in place are no longer there, and people get affected by outages because redundancy and backups are cut to the bone to save costs.
• Water. Look up the Cochamba water riots, and what happened when the municipal water supply was privatized.
• Internet. When governments and government funded education ran the show, peering was a given, and alternative routes would always exist. These days, all the eggs are put in the cheapest basket, and peering is just another way to squeeze the lemon -- if you don't pay our stock holders, we won't carry your traffic. The result is a more expensive service that doesn't auto-repair itself anymore. When a cable breaks, suddenly most of a country or continent is without Internet access, despite all the other cables that connects it.

Capitalism and consumerism is all about delivering the lowest quality product the market will accept at the highest possible price they will pay. You don't get quality that way.
Or, to put it in other words, if Stonehenge had been built on contract, it wouldn't have lasted 40 years, and definitely not 4000.

Sometimes we need officials who don't have a vested economical interest in profitability, but can spend a little extra to get a better product or service. Especially in the products and services that a government can provide.

I think it's time we saw more nationalization of what's important, not privatization. Leave the non-important stuff to capitalists and market forces, but not what really matters. Cause to a true capitalist, their wallet will always matter more than your welfare.

Re:Good for employment, bad for productivity.

[elefantstn]

Every single one of your examples is, not coincidentally, a privatization where the government granted a monopoly or oligopoly to providers. It should not be surprising that a private company with no competition is as corrupt and inefficient as a government.

I think it's time we saw more nationalization of what's important, not privatization. Leave the non-important stuff to capitalists and market forces

'Importance' has nothing to do with it -- availability of competition does. For goods like internet access, we can improve quality by loosening corrupt, good-ol-boy licensing/franchising deals that lock customers into Comcast-or-dialup. For goods like train service, it's probably not feasible.

Food, though, is certainly more 'important' than either of those two, and every instance of nationalized food supply seems to result in famine.

Re:Good for employment, bad for productivity.

[HanzoSpam]

The problems we are having are in general a result of deregulation.

ROFLMAO!!!

I keep hearing that, but I'd like you to name one example of deregulation. You call Sarbanes-Oxley deregulation? Regulation has, in fact, been pouring down thick and fast. The last major repeal of regulation was the reform of the Glass-Steagall Act in 1999. Guess who was president then?

Re:Love it!

[philspear]

At least you can choose to do business with the insurance company......

That's a good option when you're positive you will never, ever get sick or injured. And the choices don't end there, you can often choose between high premiums and high denials of coverage, or even higher premiums and higher denials of coverage. If you've had a bit of the cancer previously, your choices are even better! For instance, a friend of mine got to choose to either stay with a low paying dead-end job with adequate insurance, to switch jobs and go bankrupt with COBRA, or to go without coverage and risk a recurrance that would be classified as a pre-existing condition (again bankrupcy).

Seriously, the benefits of being able to call a number and possibly get your billing straightened out faster with a private company rather than the government more than makes up for the troubles those people who are not a good investment have. They shouldn't have ever gotten sick!

Re:brokenwindowfallacy???

[mattwarden]

Wow, I hate to be a typical slashdot commenter, but:

Bzzzt. You're wrong.

An investment is something you do when the benefits outweigh the costs. If that was the case here, it would have been on the books before the decision to "create jobs."

This is being done to "create jobs". The logic is: we need jobs, so we might as well do something that has some value and isn't a total loss.

Creating jobs in a partially useful area is a LOSS MITIGATION STRATEGY not an INVESTMENT.

The whole idea of "creating jobs" is ridiculous. If "creating jobs" is what it sounds like, then why doesn't the government always do it? And why don't we blame government when there is a rise in unemployment?

IF the government is paying for this with tax money (that it doesn't have), then this is just a wealth distribution tool (otherwise where are the wages coming from to pay these currently unemployed people?). IF the government is paying for this with debt and inflation (more likely), then this is just a temporary fix that increases the long-term consequences.

Let's call "creating jobs" what it is: floating more debt and printing more money into the economy and at the same time keeping people busy and superficially happy, with no concern for the long-term consequences. Deciding to do more stuff than was planned in order to create new jobs is by definition doing things where the benefits don't outweigh the costs for the "investment".

When do we stop deciding to screw over the country to temporarily relieve the difficulties of the minority few?

Digging Holes

[colganc]

Dig more holes faster please. Thanks for taking my hard earned rewards for work and giving it to someone else. I really appreciate it government.

