‘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.

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-Gregor