‘We’re All Keynesians Now’ and the Narcissism of Small Differences

Before the election in October of last year it seemed clear to me that Democratic control of the White House and Congress would result in a truckload of Keynesian spending. While I had no dollar amount in mind at the time of that post, I certainly did not envision a figure around (or even above) one trillion.

Since then a number of economic thinkers who may have never before considered themselves Keynesian have tipped over hard, into the Trillion Dollar Fan Club. The election of Obama, the FED going to ZIRP, the continued collapse in global industrial demand, and the heavy-duty job losses of November and December appear to have made up the minds of any fence-sitters.

Thus was heard in the land the following phrase: We’re All Keynesians Now. But if this was true, then there was suddenly merit in remembering Freud’s observation that a fierce competition and contempt can well up amongst the ranks of those who are close to each other, who resemble each other. It was inevitable therefore that if we are all now Keynesians, then our next task is to fight amongst ourselves. After all, fighting over how best to spend a Trillion is just plain fun.

Here at Gregor.us of course I have been adamant that, when it comes to spending on physical infrastructure, no area of investment will produce greater front-end and back-end returns than new Light Rail and Commuter Rail. My advocacy of investment in Rail however has been interpreted by some as my view that a perfect balm or salve exists for the sorry state of our economy. Not so. My advocacy of Rail lies (almost) completly within the current Keynesian framework. I’m just looking for the best bang for one’s buck, and I’d like the country and its cities to actually own something of value after the trillion dollar tidal wave passes over us. That’s why I’m not a fan of roads and bridges. But, I am a fan of utility grade solar and improvements to the electrical grid. Roads and bridges tend to go fallow over time. I’m not against some investment in roads and bridges. I just don’t see new roads and bridges paying off in the years ahead.

The problem of course is that certain groups, like the nation’s Governors, who tend not to be particularly forward looking, generally favor highway and bridge spending. The front-end job creation is perhaps a little more immediate on such projects, and frankly, I just have to believe there’s a better dovetail between the installed political structure of your average State, and the highway construction industry. From my post last week however, readers know I would regard any national Obama stimulus plan that favors highways over rail transport as a fiasco. And thus, we arrive at the narcissism of small differences.

Or, are these small differences? Whether they are small or large I will let others decide. What we do see now however is that economists and thinkers from Paul Krugman, Nate Silver, Clive Crook, and Tom Friedman have all weighed in on how to either spend a trillion, or, to make sure that we spend at least a trillion, if not more.

The discussion of what Obama should do has also gone global. Yesterday, on Twitter, for example, I was contacted by David Price of Debategraph who is mapping out a series of recommendations for Obama, and publishing it on the website of the Independent in the UK. He mapped out my views about investment in Public Rail transport here.

My call now is that the truly nasty debate over how to spend a trillion doesn’t start until later this month, in Congress. Because public transport is my top priority I will be looking closely to see how folks like Matt Yglesias weigh in as he has written extensively on the economic advantages of rail transport investment, and called to heel those who differ with that view from purely ideological standpoints.

To this end, tomorrow I will be looking at the rebuilding of Light Rail in Los Angeles and I will try to assess whether the investment has paid off yet for the City of L.A.

http://farm1.static.flickr.com/52/112481029_aedbcb0de8.jpg

-Gregor

  • Steve

    This policy of deficit spending has nothing to do with benefiting society at large or improving the economy.

    It is just an aggressive continuation of the time honored custom in Washington to loot the taxpayer so as to benefit government contractors, military industrialists, banks, lobbyists, think tanks and other sorted patrons of the political class.

    All of the USA is Washington DC's personal fiefdom, and it doesn't matter one bit which party is in power. Keynesianism is just another form of kleptocracy.

  • gregor.us

    I fear you'll be proven correct.

