October 2, 2009
by Sean C. Hayes (Host of this blog)
The Lee Myung-bak administration and local governments have been pumping money into the economy through infrastructure spending. The administration has also lessened the regulatory burden on builders and provided funds for infrastructure and other building improvements.
U.S. President Barack Obama, on the other hand, created a stimulus package that overwhelmingly has been used by states to pay for social program promises by politicians and feed the folks that put the Obama administration into office.
For example, a group backed by Al Gore received a $600-million grant to develop an electric car; numerous charities that promoted liberal democratic causes received a stimulus fund; $30 million went to a train station that was abandoned for over 30 years; and $1 billion is going to a ``FutureGen" power plant that seems likely to be never put into operation.
Of course, if the Republicans were in office this same type of cronyism would have occurred, but in a time of such need the political powers should have left politics at the back door.
Many Republicans and Blue Dog Democrats are beginning to question and realize that this stimulus package did little-to-nothing to improve the ailing American economy and will simply lead to a larger deficit, higher taxes and potentially a longer recession.
The stimulus, thus, seems to be failing us.
Obama's promise that the unemployment rate would stabilize at around 7.9 percent if the stimulus bill was passed is off by 2 percentage points, and the argument that the rate of increase in unemployment has decreased is backed by no evidence.
Furthermore, economies such as Brazil, China and Germany, that implemented smaller stimulus packages and maintain low debt as a percentage of GDP have fared much better in this economy than countries such as the U.K. and the U.S., which implemented massive packages and maintain high debt as a percentage of GDP.
This may indicate, but no comprehensive studies with large data sets have yet been completed, that the stimulus programs may not accomplish the pump-priming Keynesian effects envisioned, and that lower taxes and a natural decrease in the asset bubbles would have done the trick.
If this is the case or not, the Lee administration approach to the stimulus should have been the path taken by America. These programs will have a lasting effect on the economy, since infrastructure spending has been shown, in numerous studies, to increase a nation's efficiency and growth rates.
The Lee administration, realizing the value in infrastructure improvements, has implemented a plan to expand Incheon International Airport, update transportation to the airport, build and/or remodel new local and national government buildings, while lessening the regulatory burden on builders.
The Lee administration has additionally created a Green Initiative Fund and vowed to spend 50 trillion won for these green projects.
America's economy may not have been benefited by the stimulus package, but would have been benefited and is in need of a drastic overhaul of its infrastructure.
According to the president of the American Society of Civil Engineers, the U.S. has ``been operating on a patch-and-pray system." The ASCE has published a report giving America a "D" in infrastructure and claimed that America would need to spend $2.2 trillion in order to get to a "B."
There is some good news on the horizon. Obama seems to realize the problems with America's infrastructure and has vowed in campaign and non-campaign speeches to improve the ailing American infrastructure. Hopefully, this infrastructure package will not be linked with wasteful cronyism like the first stimulus bill.