Re:Digging Holes

[avandesande]

It's even worse than that. They are borrowing against you and your children's future production.

More jobs =/= more output

[Anonymous Coward]

An economist visits China under Mao Ze dong. He sees hundreds of workers building a dam with shovels. He asks: 'Why don't they use a mechanical digger?''That would put people out of work,' replies the foreman. 'Oh,' says the economist, 'I thought you were making a dam. If it's jobs you want, take away their shovels and give them spoons.'

Re:brokenwindowfallacy???

[harl]

The default tax rate is 0. The only reason people pay taxes is that people with guns will come and take the money if you don't. How exactly is that not mugging?

Re:brokenwindowfallacy???

[4D6963]

Cry me a river. Oh no, the government will demand me money so we can sustain our way of life by having infrastructure, health care, free education, garbage collection and so on.. You reap the benefits of the taxes you pay, even if the richer you are, the less you reap. Poor people reap the most compared to what they pay, because they're poor.

Not wanting to pay taxes when you're not poor is basically saying "fuck off poor kids, that's my money, you gotta get your own". Which is logically defendable, but arguably also makes you a heartless greedy egoistical apathic bastard.

I used to think that way too

[coryking]

Until I realized two things:

1) Companies located in our country have to offer health care plans. Companies located elseware dont directly have to offer this benefit--their government does it for them. GM is fux0red for many reasons--one of them is the fact they have to pay gobs of money in health care benefits when their competition doesn't. Thus, one can deduce it is harder for US companies to compete because their employee costs are higher then elseware.

2) You pay into an insurance pool of some form for pretty much your entire life. How fucked up is it that if you go uninsured for even a few months, you can get sick and go broke? Good luck getting insurance after you got sick too. While I can see things from the insurance companies perspective, and I dont think they are "evil" like some, I dont think they can sustain a business model that really keeps us all healthy.

3) Lets not forget that as you get older, your premiums go up. A young guy like me can get private insurance for around $210/mo while a 60 year old would be paying around $700/mo for the same plan. Group plans like the ones offered by companies can average the cost of their old and young employees. This is why when you go on COBRA and you are young, your premiums are way higher then what you'd pay if you got (and could qualify for) a private insurance plan. Lord help you, by the way, if you have a pre-existing condition and want to get a private insurance plan. Unless you have a "domestic partner" or a spouse who has group insurance plan, you can kiss the idea of being an independent contractor goodbye.

4) I'm glad I dont have to make decisions like this.

5) ???

6) Win Ponies.

Depends

[coryking]

Every single expansion of Governmental power erodes our freedom and liberty.

and

Group coverage plans (i.e: the kind you get from your employer) aren't allowed to exclude pre-existing conditions if you already had coverage.

Conflict. You lost freedom by not having a government provide healthcare. You have a medical condition? Want to be self-employed? Forget health insurance. You don't have that freedom anymore and you are stuck workin' for the man.

Sometimes you have to give up a freedom to gain another. This isn't all black and white.

Less is More

[mosb1000]

"People sitting around doing nothing is wasted capital."

Sometimes doing nothing is better than doing something. I am talking to you, Uncle Sam.

Re:Less is More

[plasmacutter]

The economy had broken down to the point of life support by the time roosevelt got to it.

Without swift and decisive action, whether it's the economy or a human being, severe injury will result in long-term debilitation or death.

By the time roosevelt got there, the golden hour was long past. Roosevelt did an excellent job with what he had, and his efforts founded one of our nation's largest cities and paved the way for the US rise to economic power following the war.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:Ronald Regan is on the phone...

[mattwarden]

> Most of it goes to a trademark holding company aka tax shelter in the
> Cayman Islands as "trademark license fee".

And do you ever ask why?

> Back in the 50's, corporations shared tax responsibilities evenly with
> the American individual. Now, corporations pay about 7% and 60% didn't pay a dime.

And do you ever ask why this changed?

