Wednesday, December 10, 2008

Why Obama’s Infrastructure Spending Plan Won’t Work

In 2008 the U.S. actually spent $114 billion on infrastructure, following $102 billion in 2007. Infrastructure spending over the past five years for non-defense comes to nearly $500 billion. Did that do much for jobs and the economy? Did it prevent our recession? Therefore why should we believe that Obama’s proposed $500 Billion infrastructure plan will do anymore than history already shows. If the bailout mismanagement is anything to go by, we can only anticipate more of the same, since government has no clue as to how to run business. As Amity Shlaes documents in her book "The Forgotten Man," the economy limped along under FDR's stewardship in the 1930s. Many of the era's public-works projects were undertaken for political reasons as well as economic ones. Government crowded out private initiative and neglected policies to promote the private sector. Net private investment declined at times during the 1930s. If less people are going to work, what use are more bridges and trains? Government infrastructure spending doesn’t create new jobs for very long (mostly temporary jobs), takes time to implement (approvals, planning permits etc.) and is fraught with abuse, waste and mismanagement. And by the time the money is spent, the recession will have passed. Entrepreneurs and businesses will create jobs and bring back our economy. This holds true for the other economies of the Western World; the principles are the same. We should be looking to find creative ways to encourage investment. By slashing the corporate rate tax, means a business might indeed be able to save jobs and entrepreneurs and VC’s will jump back in and invest in start-ups. This is what has fueled our growth in the past. Potentially, billions of dollars could pour back into funding start-ups. Furthermore, cut tax rates for everyone and the consumer will be back. Raising tax rates on the higher income bracket is exactly the way to prolong and deepen this recession. So why should we believe Obama’s plan of change is anything more than growing government and increasing our national debt? Post your comments here or e-mail me at businessissuestoday@gmail.com

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