Trump’s infrastructure plan is another buy now pay later short-term gimmick that will cost the economy dearly in years to come.
Bloomberg’s Tyler Cowen explained why the Trump infrastructure plan is not a good idea:
There are valuable infrastructure projects governments could and should spend money on, like road maintenance. But a short-term rise in GDP is not itself a good indicator of quality or success. Even if the Trump administration makes bad infrastructure decisions and wastes a lot of money, measured GDP still is going to rise. Don’t be fooled.
There is another reason why short-run GDP is a misleading guide to stimulus: the money spent eventually has to be paid back. So today’s GDP boost will be offset by a contraction in five, 10 or 20 years.
In Keynesian theory, fiscal policy only works well if you use it in down times and pay off the bill during a boom. Trump seems ready to do the opposite by upping spending as the economy approaches full employment. After that? Recent history suggests that many countries switch back to austerity precisely when they shouldn’t. That is a reality proponents of “spend more now” have to reckon with, and it means stimulus can bring a bigger contraction in the future than the boost it gives today.
Trump’s infrastructure plan is a gimmick that doesn’t worry about the long-term consequences. The time for a massive infrastructure plan was right after the economy collapsed. The government could have used low-interest rates to borrow the money to put people to work rebuilding the country. President Obama tried for such a measure, but Republican and conservative Democratic opposition resulted in the effective, but still a half measure, stimulus.
Trump’s proposal is going to take an economy that is already at full employment and set the stage for a recession. The infrastructure proposal combined with the massive tax cut that Republicans are drooling over will result in way more resources being taken out of the government than are being placed back in. Debt and deficits are going to skyrocket; interest rates will climb. Republicans will use the debt and deficit as an excuse to cut social programs for people who are in need, and the result will be a Trump recession.
The nation has seen this movie before. We know that anytime Republicans are given access to national finances, they get reckless with the checkbook.
What took the American people eight years to rebuild is likely to be wrecked in less than half of that time by Trump and failed Republican economic ideology.
Democrats better get ready, because when they return to power, another massive economic rebuild will be waiting for them.
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