    G

  • http://jraccountant.blogspot.com Adrienne

    I may pay my bills with US dollars but that certainly doesn't make me Keynesian, I just don't have the choice to get paid in Euros or gold or oil. So keep your “we” to yourself ;)

    I agree with you that if we are going to be forced into turning into Zimbabwe, we might as well try to get some decent infrastructure out of the deal. Sadly… probably not likely. It's too easy to pour the worthless loot into toxic banks. Light rail is an unpopular subject and with all this scrambling to spend what we don't have quicker than we print it, few will even consider it a viable option.

    But that won't matter when we're shuffling from shantytown to shantytown in broken down covered wagons a la Oregon Trail now will it?

  • Tim Flanagan

    The commuter trains in LA County are, financially speaking, a disaster. So few people use them that it costs the County about 30x the price of a ticket to move a passenger from place to place. Oh, and they occasionally kill people, and that adds greatly to the cost of operations.

    TsF in LA

  • daveinmarinca

    After years of debate and false starts, we finally passed a 1/4 % sales tax increase this past November to fund the Sonoma Marin Area Rail Transit http://en.wikipedia.org/wiki/Sonoma-Marin_Area_… Area trains and ferries run full….rebuilding passenger rail travel is long overdue in the US. Unfortunately, your assessment of the decision making process and fiscal/monetary results of the stimulus will most likely come true.
    Maybe we'll at least get a bike lane on all the freeways.

  • gregor.us

    Hi. I actually have not looked yet at the LA commuter trains. At the moment I am just looking at the 5 LA lines composed of 2 subways and 3 light rail lines.

    However, it's my understanding that the LA Commuter trains as elsewhere in the country share track with freight. This is why Union Pacific understandably does not want to share more track with more passenger rail in CA–especially not the proposed high speed CA rail which was on the ballot. (BTW, I am against very expensive high speed rail in CA before alot more Light Rail and commuter rail is built–of course, it doesn't matter because they are broke anyway and have no funds to build high speed CA rail regardless).

    10 dollar a gallon gasoline will squash the economies of southern LA county and Orange county when that unfolds no later than 2012. I think even 5 dollar gasoline gave a good taste of what's to come in California which I regard as one of the most vulnerable States in the country as its southern 1/3rd was almost completely built out past WW2 for the automobile.

    Quick take: It looks like the 5 LA lines are costing over a quarter billion a year to run. But those 5 lines are providing 90 million trips per year. That's not 90 million unique users. That's 90 million human trips. Even if we assume there is zero revenue from fares, that is a huge all-in bargain when one takes into account externalities. However, it's doubtful that, at this point, there has been much of a return on the original construction costs which I assume were huge.

    I hope to get a post up today on how to look at this stuff.

    G

  • http://gloomboom.com GloomBoom

    I agree that if we are going to spend that kind of money, we need to focus on things like rail transportation. However, that may be too difficult a leap for the Feds. After all, we have the excellent example of European rail systems that just keep getting faster and faster and go to more and more locations and we still don't seem to be inspired to emulate them. Why? Because the government is in bed(or in the oval office) with the companies that build the roads and bridges and they are both happy. It's quite a sad state of affairs……………

  • http://gloomboom.com GloomBoom

    I agree that if we are going to spend that kind of money, we need to focus on things like rail transportation. However, that may be too difficult a leap for the Feds. After all, we have the excellent example of European rail systems that just keep getting faster and faster and go to more and more locations and we still don't seem to be inspired to emulate them. Why? Because the government is in bed(or in the oval office) with the companies that build the roads and bridges and they are both happy. It's quite a sad state of affairs……………

  • http://gloomboom.com GloomBoom

    I agree that if we are going to spend that kind of money, we need to focus on things like rail transportation. However, that may be too difficult a leap for the Feds. After all, we have the excellent example of European rail systems that just keep getting faster and faster and go to more and more locations and we still don't seem to be inspired to emulate them. Why? Because the government is in bed(or in the oval office) with the companies that build the roads and bridges and they are both happy. It's quite a sad state of affairs……………