> Meanwhile, you lose about 33% of your paycheck to state and federal taxes, then
> get taxed on the gas you put in your car and the stuff you buy

Oh it's much, much worse than that. Not only do you pay taxes on the stuff you buy (ie, sales tax), but you pay a ton more in taxes that are hidden in the price of the products you buy (you hinted at this above). Due to increased competition and the ability to sell overseas more cheaply (increasing demand which affects the company's pricing model), companies can bake more taxes into the price you pay and avoid the taxes biting into their profit margins. When you buy a pair of scissors, you are paying sales tax, yes, but you are also paying payroll tax and partial income tax on the wage earner who mined the ore for the scissor blades. Same for the wage earner who formed the steel. Same for the wage earner who molded the blades. Same for the wage earner who dealt with the plastic. Same for the wage earner who molded the handles. Same for the wage earner who marketed the product. Same for the wage earner who stocked the shelf. Same for the wage earner who cleaned the store's floor. Et cetera. You pay a TON of taxes. I honestly believe if people understood how much money they pay their government to keep it running, they would be outraged and there would be considerable increased scrutiny on the government's behavior.

It truly is incredible how much the consumer pays to fund this government. Not to mention that flat consumption taxes -- and that's what this ends up being since I pay the same tax component in my scissors as the mother of 2 on welfare does -- are incredibly regressive.

Private Roads, the libertarian achilles heal.

[coryking]

Just once, I've love to hear a die-hard libertarian explain how privatized roads would work. Just once. I'm not talking highways either, I'm talking arterials, residential roads, etc. And don't cop out and point to tiny road networks found in gated communities. Tell me how you'd have a privatized road system on the scale of say, New York or LA.

And if your answer is "it would be impossible now", explain how you could, from scratch, create a privatized road network that would then give birth to a city of that size.

For extra credit, explain if it is nessicary to create a standard for signs, lighting, turn signals, mirrors, cross-walks and such. If it is, explain how this would be legislated and if it is not legislated who would regulate such things.

Re:Private Roads, the libertarian achilles heal.

[tweek]

What do libertarians have to do with it.

First off, most Libertarians are concerned with the proper roll of the federal government as defined in the Constitution. That has nothing do to with roads per se or even having those handled by private entities.

Secondly, there's a valid Constitutional argument that the federal government does, indeed, have a role in roads under the authority for interstate commerce.

What many people argue for, in terms of privatization, is getting the government out of the business of actually staffing the show. Why do we have such a large DMV? Why not farm the maintenance out to a private company that has to go through a bidding process?

I've never argued that roads need to be privatized but I have argued that we don't need a multi-thousand employee DMV when a private company can do it much more efficiently.

Re:Private Roads, the libertarian achilles heal.

[SETIGuy]

What many people argue for, in terms of privatization, is getting the government out of the business of actually staffing the show. Why do we have such a large DMV? Why not farm the maintenance out to a private company that has to go through a bidding process?

"Private business is always more efficient" is also one of the lies that never gets challenged. For anyone who has been on the buying end of a large contract can tell you is that "low bid" is equivalent to "low quality", "inexperienced workers," "behind schedule", and "over budget" and that no amount of oversight changes that. The reason why is obvious to anyone: profit motive.

For any job with a finite time frame, there is going to be a minimum cost required for engineers, workers and materials. Now add 10% profit, and you've just made the job more expensive than it would have been for the government to do it. Now add some government engineers and managers to oversee the work. You've just added more cost to a price tag that is already too high.

Now throw in competition to be the low bidder. Well, a company isn't going to cut their profit, so the only options are to cut workers below the minimum necessary to meet schedule, cut material quality, and to pay off the inspectors not to notice how you're screwing the state. Then when it becomes apparent that you won't meet schedule, you start asking for more money. What are they going to do, stop the job? Hire someone else? You've already earned your profit on what you've done so far, what do you care if they give the rest of the job to someone else?

Re:Love it!

[Rycross]

Bullshit. My friends and I would definitely like some tax-funded universal health care, and we all hold down jobs, pay taxes, and pay for our own health care. We have a friend with a severe illness, and have seen the private system fuck him over and prevent him from reaching his potential. We want universal health coverage because we respect peoples' freedom and right to life, and we're willing to suffer (very very very) light inconveniences so that we can secure this. We are not selfish assholes.

I have no faith in the private system. The private system will fuck you over hard and fast given half an opportunity if it can increase their profits by .001%. I don't think people should have their freedom and even life taken away because they had the sheer audacity to become ill.

Re:brokenwindowfallacy???

[HardCase]

Roads. Fire protection. Police. A thousand other services that make the quality of your life what it is. You don't work for free and neither do the people who do those jobs.

