Tuesday, July 21, 2009

The Anti-Stimulus That's Bigger Than the Stimulus

I am back, but still in semi-vacation mode, so I'll punt this one to James Surowiecki of the New Yorker. He makes the point I have made many times - without block grants to the states to counter their collapsing revenues, the federal stimulus is simply a weak swimmer against a strong tide. There is one small silver lining he does not emphasize: if we are left with a better infrastructure, this will, in some small way, aid the recovery.

The most interesting part of the article to me is this bit:

Much of the tens of billions of dollars that will be spent on roads, for instance, will be funnelled through the states. As a result, a disproportionate amount of the money will be spent in rural areas (which exert disproportionate influence on state governments), leaving cities—which happen to have most of the people and most of the traffic—shortchanged. The top eighty-five metropolitan areas in the country are responsible for about three-quarters of the country’s G.D.P. Yet less than half of the road money will be invested there.

I have an economist friend whose pet peeve is all the ways we, as a country, subsidize rural living - no doubt this will displease him. But I wonder, goods have to get from metro area to metro area, so don't they often travel through rural areas? I am not sure a comparison of GDP is the right metric here. I am not convinced that rural stretches of interstate are less important than urban stretches.

1 comment:

Ralph said...

You are correct, the author of that article is simply focused on GDP as a measure of the country's health. A very short-sighted point of view.

He only touched on it, but the obvious way to get GDP rising is giving the states more money. Of course he knows that is unhealthy and goes on to suggest the abolition of our current form of governance.