Yours is a typically short-sighted view of taxes, particularly regarding education. If you don't think that you've never benefited from school taxes, ask your doctor where his undergraduate degree came from. Or the pilot of the next plane you fly on. Or the architect who designed your house. Oh, you say, I just meant direct benefits. Well, sorry, pal, we don't differentiate between direct and indirect benefits. You pay to send your neighbor's kid to school and you get the indirect benefit of a more educated citizen. It seems odd that your private education didn't cover the value of benefits such as that.

Now if you want to argue that tax money may not be spent wisely, I might agree with you on that point. Narcissism doesn't really serve us all that well.

Re:brokenwindowfallacy???

[nine-times]

An investment is something you do when the benefits outweigh the costs. If that was the case here, it would have been on the books before the decision to "create jobs."

Even according to this, building useful infrastructure sounds like an "investment". Unfortunately, we've under-invested in our infrastructure for several decades, an in recent times somehow magically expected the "free market" to take care of keeping our bridges from falling down.

Building good and useful infrastructure is an investment, and one that happens to have a side benefit of "creating jobs".

Uh, no.

[Shivetya]

Corporations are merely collectors of taxes, so regardless if they actually have a payout to the treasury they are in effect only transferring wealth from American taxpayers to the government. They are nothing more than a proxy for the US government collecting money from income earners. I don't want them to have parity with the regular income earner because it means that even more taxes are indirect and the American citizen loses more. In other words, the more that taxes are indirect the more that fraud, waste, and abuse, of those tax dollars is hidden from the consumer and more of the true cost of their government is hidden.

If Americans were taxed for the full amount directly we might have real change in America. Instead by the use of class warfare including both between income earners and putting the taxpayer versus corporations government is effective at hiding its true cost to the individual earner.

As for trickle down, put it bluntly, if I stop spending my income on side items, services I could do myself, it will not trickle down. Suddenly that restaurant has less customers, that lawn service fewer contracts, that car wash gets less cars, and someone is out of a job. So it does trickle down very well. The problem is those who seek to portray it otherwise give extreme examples to bolster their case.

Trickle down works fine but the burden on the income earner is so severe that most attempts will fail because people rightfully don't want to give it up.

The greatest ponzi scheme is the American Government yet it our very representatives that seek to exaggerate and find any they can find in the private sector as examples of greed when in fact it is the very government doing this that is the greediest of them all.

Re:Ronald Regan is on the phone...

[3263827]

Obviously you've never worked in the restaurant biz. Labor is usually the highest element in the cost of goods, typically around 20%. The food items are usually around 20%, paper items another 6-8%. Throw in rent, utilities, etc. Royalty fees for McDonalds are around 10%, and the franchisee is usually gunning for a 10% margin. So for a $1.99 Big Mac, $.40 stays in the local economy as wages, $.40 stays in the state/US economy for the food components, so on and so forth. So try another stupid example...

And it's Reagan, not Regan. But then again, facts don't seem to bother you too much.

Re:No, good economics.

[Rycross]

No, you haven't figured out where I am coming from at all. I am far better off than most of the population. As a matter of fact, last time I checked, I was upper-middle class, and had a decent shot of being lower-upper class. I love in a nice place in a good city, have plenty of extra cash for entertainment and travel, and don't have to worry about next month's bills. I'm in a good position in life, and its rather presumptuous of you to assume that I'm some lazy sap looking for a handout.

What you haven't figured out is that I'm trying to be honest about where my success came from instead of patting myself on the back and turning up my nose at people less fortunate than myself.

The thing is that I realize that there are a lot of people and outside circumstances that contributed to put me where I am. A large part of it was my own effort and decisions, but I also had a lot of help along the way, and that's not substantially different than a lot of people, especially people who claim to have themselves up by their own bootstraps.

When taking a close look at my life and success, and the lives and successes of others, I've come to realize that the self-made-man is myth that people use to make themselves feel better. Its used so that people can denigrate poor people as just being lazy or unethical. Its used to reassure people that those rich guys really deserve everything because they're just so much better than the rest of us. Its used so that people can turn a blind eye to their fellow humans without feeling like assholes.

What I'm saying is that people need to take a good hard look at where their success comes from instead of patting themselves on the back too hard. It might be that we realize that we do have some social responsibility, because society gave us the opportunity to grab our success. Despite my best efforts, I would not be who I am today if I grew up in Africa or some third world hell-hole.

That is where I'm coming from: an honest assessment of reality instead of an idealized myth.

Re:Ronald Regan is on the phone...

[dunkelfalke]

i wouldn't call stock market gambling an economy, whether it is directly invested or taken by banks and invested again.